Facebook questions British watchdog's authority to order Giphy sale

By Pushkala Aripaka and Yadarisa Shabong

(Reuters) - Facebook has made a case for not selling Giphy in a strongly worded response to Britain's competition regulator, and the tech firm questioned the watchdog's call for divesting the GIF website over access and anti-competitive concerns.

Facebook argued that "the inability of the CMA (Competition and Markets Authority) 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," in a letter published by the CMA on Wednesday.

The regulator last month hinted that Facebook, the world's largest social media company, might need to sell Giphy based on its preliminary findings that the deal would hurt the display advertising market and competing social media networks.

Facebook in its response said the CMA's provisional findings had "fundamental errors," and that the British regulator had failed to provide alternative remedies that would have been "far less intrusive and equally effective" for it to clear the deal.

"Our preliminary view was that full divestiture of GIPHY would represent a comprehensive and effective remedy," a CMA spokesperson said. "However we will consider any behavioural remedies put forward as part of our consultation."

Facebook bought Giphy, a website for making and sharing animated images, or GIFs, last year to integrate it with its Instagram platform. The deal, reportedly worth $400 million, has been subject of a CMA probe since January.

Another instance where the CMA ordered the sale of a merged unit was its February order for Viagogo to divest U.S.-based ticket reseller StubHub's international business. Viagogo complied.

The regulator has also set up a digital markets wing within it to check big tech companies' market dominance after saying existing rules were insufficient.

Facebook had said earlier that Giphy's integrations with other social platforms like Twitter, Snapchat and ByteDance's TikTok would not change due to the deal.

However, the CMA in its provisional findings said it was concerned that Facebook may require other social media platforms to give away more user data to access GIFs.

The CMA's final decision is due in October. Facebook could appeal the final decision or the remedy itself.

(Reporting by Pushkala Aripaka, Yadarisa Shabong and Nivedita Balu in Bengaluru; Editing by Shinjini Ganguli and Mark Porter)