Facebook Could Be Forced To Undo Potentially Illegal $400 Million Deal

Facebook may have to sell off its newly-acquired GIF platform, undoing a deal worth $400 million, U.K. regulators said Thursday.

The Competition and Markets Authority (CMA), a U.K. market regulator, released preliminary findings Thursday saying Facebook’s acquisition of GIF platform Giphy raises competition concerns, and indicated that the tech giant may be forced to sell the platform.

“Following an in-depth investigation, the CMA has provisionally found that Facebook’s takeover of Giphy will negatively impact competition between social media platforms,” the regulator said in a statement announcing the findings.

Giphy is a library of short video clips known as “GIFs” that generates revenue by allowing companies to distribute branded content on its platform. Social media companies, such as TikTok, Twitter and Snapchat, use Giphy to distribute GIFs on their platforms.

Facebook acquired the company in a $400 million deal in 2020.

The regulator said the merger could enable Facebook to deny other platforms access to GIFs, and suggested Giphy may have emerged as a competitor to Facebook in digital advertising markets if it had not been acquired.

“Giphy’s takeover could see Facebook withdrawing GIFs from competing platforms or requiring more user data in order to access them. It also removes a potential challenger to Facebook in the £5.5 billion display advertising market,” CMA investigator Stuart McIntosh said in the statement.

The CMA will hear arguments from Facebook before it makes its final decision Oct. 6, but said if its “competition concerns are ultimately confirmed, it could require Facebook to unwind the deal and sell off Giphy in its entirety.”

The regulator cited Facebook’s 50% share in the display advertising market as justification for its findings, also noting that Facebook and its subsidiaries Instagram and WhatsApp account for 70% of the time U.K. residents spend on social media.

Facebook disputed the report, arguing its acquisition of Giphy was in the best interests of people around the world.

“We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence,” a Facebook spokesperson told the Daily Caller News Foundation. “We will continue to work with the CMA to address the misconception that the deal harms competition.”

The Federal Trade Commission (FTC) is currently suing Facebook over its acquisitions of Instagram and WhatsApp, among other alleged antitrust violations. The tech giant also faces scrutiny from U.K. and European Union regulators over its alleged anti-competitive data policies.