China Launches Investigation Into the Didi-Uber Deal

China regulator says Didi, Uber deal will need Mofcom approval
A Chinese mobile phone user looks at the icons of the mobile apps of taxi-hailing apps Didi Chuxing, upper, and Uber on his smartphone.
Shan he Shan he — Imaginechina/AP

Didi Chuxing’s acquisition of Uber’s China business is facing fresh scrutiny from one of China’s antitrust regulators in an unexpected turn.

The Ministry of Commerce said today it has opened an investigation into the deal announced last month, combining China’s top two ride-sharing services. At the time of the deal in August, the regulator said Didi hadn’t applied for an antitrust review. Didi responded that it didn’t believe Uber China’s $60 million revenues in 2015 met the threshold for a review, which typically starts when both companies’ annual revenues pass $65 million.

A Ministry spokesman said that the antitrust bureau has already interviewed Didi twice, and requested details and an explanation for why Didi hadn’t earlier applied for antitrust review.

The Commerce Department, known as MOFCOM, will continue to advance the investigation to protect fair competition in the market and safeguard the interests of consumers, the spokesman said today at a press conference.

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The antitrust review is unexpected, not least because Didi’s 2015 merger with its top competitor then, Kuaidi Dache—which gave the combined entity a 99% market share in taxi-hailing—garnered no such scrutiny.

The reason given for not calling into question that deal was that taxi-hailing still represented a small percentage of the total transportation market.

That still appears to be the case, despite a Didi-Uber combination controlling a monopoly-sized portion of the ride-sharing market. When it announced its deal with Uber, Didi said it had more than 85% market share for private car-hailing in China, and Uber CEO Travis Kalanick last said his company commanded 30% to 35% of the Chinese market.

See also: Why Uber Couldn’t Crack China

The odds of China’s regulator not approving Uber China’s sale to Didi still remain small. Didi’s previous tie-up with Kuaidi Dache, as well as its closeness to local governments, suggest the sale will go through. China recently legalized ride-sharing businesses like Didi’s, regulations which require Didi not to price its rides below the cost of operations. That requirement is also part of China’s antitrust law commanding market leaders not to abuse their dominant market position.

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