Facebook could be forced to reverse its multi-million-pound takeover of Giphy after the UK competition watchdog said the deal could harm other social media sites.
The Competition and Markets Authority (CMA) said that it might force the 400-million-dollar (£289 million) acquisition to be unwound.
The CMA said that Facebook could use the takeover to deny other social media platforms access to Giphy’s moving images, called gifs.
The gifs are used by millions of people worldwide, and if Facebook were to remove them from other platforms, such as TikTok or Twitter, it could make people stop using these social media sites.
Facebook could alternatively use its control of Giphy to demand that its rivals hand over more data on their users.
“Such actions could increase Facebook’s market power, which is already significant,” the CMA said.
Facebook said it disagreed with the CMA’s findings.
More than 70% of the time that people spend on social media is on Facebook or WhatsApp and Instagram, both of which it owns.
Stuart McIntosh, who chaired the investigation for the CMA, said: “Millions of people share gifs every day with friends, family and colleagues, and this number continues to grow.
“Giphy’s takeover could see Facebook withdrawing gifs from competing platforms or requiring more user data in order to access them.
“It also removes a potential challenger to Facebook in the £5.5 billion display advertising market. None of this would be good news for customers.”
“While our investigation has shown serious competition concerns, these are provisional. We will now consult on our findings before completing our review.
“Should we conclude that the merger is detrimental to the market and social media users, we will take the necessary actions to make sure people are protected.”
Facebook and Giphy, both of which are based in the US, announced in May 2020 that they were going to combine.
In January this year the CMA launched its investigation into the case. It is set to release its final report in October.
Facebook said: “We disagree with the CMA’s preliminary findings, which we do not believe to be supported by the evidence.
“As we have demonstrated, this merger is in the best interest of people and businesses in the UK – and around the world – who use Giphy and our services.
“We will continue to work with the CMA to address the misconception that the deal harms competition.”