Facebook may have to sell Gif library after UK regulator investigation

Competition and markets authority says deal could damage display advertising market

A sign at Facebook headquarters in Menlo Park, California. Facebook's purchase of Giphy will hurt competition for animated images, the UK regulator said on Thursday. AP

Facebook could be forced to sell Gif library Giphy, after the UK competition regulator found the deal between the two companies could damage social media choice and the display advertising market.

Facebook bought Giphy, a website for making and sharing short animations made from Gif image files, in May last year in a deal worth about $400 million.

The Competition and Markets Authority (CMA) began investigating the deal at the start of this year after raising a number of concerns, before launching an in-depth investigation in April.

Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said Giphy’s takeover could lead to Facebook withdrawing Gifs from competing platforms or requiring more user data in order to access them.

“It also removes a potential challenger to Facebook in the £5.5 billion ($7.61 billion) display advertising market. None of this would be good news for customers,” Mr McIntosh said.

Millions of people share Gifs every day with friends, family and colleagues, and this number continues to grow.

The CMA said Facebook’s takeover of Giphy will negatively affect competition between social media platforms as any reduction in the choice or quality of these Gifs significantly affect how people use these sites and whether or not they switch to a different platform, such as Facebook.

“As most major social media sites that compete with Facebook use Giphy Gifs, and there is only one other large provider of Gifs – Google’s Tenor – these platforms have very little choice,” the CMA said.

The CMA investigation found that Giphy had plans ahead of its acquisition to expand its paid advertising services offered in the US to other countries, including the UK.

However, Facebook terminated Giphy's ad partnerships after the deal, according to the regulator.

Facebook said on Thursday that it disagreed with the CMA’s preliminary findings, “which we do not believe to be supported by the evidence”.

“As we have demonstrated, this merger is in the best interest of people and businesses in the UK – and around the world,” a Facebook representative said.

The California-based company said it continued to work with the CMA.

Mr McIntosh said the watchdog would now seek feedback on the provisional findings before issuing its final report in October.

“Should we conclude that the merger is detrimental to the market and social media users, we will take the necessary actions to make sure people are protected,” he said.

The CMA said this could require Facebook to unwind the deal and sell off Giphy in its entirety.

In April, the independent oversight board ruled that Facebook and Instagram users can now appeal against other people's content that has been allowed to remain on the platforms.

The board, which began operating in October and reviews the social media company's content decisions, is allowing users to challenge posts that Facebook permits to stay on the site, not only those it has removed.