Uber-Careem merger gets CCP’s nod

–Uber asked to apply a ceiling on its ‘surge multiplier’ at a maximum of 2.5 times the non-surge price

–Safety features to be introduced within the driver application wherein the riders can complain about the driver’s behaviour or vice versa

ISLAMABAD: The Competition Commission of Pakistan (CCP) has approved the Uber-Careem merger after approximately a year of Uber announcing its acquisition of Careem for $3.1 billion.

The merger approval came through a Phase-II Order and imposes pro-competitive and tough conditions on both players.

CCP had opened the Phase-II review of the proposed merger in August last year after the usual Phase I review failed to arrive at a decision. Phase-II is an in-depth analysis of the merger’s effects on competition and requires more time. Multiple detailed hearings were reportedly held at CCP before the issuance of today’s statement announcing approval for the merger.

According to a press release issued by CCP on Thursday, the conditions imposed are to ensure “a level playing field for the new entrants/competitors in the app-based Ridesharing market”.

The said conditions will remain applicable on Uber up to three years after the merger or until the occurrence of “Meaningful Market Entry” of competitors.

The statement issued by CCP defines meaningful market entry as the time “when one or more Ridesharing Services Provider(s) enter Pakistan and achieve individually at least 25pc (market share), or collectively at least 33.3pc (market share) of weekly ridesharing trips on average for three consecutive months. This condition will allow competitors to grow and flourish in the app-based ridesharing market 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 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 quality of services, and possible lack of innovation.

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. Uber shall maintain the contractual service fee for UberGo and UberMini across all drivers, nationwide, in the range of 22.5pc to 27.5pc. 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 12.5pc per year on the total organic fare charged to riders for a trip, as that would protect the consumers from the unreasonable increase in fares.

Moreover, on the topic of “Surge”, which is a pricing mechanism to raise fares during peak or rush hours, CCP has directed Uber to apply a ceiling on its “surge multiplier” at a maximum level of 2.5 times the non-surge price. This will protect the consumers from the unrealistic hike in the fare during peak hours.

CCP said, “These conditions will ensure that there is no unreasonable increase in prices post transaction, thereby protecting consumers from burdensome increases in fares.”

The issued order also states that Uber shall grant access on a one-time basis to new/existing ridesharing service providers “point of interest map data” against the payment of applicable license fee. 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.

To address its concern that Uber continues to bring innovation to its business after the merger, the CCP has directed Uber to dedicate 10 engineers to work on R&D activities focused on product, service innovation. To address the issue, Uber has committed to introducing a DOST/Hero application, which will enable drivers to earn money while not driving by recruiting other drivers.

Moreover, Uber will introduce safety features within the driver application wherein the riders can complain about the driver’s behaviour or vice versa. An Uber Lite version of the application will also be introduced that runs on low bandwidth mobile networks and also on older Android phones.

To address the CCP’s concerns about potential exploitation of riders, Uber shall not introduce personalized pricing in Pakistan. This ensures that the post-transaction entity will not be able to charge different prices to different Riders for similar journeys.

Talking to this scribe, Uber spokesperson Hyder Bilgrami said, “We welcome the decision by the 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.”

Meanwhile, Careem said in a statement, “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.”

Prior to today’s announcement, Pakistan was one of the only three counties where Uber operates to grant the permission for the merger. The other two countries are Qatar and Morocco, both of which have disallowed the merger with the former also issuing orders of potential penalties if Uber continues with the merger in that country.