Egyptian regulators have approved Uber’s $3.1 billion acquisition of regional rival Careem after agreeing to a set of commitments proposed by the U.S.-based ride-hailing service meant to reduce harm to competitors.
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Uber and Careem operate in the markets of app-hailed passenger vehicles, high capacity vehicles (“HCVâ€), scooters, and tuk-tuks; app-based food-delivery; and courier services. ECA’s investigation focused on the market for app-hailed passenger vehicles due to its size and importance on the Egyptian market.
The deal is expected to close in January, depending on regulatory approval in various territories of which Egypt is among the most significant.
Careem will become a wholly owned subsidiary of Uber but will continue to operate as an independent brand with independent management.
The Parties notified ECA of the proposed transaction on 7 April 2019, as per the Interim Measure Order, in order to avail an exemption under Article 6(2).
ECA found that the relevant product market is that of app-hailed passenger vehicles, and that street-hailed white taxis were found not to pose a particularly strong competitive constraint. The two firms are each other’s closest competitors on the relevant product market.
ECA identified the following barriers to entry onto the market: the lack of short-term profitability on the market; the requirements and costs of building and managing a network; the difficulty of accessing funds and of attracting drivers and vehicles; the difficulty of overcoming brand loyalty; and the importance of access to data.
These barriers mean that the transaction may lead to: increased prices, decreased quality and innovation, decreased consumer choice, incentives and ability to leverage market power to adjacent markets (such as that of app-hailed HCVs), and increased risks for new or established investments.
In order to mitigate the harms identified by ECA and minimize the barriers to entry, and hence be granted an exemption under Article 6(2), the Parties proposed a number of commitments, which ECA found would protect the rights of riders, drivers, and investors, as well as encourage innovation and entry onto the market. ■