ECA’s Decision Regarding Uber and C

The decision issued by the Egyptian Competition Authority (“ECA”) with respect to the conditions for merging the activities of Uber and Careem in Egypt (the “Decision”)[1] was the subject of significant economic and media debates as it represents a new step in ECA’s intervention in an international merger. These debates, however, did not sufficiently tackle the legal aspects of the ECA’s Decision in spite of their importance not only for this case but also for the Egyptian market’s competitiveness and the ECA’s authority in general, which is what we present here.

Background

According to the facts detailed in the Decision, ECA received information in 2018 regarding an imminent international merger, including in Egypt, between Uber and Careem, both of which work in the field of transportation through the use of electronic applications (i.e., ride-hailing services). Accordingly, ECA issued its decision no. 26 of 2018[2] requiring the two companies to notify it before the completion of the merger, to which both companies responded through an official notice on 7 April 2019 by requesting the exemption of the merger from the ECA’s ban. The ECA subsequently started a formal review of the matter in coordination with both companies, which concluded on 20 December 2019 that the merger threatens competition in Egypt in view of the fact that the relevant market is the market for ride-hailing services and that the merger would introduce obstacles to competition by third parties due to the difficulty of market entry in addition to possible economic repercussions such as price increases, service quality deterioration, and the lack of alternative options available to consumers. Based on this, according to the ECA’s statement, and on 24 May 2019, the two companies proposed – “through their own free will and by choice” – a set of terms and conditions to mitigate against the possible negative impacts that could result from the merger of their activities in Egypt.

ECA’s Recent Decision

In response to the above, ECA issued its latest Decision on 29 December 2019, accepting the exemption of the merger of the two companies in Egypt from its previous ban as follows:

1. The exemption from the merger ban provided that there is adherence to the terms and conditions proposed by the two parties (Uber and Careem) regarding the provision of the service in the market.
2. The abovementioned terms and conditions are to be valid for two years that are to be automatically renewed for five years, with periodic biennial reviews.
3. The ECA’s chairperson is in charge of setting the mechanisms for implementing the agreed-upon terms and conditions.
4. Both companies are to merge their electronic apps into a single app within two years.

The Terms and Conditions

Both Uber and Careem reiterated their position that the merger of their activities in Egypt never threatened the market competition to begin with and that they have proposed the terms and conditions regulating their activities in order to cooperate with ECA. The following are among the most important of these terms and conditions:

1. The contracts concluded by the two companies must not contain exclusivity provisions with the drivers, users/consumers, or partners in general.
2. Setting a ceiling on prices.
3. Setting a ceiling on surge pricing.
4. Adherence to the cap set for recruiting drivers.
5. Adherence to a certain level of service quality.
6. Consumer data protection and usage regulations.

Conclusion

There is no doubt that this Decision represents a milestone in the Egyptian legal system for protecting competition and combating monopolistic practices, not only because of the importance of the subject it deals with, but because it provides an integrated and detailed methodology that the ECA followed in studying the case at hand, then issuing an interim decision, then consulting with the stakeholders, then issuing a final decision based on a set of terms and conditions provided by the stakeholders themselves. This is a very accurate and transparent approach to a topic of such significance. From a legal point of view, the Decision raises some important questions, which the ECA sought to answer in a separate memorandum issued for this purpose. Nevertheless, the most important question remains whether the ECA has the authority to object from the beginning to the acquisition or merger process for the companies or the activities that they undertake, because the Egyptian law is not conclusive in whether the ECA has such an authority as is the practice in other countries. For this reason, ECA overcame this issue by considering the planned acquisition between the two companies abroad and merging their activities in Egypt as a horizontal agreement between the two companies, which we believe is a controversial and very broad interpretation. But in all cases, and in view of the agreement of the ECA with the two companies on the terms and conditions related to the implementation of the activity, the matter will not be subject to judicial dispute or interpretation by the courts, which, in our assessment, remains a very important precedent.   [1] ECA Decision No. 45/2019 approving the acquisition of Augusta Aviation B.V (a company owned 100% by Uber Technologies Inc.) of 100% of the assets of Careem Inc., provided that they adhere to the "terms and conditions" in accordance with Article (6) Paragraph (2) of Law No. 3/2005, Egyptian Gazette, Issue No. 293 (contd.), 29 December 2019. [2] ECA Decision No. 26/2018 on taking interim measures with respect to the merger of Uber and Careem in accordance with Article 20 (2) of Law No. 3/2005, Egyptian Gazette, Issue No. 238 (contd.), 23 October 2018.