Not so fast: the Uber-Didi buyout needs government approval, and might not get it

The Chinese government could be the firewall that keeps Didi and Uber separate. Image credit: TIA.

Didi’s acquisition of Uber China is done and dusted as far as the two companies are concerned. But that doesn’t mean it’s actually going to happen. There’s another player in this game – China’s Ministry of Commerce – and it could throw a wrench into the works.

All businesses with sufficient scale for there to be monopoly concerns must submit an acquisition report to the Ministry of Commerce as per Chinese law. Then, they must wait for the Ministry to conduct an anti-trust investigation before the acquisition can be approved. But on Tuesday, the Ministry announced that it hasn’t yet received the mandatory report from Didi or Uber. And until that happens, this buyout is purely theoretical.

It is not a foregone conclusion that the acquisition will be approved.

Didi has told Chinese media that since neither company is currently profitable, this buyout isn’t big enough to require reporting or Ministry of Commerce approval. But Commerce Ministry spokesperson Shen Danyang’s statement is pretty unequivocal: “Didi and Uber China’s merger must be reported, and if they don’t report it, then the deal cannot proceed.”

In other words, Didi and Uber China are probably going to have to file the report whether they like it or not.

It isn’t a foregone conclusion that the acquisition will be approved, either. While it might seem that Chinese authorities would be eager to approve a deal that strengthens a Chinese company and removes a foreign competitor, Chinese government mouthpiece Xinhua has already written that there are anti-trust concerns here and that authorities should scrutinize the deal carefully.

Didi buying Uber China certainly strengthens Didi, but it also means that China’s taxi app and ride-hailing markets would be completely dominated by a single player. As numerous observers have already pointed out, that could be terrible news for both drivers and riders, since there’s no longer any real competition keeping Didi honest. And the fact that state media is publishing opinion pieces saying the deal needs to be considered by authorities suggests that, at the very least, not everyone in the Chinese government is sold on letting this happen just yet.

Public opinion on the issue seems to be mixed. In comments on stories about the Ministry of Commerce’s announcement, some Chinese net users suggested the Ministry was sticking its nose where it didn’t belong. But others said that the acquisition would create an obvious monopoly and shouldn’t be allowed. “These two companies control such a massive share of the market,” one user wrote. “If that’s not a monopoly, what would you call it?”