In a major development in the case of international merger of Uber and Careem, the Competition Commission of Pakistan (CCP) has decided to open the Phase-II review of the proposed merger to address the competition concerns, if any, arising out of the merger. Phase-II is an in-depth analysis of the merger's effects on competition and requires more time. It is opened when the case cannot be resolved in Phase-I, ie. when the Commission has concerns that the transaction could restrict competition in the relevant market.
According to sources, the CCP is legally empowered to impose conditions before approving the merger to address competition concerns. An order passed by the CCP, a copy of which is available with Business Recorder, states: "The transaction is likely to result in strengthening of dominant position in the relevant market (of Ridesharing) as it meets the presumption of dominance as determined under Section (2) (1) (e) read with Section 3 of the Competition Act,"
The order further states: "In conclusion, the Commission finds that the proposed transaction is likely to substantially lessen competition through the creation or strengthening of a dominant position in the relevant market. Accordingly, a Phase-II is hereby initiated under Section 11 (6) of the Competition Act."
In a joint pre-merger application submitted with CCP, Uber and Careem had sought merger approval in the first phase on the grounds that ridesharing services are part of the broader local, urban transportation market including all the means of transporting people from A to B including rickshaws, taxis, buses and mini buses. Based on this definition of the relevant market, the applicants submitted that their combined market share never made them dominant in the relevant market.
However, the CCP did not agree with this assessment of Uber and Careem, stating that "ridesharing by reasons of its characteristics, prices, and intended usage is not interchangeable or substitutable with the other modes of transportation as stated above." Uber Technologies, Inc. is an American multinational transportation network company (TNC) offering services that include peer-to-peer ridesharing, ride service hailing, food delivery, and a bicycle-sharing system.
The company is based in San Francisco and has operations in over 785 metropolitan areas worldwide. Careem is the internet platform for the greater Middle East region. Established in July 2012, Careem operates in 120 cities across 15 countries and has created more than one million economic opportunities in the region.
In March 2019, Uber announced that it has reached an agreement with Careem for Uber to acquire Careem for $3.1 billion, consisting of $1.7 billion in convertible notes and $1.4 billion in cash. The acquisition of Careem is subject to applicable regulatory approvals. The transaction is expected to close in Q1 2020.
Uber will acquire all of Careem's mobility, delivery, and payments businesses across the greater Middle East region, ranging from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates. Upon closing, Careem will become a wholly-owned subsidiary of Uber, preserving its brand. Careem co-founder and CEO Mudassir Sheikha will lead the Careem business, which will report to its own board made up of three representatives from Uber and two representatives from Careem. Careem and Uber will operate their respective regional services and independent brands.
Pakistani consumers are eyeing on CCP for its decision of this important merger as there are widespread concerns that it might lead to costlier services by eliminating competition. However, sources familiar with the development told Business Recorder that CCP may impose conditions before approving the merger to address competition concerns.
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