UK Regulator Probes Facebook Giphy Deal On Competition Issues

The UK’s competition authority has said it is investigating Facebook’s takeover of Giphy, the provider of humorous short looping videos, amidst competition concerns.

The Competition and Markets Authority (CMA) said it was looking into whether the $400 million (£317m) deal “has resulted or may be expected to result in a substantial lessening of competition in any market or markets in the United Kingdom”.

Giphy is widely used on social media and in announcing the deal in May, Facebook said half of Giphy’s traffic originates from Facebook apps, such as Instagram and WhatsApp.

But Giphy also provides images to Facebook competitors such as Snapchat, TikTok and Twitter.

Enforcement order

The CMA’s initial enforcement order calls for Facebook to halt any integration between the two companies, such as a transfer of ownership or structural changes, without prior written permission from the regulator.

Third parties are to be given until 3 July to provide comment, following which the CMA will decide whether to  move forward to a more foral phase one investigation.

Facebook has said it plans to integrate New York-based Giphy into its Instagram photo app, giving it access to large amounts of data.

The merger would give Facebook access to Giphy’s application programming interface (API), used by third parties to access the system, which would provide a view into the ways competitors use the service.

But Facebook said in May that it would not access user-specific data.

Giphy said becoming part of INstagram would be a “tremendous opportunity”, adding that “everyone will continue to have the same access to Giphy”.

Facebook also said developers and API partners would continue to have “the same access” to Giphy.

“We are prepared to show regulators that this acquisition is positive for consumers, developers, and content creators alike,” the company said.

Data

Facebook has been dogged by concerns over the amount of data it gathers on individuals, not only from its own service but from those it has acquired, such as WhatsApp and Instagram.

In 2017 the European Commission fined Facebook 110m euros (£99m) for providing what it described as misleading information during the EU’s scrutiny of the $19bn 2014 purchase.

Facebook told the EU at the time that it was unable to integrate WhatsApp’s user base with Facebook’s own user base, but two years later said it would begin linking Facebook and WhatsApp user accounts.

Facebook has since been the subject of widely publicised scandals over the misuse of users’ personal data.

In 2012 the Office of Fair Trading, the CMA’s predecessor, scrutinised Facebook’s acquisition of Instagram but decided against a further probe.

CMA chief executive Andrea Coscelli in March said the WhatsApp and Instagram deals were instances of “merger control gone wrong”.