Facebook ‘s acquisition of Giphy and the subsequent addition to Instagram was widely celebrated by the company. Perhaps it attracted some bad karma, for UK antitrust watchdog, Competition and Markets Authority has started inquiry of the deal, on grounds of violating competitive practices.
The authority suspects that the two companies have let go of their separate entities, and become one single organisation. Also, it suspects that the merger has caused the competition to lessen in the markets these two companies operate in, saying that the “CMA is considering, pursuant to section 22 of the Act, whether it is or may be the case that a relevant merger situation has been created and whether the creation of that situation has resulted or may be expected to result in a substantial lessening of competition in any market or markets in the United Kingdom.”
During the investigation, CMA, Facebook, Tabby Acquisition, Facebook UK and Giphy shall not “take any action which might prejudice a reference of the transaction under section 22 of the Act or impede the taking of any action under the Act by the CMA which may be justified by the CMA’s decisions on such a reference.”
These entities have also been stopped from undertaking any actions that can, “lead to the integration of the Giphy business with the Facebook business”, “transfer the ownership or control of the Facebook business or the Giphy business or any of their subsidiaries” or, “otherwise impair the ability of the Giphy business or the Facebook business to compete independently in any of the markets affected by the transaction. ”
There’s a whole announcement, which goes into extensive detail about what the concerned parties can and cannot do while the investigation is taking place, and why the investigation is happening in the first place. The gist of it is, CMA suspects Facebook and Giphy merging into a single entity, which would impact the competition in a negative way. All the restrictions placed on the companies are set in place to make sure that the two companies maintain their individual identities.
Now this may seem weird, seeing how GIFs are free and Giphy has not made any money so far. However, when it comes to Facebook, all investigations are somewhat valid. The company has been in the crosshairs of watchdogs in both U.S. and U.K., and honestly, can you blame them?
With the ongoing investment, the Giphy deal is now up in the clouds of uncertainty.
