Didi, Uber merger faces first hiccup: China regulator says deal will require ministry approval

Beijing, ChinaUpdated: Aug 02, 2016, 01:35 PM IST

Didi's acquisition of Uber's China operations could raise monopoly concerns as Didi claims an 87 per cent market share in China. Photograph:(AFP)

A merger between Chinese ride-hailing firm Didi Chuxing and the China unit of US rival Uber could face its first hiccup after China's commerce ministry (Mofcom) said today it had not received a necessary application to allow the deal to go ahead.

However, Didi said there was no need to seek regulatory approval, saying the two ride-hailing companies' lack of profits meant they weren't required to file with the ministry.

Didi's acquisition of Uber's China operations, announced on Monday, will create a roughly $35 billion ride-hailing giant and could raise monopoly concerns as Didi claims an 87 per cent market share in China. Uber China is the second largest player.

Mofcom, one of China's anti-trust regulators, said at a news briefing that the two firms need to seek approval for the deal to go ahead. It had been unclear previously whether such a filing would be required as both firms are loss-making in China.

"Mofcom has not currently received a merger filing related to the deal between Didi and Uber," ministry spokesman Shen Danyang said. "All transactors must apply to the ministry in advance. Those that haven't applied won't be able to carry out a merger" if they fall under applicable anti-trust and merger rules, he said.

In an emailed statement to Reuters today, Didi contested Shen's assertion that the firm is required to apply for approval. "We are in close communication with authorities," said Didi. "Some of the financial metrics of the transaction did not meet the filing requirements. UberChina and Didi are not profitable yet, and UberChina's turnover in 2015 didn't meet the $60.30 million trigger requirement for the anti-trust process."

Didi and Uber have been in a fierce battle in China, spending billions of dollars to subsidise rides and win users.

Other players, however, could step up competition. Jia Yueting, head of LeEco, the parent of smaller ride-hailing rival Yidao, said in a social media post the firm would offer steep rebates to attract passengers to help avoid a monopoly in the market.

"Yidao will soon kick off an even more aggressive cashback campaign," according to a translation of Jia's posting provided by a LeEco spokeswoman.

Regulations released last week that take effect on Nove,ber 1 legitimise ride-hailing, but prohibit services from offering rides below cost.