Facebook’s merger with Giphy could harm competition between social media platforms and remove a potential challenger in the display advertising market, the Competition and Markets Authority (CMA) has said.

The merger brings together Facebook, the largest provider of social media sites and display advertising in the UK, with Giphy, the largest provider of GIFs.

Following an in-depth investigation, the CMA provisionally found that Facebook’s takeover of Giphy will negatively impact competition between social media platforms.

If the UK watchdog’s competition concerns are ultimately confirmed, it could require Facebook to unwind the deal and sell off Giphy in its entirety.

The regulator said that with millions of posts on social media sites including GIFs, any reduction in the choice or quality of these GIFs could 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 has provisionally found that Facebook’s ownership of Giphy could lead it to deny other platforms access to its GIFs.

It also warned that the merger could change the terms of this access – for example, Facebook could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more user data in order to access Giphy GIFs. The organisation said that such actions could increase Facebook’s already extensive market power.

The competition watchdog also raised concerns about the possible impact on digital display advertising.

Before the merger, Giphy was offering innovative paid advertising in the US, which had the potential to compete with Facebook’s own display advertising services. This allowed companies – including customers such as Dunkin’ Donuts and Pepsi – to promote their brands through visual images and GIFs.

The CMA found that, prior to the deal, Giphy was considering expanding its advertising services to other countries, including the UK. It said that this would have brought a new player into the advertising market and a potential challenger to Facebook.

“It would also have encouraged greater innovation from others in the market, including social media sites and advertisers,” added the watchdog. “However, Facebook terminated Giphy’s paid advertising partnerships following the deal, meaning an important source of potential competition has been lost.”

“Millions of people share GIFs every day with friends, family and colleagues, and this number continues to grow,” said Stuart McIntosh, chair of the independent inquiry group carrying out the phase 2 investigation. “Giphy’s takeover could see Facebook withdrawing GIFs from competing platforms or requiring more user data in order to access them.”

McIntosh added: “It also removes a potential challenger to Facebook in the £5.5 billion display advertising market. None of this would be good news for customers.”
The chair said that while the probe has shown “serious competition concerns,” these are provisional.

The CMA now plans to consult on its findings before completing its review.

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