Facebook has hit back at the UK’s competition watchdog for suggesting it may force the company to undo its multimillion-pound takeover of Giphy, saying that provisional findings contain “fundamental errors”.
The Competition and Markets Authority (CMA) previously said it might force the 400 million dollar (£289 million) acquisition to be reversed.
But in a strongly worded response on Wednesday, the social media giant questioned whether such action would be viable or enforceable.
The CMA said that Facebook could use the takeover to deny other social media platforms access to Giphy’s moving images, called gifs.
Stuart McIntosh, who chaired the investigation for the CMA, said: “Giphy’s takeover could see Facebook withdrawing gifs from competing platforms or requiring more user data in order to access them.”
It said such actions could increase Facebook’s market power, which is “already significant”.
Facebook’s response described the CMA’s complete divestiture remedy as “grossly unreasonable and disproportionate”, and questioned the watchdog’s authority to enforce such action.
It was necessary to demonstrate a “substantial lessening of competition” and the provisional findings “fell well short” of the legal requirement, the response said.
It said the CMA’s view that the merger would lead to a substantial lessening of competition in display advertising services in the UK was “erroneous”, adding that reversal of employment contracts would be “unnecessary” and “detrimental” to workers’ interests.
Facebook added that Giphy “currently has no existing commercial interest in conducting its activities in the UK”.
“This underscores the importance of the CMA not relying upon a speculative loss of potential competition theory of harm (with a negligible, if any, future impact in the UK) as a basis for forcing the divestment of an exclusively US business,” it said.
“The inability of the CMA to issue any order against Giphy raises serious questions as to the enforceability of any divestment order and whether any such order could be effective.
“These are questions which the CMA must carefully consider, and address, before taking the extreme intrusive step of ordering the sale of a company which does not carry on business in the UK.”
The CMA is set to release its final report on the deal in October.
A CMA spokesperson said: “The CMA provisionally found that Facebook’s merger with Giphy will harm competition between social media platforms and remove a potential challenger in the display advertising market.
“Our preliminary view was that full divestiture of Giphy would represent a comprehensive and effective remedy.
“However we will consider any behavioural remedies put forward as part of our consultation.”