Home Law in IT Bloomberg: Giphy underestimated its value before the deal with Facebookto avoid antitrust scrutiny

Bloomberg: Giphy underestimated its value before the deal with Facebookto avoid antitrust scrutiny

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According to report Bloomberg, Giphy dropped in value before it was bought out by Facebook. The amount of the deal was so low that the companies didn’t need to report it to antitrust regulators. By doing so, they hoped to avoid the scrutiny of the takeover.

Facebook bought gif image search service Giphy last May. The company did not specify the amount of the deal, but according to Axios’ website sources, it made up about $400 million. Negotiations between the companies began before the coronavirus epidemic, but at the time they were discussing a partnership rather than a sale.

Bloomberg inside sources said Giphy paid investors a dividend before the takeover. This reduced its value to $18.8 million at the time of the deal. Thanks to this, the companies did not need to inform the antitrust agencies about the purchase. Under U.S. law, companies are required to inform the agency only if the amount of the transaction exceeds $92 million.

As Bloomberg points out, this method does not violate U.S. law. But it was a very bold move for Facebook. At the time, the company was under investigation for suppressing competition by taking over other companies. In addition, this move did not help it to avoid inspections by the regulator.

In April of this year, the U.K. antitrust watchdog began audit Giphy deal. Buying the service, she said, could lead to its removal from the resources of Facebook’s competitors. In addition, the new owners could require more data from users to access the service.

On Aug. 21, the U.S. Federal Trade Commission filed a second lawsuit against Facebook, accusing the company of violating antitrust laws by buying Instagram and WhatsApp. According to the agency, unable to withstand competition, Facebook illegally bought the services when their popularity became a threat.

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