On Thursday, the U.K.’s competition regulator, the Competition and Markets Authority (CMA) said that it was going to conduct an in-depth investigation on the recent acquisition of Giphy by Facebook. Facebook had purchased the search engine company Giphy Inc. for $400 million. It has already completed an initial study and found that the deal brings up concerns about competition.
CMA said that it has seen evidence that Giphy was planning to increase its digital partnerships in the U.K as well as in other markets. After combining with Facebook, the company has lost its incentive to augment its digital ads business. As a result there is a loss of potential competitiveness.
The watchdog had given the companies five working days to reply to their concerns but Facebook did not respond. Although both Facebook and Giphy have their headquarters in the U.S., the CMA can follow up with the investigations as the business that was acquired had annual revenues of at least £70 million or an equivalent of approximately $96.5 million.
The watchdog could potentially complete its investigations by September 15. The Australian Competition and Consumer Commission are also investigating this merger.
Giphy is one of the world’s leading digital libraries for GIFs. These are animated images. They generally consist of pop up images or memes that are widely shared on the internet. The company competes with Google’s GIF platform Tenor as well as the start-up Gfycat.
A Facebook spokesperson told CNBC that they would continue to fully cooperate with the CMA’s investigation.
The U.K. regulators are taking a tougher approach as giant tech company buy up their competitors and create monopolies. In October, CMA Chief Executive Officer Andrea Coscelli had said that tech giants should face scrutiny for any transaction, no matter how small and the Facebook-Giphy transaction is not small.