Facebook Might Need To Sell Giphy Amid UK Crackdown on Platform

If you've sent GIFs to your family and friends on Facebook or Instagram, then you might be familiar with Giphy. Giphy is a database of GIFs that was bought by Facebook for US$400 million (approximately S$543.22 million) in May 2020.

As U.K. regulators consider the Facebook-Giphy acquisition to be anticompetitive, Facebook might have to reverse the deal. This means that Facebook could be forced to sell Giphy, as the U.K.’s Competition and Markets Authority (CMA) stated in its findings on the two companies.

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"In our notice of possible remedies published alongside our Provisional Findings, we have set out our initial view that the only effective way to address the competition issues that we have identified is for Facebook to sell GIPHY, in its entirety, to a suitable buyer," wrote CMA.

The CMA also reminded involved parties that they must propose solutions addressing the concerns it raised by 25 August 2021.

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The CMA believes that the tech company’s absorbing of Giphy hurts competition in the display advertising and social media industry as it might prevent other platforms from enjoying Giphy’s graphics. The regulatory agency stated that Facebook could ask Giphy’s other customers like TikTok, Twitter and Snapchat for user data in exchange for access to Giphy’s massive collection of GIFs. In return, this could make Facebook — already a social media giant — more dominant in its own field.

Before it was acquired, Giphy sold advertising services in the United States and became a potential challenger to Facebook in the display advertising business. But when the tech behemoth took ownership of the GIF library, Facebook pulled the plug on Giphy’s paid advertising deals. In effect, it thwarted a formidable competitor.

If the U.K. regulators rule against Facebook, then this could be the first deal reversal that the social network will experience. In response to the CMA’s findings, a Facebook representative said that the company did not carry out anti-competitive practices.

"This merger is in the best interest of people and businesses in the U.K. — and around the world — who use Giphy and our services. We will continue to work with the CMA to address the misconception that the deal harms competition," said the spokesperson.

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Written by Sophia Lopez