“The Authority initially learned of the proposed transaction through leaked media reports in July and again more concretely in September. As the parties had not yet closed (and thus did not need to file a mandatory notification, as Egypt is a post-closing notification jurisdiction) the ECA took the highly unusual step of investigating sua sponte, prohibiting the contemplated deal ex ante. In its original administrative decree taken against the two firms, the ECA acknowledged in its opinion (only available in Arabic) that its competence is only that of a post-merger review body. Yet, the Authority based its administrative decision on the fact that it is able to take judicial notice of public facts, such as the Uber/Careem negotiation press reports, and that the companies did not deny their existence when the ECA inquired.
It therefore initiated a hypothetical analysis of the transaction, were it to proceed, on available data (including from other jurisdictions such as Singapore), concluding that, and based on the (would-be) parties’ size in the market and other ‘obvious evidence’, a merger would likely lead to unavoidable harm to competition and consumer welfare. The ECA based its decision on multiple provisions of competition law, including the new amendment to Article 20; Article 5 (extraterritoriality), Article 4 of the Investment Law protecting the Free competition in the market; Article 5 of the executive regulations (related parties), and even Article 6 (cartels), as well as quoting multiple foreign legal sources, such as the OECD’s research papers on ride-sourcing services and on two-sided markets. Accordingly, the ECA ordered that, in light of the application of Article 20, both companies and their related parties were obligated to present a merger notification to the ECA for any transaction, even if concluded abroad, and to include with their notification all preliminary agreements struck during the negotiations, as well as the usual market share data, turnover, etc.”
This outlier of a decision highlights the relevance of car-hailing services to the Egyptian economy, especially the critical markets of Cairo and Alexandria, as well as “the importance of parties’ ensuring to keep deal negotiations secret or, at a minimum, making proactive efforts to make pre-filing contacts with the relevant antitrust enforcement agency, so as to avoid results such as this,” says Mr. Stargard. Historically, most ECA notifications have gone through the review process without substantive competition concerns being raised, assuming there are no dominant market shares or third-party complaints involved. Here, the mega deal combined the world’s largest ride-sharing company with the region’s biggest, as Dubai-based Careem has more than a million drivers and 30 million users across 90 cities.
In the ECA’s now-reversed course, the regulator approved the $3.1 billion deal (of which $1.4bn will be paid in cash), subsequent to Uber’s commitments to ensure competition in the regional market remained intact. These include abolishing exclusivity provisions in their contracts, reducing barriers to entry, agreeing to price concessions (capping annual increases and limiting surge pricing) and submitting monthly ride data reports to an independent monitoring trustee to be approved by the ECA for a term of either five years or until Uber/Careem’s competition obtains 20% of weekly rides individually (or 30% percent) in overlapping geographies other than the two large urban markets.
“We welcome the decision by the Egyptian Competition Authority (ECA) to approve Uber’s pending acquisition of Careem,” Uber’s spokesman noted.