Facebook Shouldn’t Be Allowed to Buy Giphy, Says UK Regulator
As per the preliminary finding reports by UK’s Competition and Markets Authority (CMA), the acquisition deal between Facebook and popular GIF search engine Giphy should not be allowed as it will “negatively impact competition between social media platforms.” Fifteen months ago, Facebook announced their plan to acquire Giphy for 400 million dollars which now seems difficult to complete.
The CMA expressed their fear that Facebook’s ownership of Giphy could be a barrier to other social media platforms in accessing its GIFs as Facebook could modify the terms and conditions to access them. For instance, Facebook might ask Giphy customers, including TikTok, Twitter, and Snapchat, to share users’ databases in exchange for Giphy GIFs. The CMA also argued that such actions would lead to giving more market power to Facebook and reducing that of Giphy, which is in the process of setting up an ads business.
At the time of agreeing on the deal with Facebook, Giphy was short of money, though, in 8-years history, they raised $150 million. Giphy agreed to be sold in the lesser amount of its prior valuation as their business was in trouble and facing difficulties to generate profits. In May, when Facebook and Giphy submitted their internal documents to the CMA for the probe, Facebook advocated that Giphy had “no meaningful audience of its own” and was already relying on Facebook for the noticeable proportion of its users’ traffic.
A Facebook spokesperson showed the disagreement with CMA by stating that, “We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence. We will continue to work with the CMA to address the misconception that the deal harms competition.”
Giphy’s employees have been stuck in a whole new problem since the announcement of the deal. They are not allowed to turn into Facebook employees though Facebook is paying Giphy’s bills to keep the company running. After Facebook’s spokesperson declined to comment on any financial-related matters, the percentage of the amount to be withheld for employee retention stays in limbo.
Facebook has already covered the payment for most of Giphy’s stock as per the terms of the deal, but the scrutiny on the deal shows no positive sign of social-media-related acquisition. Facebook’s plan to buy a GIF-making website and integrate a massive GIF library into Instagram and other Facebook apps might not be completed before permission is granted by the relevant regulatory body.