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Thursday, 25 October 2018

Egypt competition watchdog warns Uber and Careem of fines up to EGP 500 mn each in case of merger

** #1 Competition watchdog warns Uber and Careem of fines up to EGP 500 mn each in case of merger: The Egyptian Competition Authority (ECA) has sent another sharp, unprecedented warning to ride-hailing companies Uber and Careem that they could be fined up to EGP 500 mn each if they go through with a merger that has been the subject of wide speculation in the business press. Any merger would be harmful to the competition and consumers, the watchdog said in a statement on Wednesday (pdf). A separate statement emailed to reporters noted that the companies have not yet denied they were in merger talks (which isn’t exactly the case, as we note below.)

The ECA’s argument: “Uber and Careem are the only ride-hailing applications available in Egypt. Any anticompetitive interaction or harmonization of their business strategies including agreement to merge has the potential to cause serious and irrecoverable damage to Egyptian competition and consumers,” said ECA Chairman Amir Nabil. The warning, which the ECA’s board unanimously approved, apparently followed an investigation that showed that “riders and drivers both benefit substantially from current competition between Uber and Careem, and that these benefits will be lost if the two parties ceased to compete.”

Measures to avoid a fine: The statement noted that to avoid a fine, the ECA would have to grant them an exemption to the Antitrust Act (or Egyptian Competition Act). The firms must notify it officially of their intentions to merger, give it 60 working days after the notification to study the impact, and not consummate a marriage without the authority’s approval.

Taking the case to national television: Egyptian Competition Authority Chairman Amr Nabil discussed the issue at length on Masaa DMC (watch, runtime: 17:21).

Background: This is the second time the ECA has warned the companies against merger — but the first time the watchdog has threatened them with fines. The authority had issued its first warning last month following a Bloomberg report in July saying that Uber was in talks to acquire its regional rival Careem. While both companies denied the initial reports, Bloomberg revealed earlier this month that talks were ongoing and that the potential merger could be worth USD 2-2.5 bn. Uber’s CEO met with President Abdel Fattah El Sisi after the first warning. In its warning, the ECA had cited a similar case in Singapore where the US company and its Asian rival Grab were fined a combined USD 9.5 mn.

Move comes as ECA seeks M&A sign-off powers: The competition authority has been bidding for more than a year now for the authority to sign off on mergers or acquisitions worth more than EGP 100 mn; it is championing amendments to the Antitrust Act to that effect.

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