Uber Careem merger approved by CCP but with powerful conditions

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February 21, 2020
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The Competition Commission of Pakistan has approved the Uber-Careem merger through a Phase-II order, imposing pro-competitive and tough conditions ensuring a level playing field for newcomers in the app-based ridesharing market.

The terms will remain applicable to Uber for up to three years following the acquisition or until the Competitors’ Meaningful Market Entry occurs. Significant market entrance will occur when one or more Ridesharing Services Providers enter Pakistan and gain a market share of at least 25 percent, or collectively at least 33.3 percent (market share) of weekly ridesharing trips on average for three consecutive months. This condition would encourage competitors to grow and flourish in the ridesharing market based on the app and not misuse its dominant position for the merged entity.

The CCP opened a Phase-II review of the merger as it was resulting in a significant lessening of competition in the market for app-based Ridesharing services. In its Phase II-Order, the CCP has imposed certain conditions on Uber to address the competition concerns regarding an increase in prices of products or services, discriminatory pricing, degradation in the quality of services, and possible lack of innovation.

Conditions by CCP

The CCP has imposed a “No Contractual Exclusivity” condition to ensure that drivers or captains are free to offer their services on any ridesharing platform they choose, as well as being street hailed.

Uber shall maintain the contractual Service Fee for UberGo and UberMini across all drivers, nation-wide, in the range of 22.5% to 27.5%. This Service Fee cap will ensure that drivers or captains do not see a decrease in their earnings.

The CCP has directed Uber to apply a cap of 12.5% per year on the Total Organic Fare charged to riders for a trip, to protect consumers from any unreasonable increase in fares.

In addition, surge or peak factor is a price-raising mechanism for fares during peak or rush hours. The CCP has ordered Uber to impose a limit on its surge multiplier to a maximum level of 2.5 times the non-surge price on the services in question. This will protect consumers during peak hours, against any unreasonable increase in the fare.

Another important condition is that Uber shall grant access to “point of interest map data”, on a one-time basis, to new or existing Ridesharing service providers against the payment of applicable license fees.

The CCP was of the view that control of data by a single undertaking with market power is a significant barrier to entry. This condition would offset any increase in the market power or the elimination of competitive constraints and ensure the ease of entry into the market.

Uber Agrees Happily

Uber’s spokesperson Hyder Bilgrami shared the company’s stance on the conditions by saying:

We welcome the decision by the Competition Commission of Pakistan (CCP) to approve Uber’s pending acquisition of Careem. Uber and Careem joining forces will deliver exceptional outcomes for riders, drivers, and cities across the country, and in this fast-moving part of the world.

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