Uber’s acquisition of Careem is bad news for riders and drivers, and a serious concern for competition. The joint company will fully dominate the on-demand ride-hailing market. Uber’s experience in Asia has been less than welcoming. In the past three years, Uber exited the East-Asia market by selling its operations to Singapore based Grab in return for a 27 percent stake in the company. Similarly, Uber sold its operations in China to the local operator Did-Chuxing in 2016. On the face of it, Uber’s acquisition of Careem looks similar to one of these strategic manoeuvers. In Pakistan’s case, however, this acquisition requires a closer look because it is dissimilar and a more serious threat to competition.

In anti-trust cases, defining the market is one of the most critical dimensions to assess threat to competition. For example, do ride-hailing apps operate in wider transportation industry, competing with buses, taxis, rickshaws, subways and private cars; or as a mobile app do they provide digital services like dropbox and iTunes? If on-demand transportation is defined as an industry then Uber and Careem clearly dominate the industry. Instead, if on-demand ride-hailing is considered a part of the wider-transportation industry then Uber-Careem has limited dominance.

In countries like Singapore, Thailand, Indonesia and Malaysia – where Uber has sold itself to Grab – mass transit, public subway systems, and local taxi providers provide a strong substitute to on-demand ride-hailing. In Pakistan’s case, availability of such mass transit system and local taxi competition is missing. The closest substitute to private ride-hailing are rickshaws which have also been enlisted on Uber and Careem apps. In this perspective, on-demand ride-hailing in Pakistan is an industry and an Uber-Careem joint company will clearly have a monopoly position. Fascinatingly, for the academically inclined, this also presents a case of a monopsony as a joint Uber-Careem operation will also be the largest ‘buyer’ of private driver services in Pakistan.

Acquisitions and overlapping investment interests in the ride-hailing industry are already being investigated across the board. Uber-Didi merger in China has been under investigation by the Anti-Monopoly Bureau for two years now, scrutinizing post-acquisition rising prices. Philippines Competition Commission (PCC) has approved the merger after issuing “service quality and pricing standards” guidelines and expressing concern of a ‘virtual monopoly’. Competition and Consumer Commission of Singapore (CCCS) has already found Grab to be exploiting its pricing and increasing prices by 10 to 15 percent post-merger. CCCS has also noted that the merger transaction is anti-competitive as the joint company controls 80 percent market share in on-demand transportation and ruled Grab to use its pre-merger pricing algorithm and driver commissions. The Egyptian Competition Authority (ECA) has also warned Uber and Careem of a possible merger without approval, citing “serious and irreversible damage to competition and consumers.”

Countries like China and Singapore have conditionally approved mergers, in part, because a local business is able to acquire an international brand that is unable to compete in the local market. In China, for example, Didi had an eighty percent market share while Uber had less than ten percent. In Pakistan’s case Uber and Careem have near equal market share and there is no mass-transit substitute to compete against the joint company. The joint company will not only eliminate competition in ride-hailing market but also create an indomitable barrier for future ride-hailing companies to enter and compete against such massive operational scale.

Keeping in view the state of competition and the lack of close substitutes in Pakistan, the Competition Commission of Pakistan (CCP) should take notice of this acquisition. A conditional merger should also be scrutinized very closely. In cases such as this, merging parties agree to submitting pricing data and commit to not increasing prices beyond reason. The truth is that pricing algorithms in ride-hailing apps are very opaque. The peak factor via demand and supply of drivers, the fluctuating oil prices, and domestic inflation can conveniently justify healthy increase in prices. That the best check on prices is competition, and not arbitrary benchmarks, is a well-established fact in anti-trust cases.

The argument that ride-hailing companies were making marginal profits or even losses are disingenuous because rides were being subsidized to buy market share. Careem’s announcement that they will operate separately means nothing. Same ownership and shared profitability means there is no incentive to compete but an illusion of competition. The Clayton Anti-trust act passed in the U.S. was specifically aimed at stopping such corporate entanglements. Under the same law, the FTC asked Google’s CEO Eric Schmidt to step down from Apple’s board of directors because the two firms are competitors.

CCP is one of the only four-star commissions in the middle-eastern region where both Uber and Careem operate. It remains to be seen whether the CCP can pull above its weight to scrutinize an acquisition being celebrated in neighboring countries as a symbol of their entrepreneurial success. The rest of us can say a prayer that a would-be monopoly be broken by a domestic distruptor.