On 24 March 2019, Uber announced the USD 3.1 billion acquisition of Careem, one of the largest technology transactions in the MENA region. Shortly thereafter on 26 March 2019, the Egyptian Competition Authority (the “ECA”) issued a press release expressing its concerns about the transaction, echoing an earlier statement October 2018, when rumors of the transaction first surfaced (you can consult the decree here). We also refer you to our previous newsflash covering this issue.
The ECA has recently approved Uber’s acquisition of Careem by virtue of Decree No. 45 of 2019 on 29 December 2019 (the “Decree”), prior to the execution of the acquisition (the “Transaction”).
A move away from the post-closing regime?
Except as further outlined, neither the competition law nor its executive regulations specifically require the prior approval of the ECA for mergers, acquisitions or establishment of joint ventures. The only requirement is a post-closing notification to the ECA in certain cases, outlined in detail in the ECA’s recently published guidelines.
However, the recent developments raise the question as to whether the Egyptian competition regime is de facto moving away from a post-merger notification regime to a pre-merger notification regime, as is the case in other jurisdictions, including the EU (whether it is the prior approval of the local competition authorities of the EU’s Member States or the European Union’s Competition Commission).
The prohibition of anticompetitive practices
The ECA’s intervention in the Transaction is based on its interpretation of the law and the executive regulations, where it recognizes its authority to protect competition and prohibit monopolistic practices. Under the provisions the ECA relied on for its investigation of the Transaction, competitors in the market must refrain from forming cartels and anti-competitive agreements, such as agreeing on pricing strategies, geographically dividing the market, agreeing on conduct during bids or tenders, and synergizing with regard to the control of the supply, production and availability of certain products in the aim of increasing demand.
Further, the law permits competitors to submit a request to the ECA in order obtain its approval before the conclusion of such agreements if such agreements prove to be economically efficient and have a positive effect on and bring about benefits for the consumer, which exceed the negative effects on competition.
In light of the above, the ECA has recognized its power to intervene prior to the execution of the Transaction.
The Parties’ Commitments under the Transaction
Based on the above, Uber submitted to the ECA its request for the ECA’s approval in order to move forward with the Transaction. This request outlines commitments, which Uber will follow in order to incite the ECA to not prohibit the Parties from going forward with the Transaction.
The commitments are not limited to the Parties’ car ride-hailing services, these also concern the Parties’ bus services. The commitments are mainly divided into two sets, the first is for the benefit of the driver and the consumer (those include restrictions on commissions and surge multipliers’ caps); and the second is for the benefit of the market (those include restrictions on branding and allowing access to mapping and trip data to competitors).
Compliance with Commitments
To ensure compliance with the commitments, a monitoring trustee nominated by Uber and approved by the ECA will be appointed. Uber will be required to provide the monitoring trustee with random trip data samples to show compliance with its commitments to the ECA.
The regulations outlined under the Decree will be in effect for the first two years following the Transaction. This period of two years may be renewed for an additional two years. However, the regulations may not be in effect for a period exceeding five years.
Market Reaction
The ECA’s intervention has been well received by the stakeholders in the ride-hailing sphere. Swvl CEO, Mostafa Kandil, believes that the ECA’s approval of the Transaction is in favour of “the market, investment and the consumers”. In addition, drivers operating under Uber and Careem praise the ECA for its intervention, stating that no market player should be able to monopolize the market.
