In a provisional finding, the UK’s Competition and Markets Authority (CMA) said Facebook’s control over Giphy could allow it to cut off other social media sites’ access to Giphy’s images. Giphy’s services currently integrate with services like Twitter, Snapchat, iMessage and Slack.
The finding is a blow to Facebook’s global aspirations amid intense antitrust scrutiny by governments around the world, and a potential red flag for other Big Tech companies pursuing acquisitions in this regulatory climate.
In a statement, a Facebook spokesperson said the company disagrees with the finding and that it lacks evidence.
“This merger is in the best interest of people and businesses in the UK — and around the world — who use Giphy and our services,” the spokesperson said. “We will continue to work with the CMA to address the misconception that the deal harms competition.”
The CMA said Thursday that Giphy had been planning to expand its growing advertising business to the UK before the Facebook acquisition, a move that could have given UK brands a new way to promote themselves and provided a direct challenger to Facebook in the advertising market.
“However, Facebook terminated Giphy’s paid advertising partnerships following the deal, meaning an important source of potential competition has been lost,” the CMA said in a blog post. A related document by the agency said that only a full spin-off of Giphy from Facebook would be enough to correct the harms to competition.
“A full divestiture of Giphy would represent a comprehensive and effective remedy,” the agency said. “At this point we have not identified any smaller divestiture package that would be similarly effective.”
The CMA is soliciting public feedback on its investigation and proposed remedy and is expected to issue a final decision by Oct. 6.