Facebook should not be allowed to buy Giphy, says the UK regulator

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15 months ago, Facebook said he would buy the popular GIF search engine Giphy for about $ 400 million. Now the acquisition could be a collapse thanks to competition law from the UK Competition and Market Authority.

Inside something preliminary findings report According to the CMA, the deal should be dismantled on Thursday because it “negatively affects competition between social media platforms”.

The CMA’s reasons for blocking the Giphy Agreement are as follows:

“Millions of messages on social media sites now contain a GIF file. Decreasing the selection or quality of these GIF files can have a significant impact on how people use these sites and whether they move to a different platform, such as Facebook. Because most large social media sites that compete with Facebook use Giphy GIFs, and there is only one other large GIF provider – Google Tenor – these platforms have very few options.

The CMA tentatively found that Facebook’s ownership of Giphu could cause it to deny other platforms access to its GIF files. Alternatively, it can change access conditions – for example, Facebook may require Giphy clients such as TikTok, Twitter, and Snapchat to provide more credentials to access Giphy GIF files. Such actions can increase Facebook’s market power, which is already significant. “

Aside from the logic that someone will switch to using Facebook because of GIF files (I love GIF files as much as the next person, but come on), the CMA claims that Giphy was building an advertising business that would have competed with Facebook. It claims that Facebook caused Giphy to discontinue these plans after it announced the deal, which will reduce competition in the market.

Facebook has disputed this idea in previous CMA broadcasts, citing internal documents it and Giphy submitted to the agency for review. In May, Facebook wrote filing a watchdog that Giphyl did not have “his own meaningful audience” and that he was already “dependent on Facebook for a significant portion of his user traffic.”

Giphy raised $ 150 million in funding over its 8-year history, but hadn’t yet made a profit, and the money was running out when it agreed to a deal with Facebook. When it failed to raise a round of financing several months earlier, it agreed to sell below the previous value of investors, demonstrating its viability as an independent company.

“We disagree with the preliminary findings of the CMA, which we do not believe support the evidence,” a Facebook spokesman said. Limit, adding that the company “will continue to work with the CMA to correct the misunderstanding that the transaction will harm competition”.

Meanwhile, more than 100 Giphy employees have been stuck in possession since the Facebook deal was announced. They have not been allowed to become Facebook employees, even though Facebook has paid Giphy’s bills to keep the company running, according to a person familiar with the arrangement. Facebook has already paid for most of Gify’s shares as part of the terms of the deal, but the percentage withheld from retaining employees is still in the dark. (A Facebook spokesman declined to comment on financial matters with Giphy.)

Whether Facebook’s right to buy Giphy or not, a review of this agreement shows how the era of Facebook’s social media acquisitions may be over. Its newer A $ 1 billion sourcing company for Kustomer, a customer service platform for businesses, is subject to competition law review in several countries and can also be prevented. The only types of acquisitions that Facebook has been able to get rid of in recent years are related to its augmented and virtual reality efforts.

The CMA’s final report on the Giphy deal is due to be released in early October.

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