Facebook (NASDAQ:FB) has been ordered to sell its GIF-sharing platform "Giphy" by Britain’s competition watchdog.
The United Kingdom’s Competition and Markets Authority (CMA) concluded that Facebook’s acquisition of Giphy reduces competition between social media platforms. It added that the deal has already removed Giphy as a potential challenger in the display advertising market.
A panel found that Facebook would be able to increase its already significant market power in relation to other social media platforms by denying or limiting other platforms’ access to Giphy GIFs.
This would send more traffic to Facebook-owned sites such as WhatsApp and Instagram, which, combined with Facebook, account for 73% of user time spent on social media in the United Kingdom.
Prior to the deal closing in May 2020, Giphy launched its own advertising services and was considering expanding to countries outside the U.S., including the United Kingdom. Giphy’s advertising services allowed firms such as Dunkin’ Donuts to promote their brands through visual images and GIFs.
The British competition authority found that Giphy’s advertising services would have been able to compete with Facebook’s own display advertising services, while also encouraging innovation from other social media sites and advertisers.
Facebook shut down Giphy’s advertising services at the time of the merger. The competition watchdog said this is a cause for concern, especially because Facebook controls nearly half of the $9.4-billion U.S. display advertising market?in the United Kingdom.
When the $400-million deal was announced, Facebook said it wanted to further integrate Giphy into the Instagram app "so that people can find just the right way to express themselves."
The Competition and Markets Authority fined Facebook in October for failing to provide regular updates to show that it is complying with an order. It said Facebook "significantly limited the scope of those updates" despite repeated warnings.
