India Competition Commission shows red signal to Ola-Uber merger

Ola

The SoftBank-backed company Uber and homegrown cab-hailing major Ola’s much-talked-about merger may not see the light of the day.

The Competition Commission of India (CCI) has expressed concern over the compromise of ride-hailing competition by common investors in India.

The commission will monitor whether safeguards/Chinese walls (are) put in place, and/or envisaged further by them, to ensure that competition is not compromised by the common investments, FactorDaily report quoted the CCI response, over the merger query raised by Meru Cabs.

The Commission also added that it will not hesitate to take action, suo-motu or otherwise, if concern arising out of horizontal shareholdings prima facie seem to exist at any point of time in future wherein the opposing parties (Ola and Uber) are found competing less vigorously because of any interference by the common investors in the management decisions.

The statutory body will also keep a vigil if the two companies or its investors violate regulations.

The decision would serve as a big blow to SoftBank, which has been aiming to recover losses through the merger. Both ride-hailing firms are in losses. Ola saw its losses widening to Rs 4,897.8 crore during FY 2016-17. The loss incurred by Uber is not available.

Previously, many cab firms such as Meru Cabs, Easy Cabs, Mega Cabs, among others, have time and again complaint about paying the price of rivalry between the deep-pocketed Ola and Uber. A few of them had to pull the shutter down due to continued losses.

Earlier in March, the reports of the merger came out soon after Uber sold its business to Grab for a minority stake of 27.5 per cent in the merged entity.

Softbank has acquired 15 per cent stake in Uber with around an $8 billion investment in January. The Masayoshi fund group owns 33 per cent in Ola. The Masayoshi Son-founded Japanese conglomerate had played a pivotal role in consolidating the two in the SEA region.

Till December last year, Ola’s market share was 56.2 per cent. Whereas Uber’s market share decreased by about 2.4 per cent from 42 to 39.6 per cent.

Meanwhile, all doors are not shut yet. Both companies can appeal for the regulator decision before the National Company Law Appellate Tribunal (NCLAT) and courts.

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