UK regulator calls on Facebook to lift $400 million in Giphy deal

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The British competition watchdog called on Facebook to sell Giphy, an online image platform, which Bought for 400 million U.S. dollars Last year, after in-depth investigation, competition problems were temporarily discovered.

This move is a rare example of overseas regulators trying to unwind large-scale technology transactions because Antitrust review Silicon Valley’s acquisition activity has intensified globally.

The Competition and Markets Authority said on Thursday that it believes that Facebook’s cooperation with Giphy will harm competition between social media platforms and eliminate potential competitors in the display advertising market.

The CMA’s findings are temporary, but if it concludes that its concerns are valid, Facebook will be forced to cancel the transaction.

CMA stated that its “preliminary views [is] The only effective way to solve the competitive problems we have identified is for Facebook to sell Giphy as a whole to suitable buyers”.

Regulators in June 2020 Investigate The transaction unites the largest provider of social media and digital display advertising in the UK with the largest provider of animated images (called GIF). It will release its final report in October.

CMA said on Thursday that Facebook may deny other platforms access to GIF due to the partnership. According to the CMA, the social media giant may change its terms of access so that platforms such as TikTok, Twitter, and Snapchat may be forced to hand over more user data to access GIFs, thereby consolidating Facebook’s already important power.

According to CMA’s analysis, the regulator said the deal may also eliminate Facebook’s key competitor in the UK display advertising market, which controls about 50% of the UK display advertising market. CMA said that Giphy had previously provided paid advertising services in the United States, allowing companies such as Pepsi to promote its brands through its platform, and is considering expanding the service to other countries, including the United Kingdom, before the transaction.

Facebook said: “We do not agree with the CMA’s preliminary investigation results, and we believe that the investigation results are not supported by evidence.”

It added: “As we have proved, this merger is in the best interests of the people and companies that use Giphy and our services in the UK and around the world. We will continue to work with the CMA to resolve misunderstandings that the transaction harms competition.”

Stuart McIntosh, chair of the independent investigation team that conducted the investigation, said: “Millions of people share GIFs with friends, family, and colleagues every day, and this number continues to grow. The Giphy acquisition may cause Facebook to withdraw GIFs from competing platforms, or More user data is needed to access them. It also eliminates Facebook’s potential challenger in the £5.5 billion display advertising market. This is not good news for customers.”

Facebook insists that Giphy, which has no income or employees in the UK, does not compete with its existing services. It stated that its Instagram subsidiary has pledged to continue to allow competitor photo and messaging apps to access Giphy’s library.

Facebook argued in a document submitted to the CMA that Giphy “does not display advertising products, nor does it develop products,” nor does it have its own social network or “meaningful audience.” It positions Giphy as a company that is struggling to survive as an independent business, and Facebook plans to invest in and develop the service.

Tom Smith, a competition lawyer at Geradin Partners and former CMA legal director, said: “This is the first time CMA has lifted the acquisition of a large technology company… Today’s interim decision once again shows that CMA is making a big effort after Brexit, especially in technology. Field, and are not afraid to challenge global transactions between overseas companies.”

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