Chinese Didi-Uber merger held up by lack of regulator approval: Report

The $35 billion acquisition between the two largest ride-hailing firms in China is unlikely to be a smooth ride as it could be difficult to get the nod from regulators, while also sparking monopoly concerns.

Monday's merger announcement between Didi Chuxing and Uber China remains far from concluded, with a top Chinese regulator indicating that there is a lack of approval to allow the deal to go ahead.

On Tuesday, a day after the announcement, a spokesman of China's Ministry of Commerce said it had not received any necessary merger filing related to the deal. Any case falling under anti-trust and merger rules must be submitted to the ministry in advance, or it won't be able to carry out a merger, added the spokesman, according to a Sina news report.

Industry insiders believe the response shows that the ministry is likely to take a tough stance on the deal, according to the report.

Responding to Ministry of Commerce's statement, Didi argued that the deal needs no approval from authorities regarding financial metrics of the transaction not meeting filing requirements, as both Didi and Uber China are yet to make profits, and Uber China's net income in 2015 fell below the 400 million yuan ($60 million) requirement to trigger an anti-trust scrutiny.

"A monopolist in loss is still a monopolist," said legal professor Deng Feng of Peking University, in the Sina news report, who added that all kinds of monopolies will trigger anti-trust scrutiny no matter whether the transactors are profitable or not.

As of the end of 2015, Didi claimed that its market share in China exceeded 80 percent while Uber put it between 30 to 35 percent.

A financing plan released by Didi in May revealed transaction values on Didi's ride-hailing platform reached 34.7 billion ($5.2 billion) in 2015. Although Uber China's income last year was unknown to the public, Deng and other experts estimate its income has also exceeded the 400 million yuan trigger requirement if taking into consideration market shares of the two firms, according to the Sina report.

Even if Uber China's income failed to trigger the anti-trust scrutiny, the Ministry of Commerce is also obligated to investigate into businesses that may eliminate or restrict competition, and the ministry's scrutiny in Didi-Uber China's acquisition is almost "without any doubt", said the report.


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