The Competition Commission of Pakistan has approved the Uber-Careem merger through a Phase-II Order, imposing pro-competitive and tough conditions ensuring a level playing field for the new competitors in the app-based Ridesharing market.
Ease for Competitors
The conditions will remain applicable to Uber for 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 at least 25% market share, or collectively at least 33.3% (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 the quality of services, and possible lack of innovation.
Conditions for Captains
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% to 27.5%. This Service Fee cap will ensure that drivers or captains do not see a decrease in their earnings.
Limitations to Support Riders & Customers
The CCP has directed Uber to apply a cap of 12.5% per year on the Total Organic Fare charged to riders for a trip, to protect consumers from any unreasonable increase in fares.
Moreover, surge (Peak factor) 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. This will protect the consumers from any unrealistic hike in the 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.
Access to Data
Another important condition is that Uber shall grant access to “point of interest map data”, on a one-time basis, to new or existing Ridesharing service providers 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.
Innovation is Compulsory
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 app, 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 the 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:
(a) three year anniversary of the completion of the Transaction
(b) the occurrence of National or Local Meaningful Market Entry.
Uber shall engage a third-party Monitoring Trustee who will submit a regular compliance report to the CCP to ensure compliance with these conditions.
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.
Careem, in an email sent to ProPakistani, commented on CCP’s ruling and said:
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.
Sharing Uber’s official stance on the development, the company’s spokesperson Hyder Bilgrami 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.