CCP okays Uber-Careem merger, attaches conditions

Updated February 21, 2020

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The Competition Commission of Pakistan (CCP) has approved the Uber and Careem merger, imposing pro-competitive and tough conditions ensuring a level-playing field for new entrants and competitors in the app-based ridesharing market. — Dawn.com/File
The Competition Commission of Pakistan (CCP) has approved the Uber and Careem merger, imposing pro-competitive and tough conditions ensuring a level-playing field for new entrants and competitors in the app-based ridesharing market. — Dawn.com/File

ISLAMABAD: The Competition Commission of Pakistan (CCP) has approved the Uber and Careem merger, imposing pro-competitive and tough conditions ensuring a level-playing field for new entrants and competitors in the app-based ridesharing market.

The conditions will remain applicable on Uber up to three years after the merger or until the occurrence of ‘meaningful market entry of competitors’.

Meaningful entry will occur when one or more ridesharing services provider(s) launch in Pakistan and achieve individually at least 25 per cent market share, or collectively at least 33.3pc of weekly ridesharing trips on average for three consecutive months.

This condition will allow competitors to grow and flourish in the app-based ridesharing and for the merged entity not to abuse its dominant position.

The CCP opened a Phase-II review of the merger as it was resulting in a significant lessening of competition in the market for ridesharing apps.

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 quality of services, and possible lack of innovation.

The commission 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 nationwide, in the range of 22.5-27.5pc. This cap will ensure that drivers or captains do not see a decrease in their earnings.

The CCP has also directed Uber to apply a cap of 12.5pc per year on the Total Organic Fare charged to riders for a trip to protect consumers from unreasonable increases.

At the same time, it has directed that the surge is price to raise fares during peak or rush hours will have a maximum ceiling of 2.5 times the non-surge price on the applicable products countrywide.

To address the concern that Uber continues to bring innovation in business after the merger, the CCP has directed the tech giant to dedicate 10 engineers to work on research and development activities focused on product and service innovation.

While Uber has committed to introduce a ‘DOST/Hero’ application, which will enable drivers to earn money while not driving by recruiting others, it will bring in safety features within the driver application to let either side submit any complains about the demand/supply.

To ensure compliance with these conditions, Uber will have to engage a third-party ‘monitoring trustee’ for a regular compliance report to the CCP.

Responding to the development, Careem issued a statement praising the CCP move:

"We are pleased with CCP's approval for Careem's pending acquisition by Uber and believe that appropriate safeguards have been included in order to ensure healthy competition within the market. We are impressed by the thorough vetting process undertaken by the CCP and will continue to work with the regulators to ensure a transparent and competitive environment that will benefit our captains, customers and the ride hailing industry at large."

A statement from Uber said:

“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.”

Published in Dawn, February 21st, 2020