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Uber Acquisition Of Careem Approved By Egypt Competition Regulator


12/30/2019


Uber Acquisition Of Careem Approved By Egypt Competition Regulator
The plans of ride hailing giant Uber to expand in the Middle East through the acquisition of the Egypt based regional rival Careem got a boost after the regulators in Egypt cleared the deal, albeit with a set of commitments from the United States based ride hailing service about not taking any business measures that can reduce the competition in the market.
 
Both that companies had announced the acquisition deal back in March this year following negotiations for a total of nine months between them. The Careem deal is seen as a major achievement for Uber in a foreign after the company was forced to divest a number of its overseas businesses.
 
Both the companies expect to complete the deal by January next year pending approval by a number of regulators in the Middle East of which Egypt was the most significant because it is currently the largest ride hailing services market of the region with its population of about 1000 million and rising. 
 
Post the acquisition, Careem will be transformed in a wholly owned subsidiary of Uber but the two companies have agreed to keep the operation of the company as an independent one with a management team of its own .
 
“We welcome the decision by the Egyptian Competition Authority (ECA) to approve Uber’s pending acquisition of Careem,” a spokesman for Uber said. “Uber and Careem joining forces will deliver exceptional outcomes for riders, drivers, and cities across Egypt.”
 
There were however a number of commitments that had to be made to the Egyptian regulator by the San Francisco-headquartered company which included Uber agreeing to do away with the exclusivity provisions with partners and intermediaries as well as take measures to reduce the barriers to entry in the industry in the region.  
 
Uber will nominate, and the Egyptian regulator will approve, an independent monitoring trustee which will be mandated to ensure that Uber sticks to and implements its commitments made to the regulator. In order to ensure compliance, random samples of trip data will be shared by Uber with the trustee every month.
 
According to the agreement reached with the Egyptian regulator, the commitments made by Uber are to be maintained in letter and spirit for  a period of five years from the date the transaction closes or till such time that one or more ride hailing service offering rivals in the region is able to achieve a 20 per cent market share of the weekly rides individually or 30 per cent of the same share collectively in overlapping areas excluding Cairo and Alexandria, Egypt’s biggest cities.
 
Under the agreement between the Egyptian regulators and Uber, the annual fare increases by Uber will have to be capped at 10 per cent on account of inflation for Uber X and Careem GO – the two most popular ride hailing services in Egypt. That will however not include surge pricing.
 
Surge pricing is a pricing mechanism that is used by companies to increase prices for rides when there is high demand and shortage of supply of bookable cars during any time of the day. However the regulator has also capped this surge pricing at 2.5 times of the base fare for Uber X and Careem GO.
 
(Source:www.reuters.com)