Chinese regulators insist the Didi-Uber merger must go through anti-trust investigation although Didi's management previously claimed that due to both companies' unprofitable operations, anti-competitive review should not be applicable. Anti-trust law experts predict that considering the ride-hailing industry is of vital importance to people's livelihood in China, the regulators are under pressure to investigate the deal.
Shen Danyang, spokesperson for the Ministry of Commerce (MOFCOM), once again talked about Didi Chuxing's acquisition of Uber's China operation in a routine press conference this Wednesday, signaling that the merger deal is liable to its agency's anti-competitive reviews.
To bolster the official stance, Shen reiterated China's practice of calculating annual turnover to see if a M&A deal would fall under review category. “Even if business operators' concentration is not up to the standards, as long as there are facts and proofs collected based on regulated procedures that show that the concentration may inhibit competition, MOFCOM should investigate in accordance with the laws,” Shen said in response to a question regarding the deal that has caught widespread media attention.
Zhou Mi (周密), senior researcher and deputy director with a think tank affiliated to the MOFCOM, told sino-us.com that when regulators are evaluating business operators' concentration, they are mainly concerned about effects of the concentration on related markets and consumers. “They would assess if the merger would sabotage consumers' interests,” Zhou said.
Didi's acquisition of Uber's China operations, announced at the beginning of this month, is estimated to create a roughly $35 billion combined business, which has raised widespread monopoly concerns as Didi claims an 87 percent market share in China and the merged company would occupy as large as 90%.
Law experts and industry insiders surveyed by sino-us.com generally believe there is little chance for MOFCOM or other related regulators to block the deal as it is aimed at creating a national giant in the limousine services industry.
MOFCOM said at a previous press conference that the two companies need to evaluate if their merger should be reviewed and accordingly file with MOFCOM for anti-competitive investigation. Despite Didi's intentions to evade regulatory reviews, Shen's new comments show strengthened resolve on the part of the regulators. “We've made our attitude (toward the deal) quite clear,” Shen was quoted as saying after the news briefing.
Anti-trust law expert and a partner with the Beijing-based Global Law Office Chen Huanzhong (陈幻中) told sino-us.com that even if the deal could gain clearance from the regulators, there definitely would be terms attached to limit overwhelming market dominance of the combined business. “Although Didi Chuxing has done some lobbying work and has been maintaining close communications with the government, the deal has brought anti-competitive concerns and so the regulators are now under pressure to make the deal right for consumers' interests,” said Chen.
In his perspective, although regulators like MOFCOM would take national interest into account, they are held to the principle of fairness in the first place.
MOFCOM is also known to extend its review of the Marriott-Starwood deal by up to 60 days this month, the only hurdle left for the merger to create the world's biggest hospitality group. Some mainstream international media have raised concerns that China's review might bring uncertainties to the almost finished deal considering a stronger presence of international hotel chain might hurt the country's burgeoning hotel industry. However, Chen Huanzhong believes it is common for Chinese regulators to extend the review and he predicts a final approval is around the corner.
According to Chen, compared with the Didi's acquisition, five-star hotels are seldom involved in common Chinese people’s lives and so are less sensitive for anti-trust regulators.
An industry insider who declined to be named said “the maturing of anti-trust legislation in all countries requires a period of data accumulation. For regulators like MOFCOM, sometimes their request to business operators to file for reviews aims at finding out the real situation of the industry instead of blocking a merger case.”