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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

Zuckerberg testified before FTC during antitrust probe into Facebook

Photo: Tobias Hase/Picture Alliance via Getty Images

Facebook CEO Mark Zuckerberg testified during a Federal Trade Commission hearing this week as part of the agency's antitrust investigation into the social media company, Politico reports.

Why it matters via Axios' Ashley Gold: The FTC deposing Zuckerberg is not a surprising move in an antitrust case that may result in a lawsuit. It also gives the agency some cover after being criticized for not having Zuckerberg testify in the Cambridge Analytica data scandal case.

Dems race to address, preempt stimulus fraud claims

Illustration: Aïda Amer/Axios

Biden officials are working to root out the systematic fraud in unemployment and Paycheck Protection Program claims that plagued the Trump administration’s efforts to boost the economy with coronavirus relief money, Gene Sperling told House committee chairmen privately this week.

Why it matters: President Biden just signed another $1.9 trillion of aid into law, with Sperling tapped to oversee its implementation. And the administration is asking Congress to approve another $2.2 trillion for the first phase of an infrastructure package.

1 hour ago - Politics & Policy

Scoop: Biden close to picking Nick Burns as China ambassador

Nicholas Burns. Photo: Alex Wong/Getty Images

Nicholas Burns, a career diplomat, is in the final stages of vetting to serve as President Biden’s ambassador to China, people familiar with the matter tell Axios.

Why it matters: Across the administration, there's a consensus the U.S. relationship with China will be the most critical — and consequential — of Biden's presidency. From trade to Taiwan, the stakes are high. Burns could be among the first batch of diplomatic nominees announced in the coming weeks.