The Competition Commission of Pakistan (CCP) has strongly recommended that the legislature should introduce a modern law for the regulation of ridesharing market in the transport sector.
According to the order of the CCP on Uber-Careem merger approval, "the ridesharing market is a developing sector and can also fetch a significant FDI and may provide new employment opportunities. At the moment, this increasingly important developing segment of the economy has no regulatory legal framework in place; therefore, the Bench strongly recommends that the concerned legislature should propose a modern regulatory law for regulation of this sector inter alia taking care of licensing and issuing certificates of road-worthiness of vehicles".
The CCP approved the Uber-Careem merger through a phase-II order, imposing pro-competitive and tough conditions ensuring a level-playing field for the new entrants/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 market entry will occur when one or more ridesharing services provider(s) enter Pakistan and achieve individually at least 25 percent (market share), or collectively at least 33.3 percent (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, 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 percent to 27.5 percent. 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 percent per year on the total organic fare charged to riders for a trip, to protect consumers from unreasonable increase in fares. Moreover, surge is a pricing mechanism to raise fares during peak or rush hours.
The CCP has directed Uber to apply a ceiling on its surge multiplier at a maximum level of 2.5 times the non-surge price on the applicable products Pakistan-wide. This will protect the consumers from unrealistic hike in fare, during peak hours. These conditions will ensure that there is no unreasonable increase in prices post-transaction, thereby protecting consumers from burdensome increases in fares.
Another important condition is 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 introduce 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 behavior 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. All these conditions will apply until the earlier of (a) three-year anniversary of the completion of the transaction or (b) the occurrence of national or local meaningful market entry. To ensure compliance with these conditions, Uber shall engage a third-party monitoring trustee who will submit a regular compliance report to the CCP.
In view of the above, the commission believes that, although the transaction will result in increased market power and decreased competitive constraints, the conditions it is imposing on Uber sufficiently address its competition concerns. The transaction, therefore, has been authorized under Section 31(1)(d)(i) of the Competition Act, 2010.
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