Facebook may have to sell Giphy on Britain’s competition concerns

ritain’s competition watchdog said on Thursday it could require Facebook Inc (FB.O) to sell GIF website Giphy after its investigation found that the deal between the two companies would harm competition in display advertising.

The U.K. markets regulator said Thursday that it has provisionally found that Facebook Inc.’s merger with Giphy will harm competition between social media platforms and remove a potential challenger in display advertising markets.

The Competition and Markets Authority said that if its concerns are ultimately confirmed, it could require Facebook to unwind a $400 million deal made in May 2020 and sell off Giphy in its entirety. Giphy allows users to search, create and share GIFs, short looping videos.

Responses from interested parties to the provisional findings are open until Sept. 2, and the CMA said it will issue a final report by Oct. 6.

The CMA said that given millions of daily posts on social media include GIFs, any reduction in choice or quality of images could affect how people use the sites and whether or not they will switch to another platform.

As most major competitors, such as Twitter, TikTok and Snapchat use Giphy GIFs, platforms would have little choice if Facebook were to deny its peers access to the images, or change usage terms, such as requiring more user data, the CMA said.

The CMA began probing the deal in June 2020, and launched an initial investigation in January.

The watchdog said that before the merger, Giphy’s own paid advertising in the U.S. had the potential to compete with Facebook’s advertising services, and had been considering expanding the service to other countries including the U.K., potentially challenging Facebook. In July 2020, the CMA found that Facebook controlled more than 50% of the U.K.’s 5.5 billion-pound ($7.63 billion) display advertising market.

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