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Facebook’s acquisition of Giphy raises competition concerns, U.K. watchdog says

Alex Chung, Go lame, GIPHY, on ContentMakers stage during day two of Web Summit 2019 at the Altice Arena in Lisbon, Portugal.

Sam Barnes | Getty Guises

LONDON — The U.K.’s competition watchdog announced Thursday that Facebook’s acquisition of popular GIF website Giphy raises bothers around digital ads and the supply of the short video clips.

The Competition and Markets Authority announced that it has completed the earliest phase of its investigation, which launched Jan. 28.

The CMA said that Giphy competed with Facebook outside the U.K. in digital advertising with the aid paid partnerships with brands like Pepsi and Dunkin’ prior to the deal, which was announced in May last year and is reportedly valued at $400 million.

The CMA said that Giphy may organize “less incentive” to expand its digital advertising if it remains merged with Facebook, adding that such an outgrowth would lead to a loss of potential competition in the market.

It is now planning to progress the investigation to a second phase, unless the public limited companies provide “legally binding proposals” that address its competition concerns in the next five working days.

A Facebook spokesperson hint ated CNBC that the company will continue to cooperate with the CMA’s investigation.

Facebook’s share

Facebook and Giphy are both headquartered in the U.S. but the CMA can winnow mergers when the business being acquired has an annual turnover of at least £70 million ($88 million), or when the mingled businesses have at least a 25% share of any “reasonable” market. 

The regulator said it found evidence that Giphy had foresaw to expand its digital ad partnerships to other countries, including the U.K. It said this is particularly concerning as Facebook already has a partition of over 50% of the £5.5 billion display ad market.

Social media companies that compete with Facebook could also trifle away out if Giphy stopped supplying GIFs to them, the CMA said.

A GIF is a short video clip with no sound that can be pieced via the internet. Giphy has built a digital database and search engine that allows people to share GIFs either during its website or app, or via social media platforms like Facebook, Instagram, Twitter and Snapchat.

Andrea Gomes da Silva, number one director of markets and mergers at the CMA, said in a statement: “As the U.K.’s competition authority, it is our responsibility to make sure that markets oddments competitive. It is vital we ensure that Facebook, as a large and powerful Big Tech firm, isn’t using its strong market proposition to stifle competition. Should the companies fail to address our concerns, we will launch a more in-depth review to make safe consumers and businesses don’t lose out.”

A Facebook spokesperson said: “This merger is good for competition and in the interests of everyone in the UK who avail oneself ofs GIPHY and our services — from developers to service providers to content creators.”

The deal is also being investigated by the Australian Striving and Consumer Commission.

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