In May 2020, Facebook announced plans to buy Giphy, one of the world’s largest GIF libraries. However, following an investigation, the UK’s Competition and Markets Authority (CMA) raised competition concerns about the acquisition. If these concerns are confirmed, Facebook could be forced to unwind the deal and sell off Giphy.

The CMA’s final report on the deal is due in early October. The unwinding of a merger is unexplored territory for regulators, so this case could set an important precedent for future M&A activity.

Antitrust watchdogs are increasingly targeting Big Tech

According to GlobalData’s deals database, GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) completed a total of 168 M&A deals between 2018 and 2020. Most of these deals were not investigated, nor were competition authorities notified. According to merger regulations in most jurisdictions, including the CMA and the US Federal Trade Commission (FTC), notification is obligatory if the acquisition exceeds specific turnover thresholds.

Antitrust watchdogs are increasingly concerned that digital platforms use acquisitions to crush competitors, as Facebook did to Instagram.

Facebook has already attracted the FTC’s scrutiny

Prior to the CMA probe, the FTC opened an antitrust investigation against Facebook in October 2020, which contemplates the unwinding of its purchases of Instagram and WhatsApp. Facebook’s aggressive M&A strategy targets players that it thinks might be potential threats to nullify the competition.

The company’s acquisition of Instagram in April 2012 is a prime example. Instagram was a rapidly growing startup that emerged at a critical time when users were switching to smartphones and were increasingly embracing photo-sharing apps. According to the FTC’s complaint, filed in 2020, Facebook initially tried to compete with Instagram by improving its own offerings, but once it realized it posed a threat to its monopoly power, it chose to buy it instead.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

View profiles in store

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

Submit

UK USA Afghanistan Åland Islands Albania Algeria American Samoa Andorra Angola Anguilla Antarctica Antigua and Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bermuda Bhutan Bolivia Bonaire, Sint Eustatius and Saba Bosnia and Herzegovina Botswana Bouvet Island Brazil British Indian Ocean Territory Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Islands Central African Republic Chad Chile China Christmas Island Cocos Islands Colombia Comoros Congo Democratic Republic of the Congo Cook Islands Costa Rica Côte d"Ivoire Croatia Cuba Curaçao Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Falkland Islands Faroe Islands Fiji Finland France French Guiana French Polynesia French Southern Territories Gabon Gambia Georgia Germany Ghana Gibraltar Greece Greenland Grenada Guadeloupe Guam Guatemala Guernsey Guinea Guinea-Bissau Guyana Haiti Heard Island and McDonald Islands Holy See Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Isle of Man Israel Italy Jamaica Japan Jersey Jordan Kazakhstan Kenya Kiribati North Korea South Korea Kuwait Kyrgyzstan Lao Latvia Lebanon Lesotho Liberia Libyan Arab Jamahiriya Liechtenstein Lithuania Luxembourg Macao Macedonia, The Former Yugoslav Republic of Madagascar Malawi Malaysia Maldives Mali Malta Marshall Islands Martinique Mauritania Mauritius Mayotte Mexico Micronesia Moldova Monaco Mongolia Montenegro Montserrat Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands New Caledonia New Zealand Nicaragua Niger Nigeria Niue Norfolk Island Northern Mariana Islands Norway Oman Pakistan Palau Palestinian Territory Panama Papua New Guinea Paraguay Peru Philippines Pitcairn Poland Portugal Puerto Rico Qatar Réunion Romania Russian Federation Rwanda Saint Helena, Ascension and Tristan da Cunha Saint Kitts and Nevis Saint Lucia Saint Pierre and Miquelon Saint Vincent and The Grenadines Samoa San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Solomon Islands Somalia South Africa South Georgia and The South Sandwich Islands Spain Sri Lanka Sudan Suriname Svalbard and Jan Mayen Swaziland Sweden Switzerland Syrian Arab Republic Taiwan Tajikistan Tanzania Thailand Timor-Leste Togo Tokelau Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Turks and Caicos Islands Tuvalu Uganda Ukraine United Arab Emirates US Minor Outlying Islands Uruguay Uzbekistan Vanuatu Venezuela Vietnam British Virgin Islands US Virgin Islands Wallis and Futuna Western Sahara Yemen Zambia Zimbabwe Kosovo

Industry * Academia & Education Aerospace, Defense & Security Agriculture Asset Management Automotive Banking & Payments Chemicals Construction Consumer Foodservice Government, trade bodies and NGOs Health & Fitness Hospitals & Healthcare HR, Staffing & Recruitment Insurance Investment Banking Legal Services Management Consulting Marketing & Advertising Media & Publishing Medical Devices Mining Oil & Gas Packaging Pharmaceuticals Power & Utilities Private Equity Real Estate Retail Sport Technology Telecom Transportation & Logistics Travel, Tourism & Hospitality Venture Capital

Tick here to opt out of curated industry news, reports, and event updates from Verdict.

Submit and download

Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Moved by similar concerns, the European Commission fined Facebook €110m ($129m) in 2017 for misleading regulators over its takeover of the WhatsApp messaging service three years earlier.

Giphy could add to Facebook’s competitive advantage

According to the CMA’s analysis, Facebook’s platforms, including WhatsApp and Instagram, already account for over 70% of the time people spend on social media. It also found that before the Facebook and Giphy deal, the latter was considering expanding its advertising services to other countries, including the UK. This would have brought a new player into the online advertising market and a potential challenger to Facebook in this segment.

Facebook aims to integrate Giphy with Instagram. That could lead to Facebook withdrawing GIFs from competing platforms, such as TikTok, Twitter, and Snapchat, or restricting access to those willing to provide additional data. In the EU, the social media giant has already been attacked for its dominance in the online advertising market and perceived monopoly over its users’ data.

Regulatory bodies worldwide are considering measures to curb Big Tech’s growing power, including mandating the spin-off of specific business units or subsidiaries. The FTC has also asked for Instagram and WhatsApp to be split off from the main Facebook company but must demonstrate that Facebook illegally maintains monopoly power, which is not an easy task.

If the CMA is able to unwind Facebook and Giphy, it would set an important precedent for future M&A activity. No matter the outcome, Big Tech’s M&A activity will come under increased scrutiny in the future.