May 15, 2020 - Technology

Facebook's Giphy acquisition invites antitrust attention

Illustration: Sarah Grillo/Axios

Facebook's acquisition of Giphy, the platform for sharing animated images, could raise antitrust questions for the social network at a time when it is already under intense scrutiny.

The big picture: State and federal agencies are investigating Facebook for potential anticompetitive actions. The Federal Trade Commission is also reviewing a decade's worth of smaller acquisitions by Facebook and other tech giants.

  • "In the current political environment, regardless of the merits of an antitrust case against a transaction, the reality is that the FTC is likely to face intense criticism and pressure whether it does something or doesn’t do something in this matter," Michael Kades, director of markets and competition policy at the Washington Center for Equitable Growth, told Axios.

Details: The Facebook-Giphy transaction is not subject to any mandatory merger control review, a source familiar with the deal told Axios. Such reviews are triggered for deals that reach certain financial thresholds.

But regulators could investigate anyway.

  • Maureen Ohlhausen, former chair of the Federal Trade Commission, said even a deal that doesn't face mandatory review is not "immune to the antitrust laws." "This is not one that is flying under the radar screen," Ohlhausen told Axios.
  • Sen. Amy Klobuchar (D-Minn.), ranking member of the Senate Judiciary antitrust subcommittee, called on the FTC or Justice Department to investigate.
  • "Many companies, including some of Facebook’s rivals, rely on Giphy’s library of sharable content and other services, so I am very concerned about this proposed acquisition," Klobuchar said in a statement.

Yes, but: Some say Facebook's proceeding with the deal indicates the company is not too worried about antitrust regulators, even in this climate.

  • "They probably feel like this is a pretty safe deal that makes business sense, even with the investigations going on," said Neil Chilson, a former FTC chief technologist now with the Charles Koch Institute.
  • Chilson noted that Facebook and Giphy are not direct competitors.
  • “It suggests that Facebook doesn’t believe that they’re operating in an environment where they will automatically face challenges for any acquisitions they make," Kades said.

Context: The key questions in a potential investigation would involve barriers to entry — how hard it was to build Giphy and how challenging it would be for a competitor to replicate Giphy's interoperability with other companies, said Charlotte Slaiman, competition policy director at Public Knowledge.

  • "If Facebook buys Giphy, they may have an incentive to withhold some of those interoperabilities," Slaiman told Axios. "But if the companies working with Giphy now can replace it with a competitor, that weakens that argument."
  • In a blog post, Facebook said Giphy will continue to operate its library. "People will still be able to upload GIFs; developers and API partners will continue to have the same access to Giphy’s APIs; and Giphy’s creative community will still be able to create great content," Facebook said.

Observers of the deal raised other concerns, suggesting that Facebook might mine data from Giphy users in various ways and use the service as a means to observe user behavior on platforms beyond Facebook.

  • Some also noted that the company's image library is full of borrowed clips from movies and TV shows that could cause Facebook copyright headaches.

The bottom line: "The concern is that in the social networking space, Facebook is the only game in town," Kades said. "Does acquiring Giphy help build a bigger wall to someone else doing a new social network that could be competitive to Facebook?"

Go deeper

Updated 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7:30 p.m. ET: 6,722,408 — Total deaths: 393,934 — Total recoveries — 2,996,534Map.
  2. U.S.: Total confirmed cases as of 7:30 p.m. ET: 1,894,502 — Total deaths: 109,000 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.

Scoop: German foreign minister to travel to Israel with warning on annexation

Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

German Foreign Minister Heiko Maas is expected to travel to Israel next week to warn that there will be consequences if Israeli leaders move forward with plans to annex parts of the West Bank, Israeli officials and European diplomats tell me.

Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.

Minneapolis will ban police chokeholds following George Floyd's death

A memorial for George Floyd at the site of his death in Minneapolis. Photo: Steel Brooks/Anadolu Agency via Getty Images

Minneapolis has agreed to ban the use of police chokeholds and will require nearby officers to act to stop them in the wake of George Floyd's death, AP reports.

Why it matters: The agreement between the city and the Minnesota Department of Human Rights, which has launched an investigation into Floyd's death while in police custody, will be enforceable in court.