Facebook criticises UK watchdog's concerns over Giphy takeover
Company says the CMA's findings contain 'fundamental errors'
Facebook has hit back at the UK's competition regulator for suggesting that it might force the social media giant to sell off Giphy, to address competition concerns.
In a strongly worded response [pdf] to the Competition and Markets Authority (CMA), Facebook claimed the regulator's provisional findings contained 'fundamental errors'. It said the proposal to sell its subsidiary is 'grossly unreasonable and disproportionate'.
The company said regulators should carefully weigh 'the intrusive step of ordering the sale of a company which does not carry on business in the UK' (this is a technicality; although Giphy is headquartered in the USA, both it and Facebook offer their services worldwide).
Facebook questioned whether the call to sell Giphy would be effective or enforceable, further alleging that the watchdog had failed to provide alternative remedies that would have been 'far less intrusive and equally effective' for it to clear the deal.
Giphy is a popular website that lets users make and share GIFs. It has a large library of short video animations, which are highly popular among social media users.
The CMA opened an antitrust probe into the $400 million (£289 million) takeover deal, after Facebook announced it was acquiring the platform to integrate it with photo-sharing app Instagram.
The company said that nearly 50 per cent of Giphy's traffic comes from various Facebook apps, including Instagram and WhatsApp. It added that the deal would not affect Giphy's earlier arrangements with platforms like Snapchat, Twitter and TikTok.
'We are prepared to show regulators that this acquisition is positive for consumers, developers and content creators alike,' Facebook said in June 2020.
Last month, the CMA said its provisional findings suggested that the Giphy acquisition would hurt competing social media platforms and stifle competition in the digital advertising competition market.
'Millions of posts every day on social media sites now include a GIF. 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,' the CMA said.
'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 watchdog said it was concerned that Facebook might ask other social media network to give away more user data to access GIFs.
The CMA declined to accept an offer Facebook made earlier this year for customers and rivals to be able to access Giphy's library on the same terms as before the deal for five years.
"Our preliminary view was that full divestiture of GIPHY would represent a comprehensive and effective remedy," a CMA spokesperson told Reuters.
"However, we will consider any behavioural remedies put forward as part of our consultation."
The CMA's final decision on the Giphy deal is due on 6th October. Facebook could appeal the decision.