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A smartphone shows the two apps, Kuaidi Dache, part-owned by Alibaba, and Didi Dache, backed by Tencent. The two firms announced a merger. Photo: AFP

China’s biggest taxi-app merger hits a bump as smaller rival files monopoly complaint

The high-profile merger of China’s two largest taxi-booking apps is now under threat after a smaller rival filed a monopoly complaint to the Chinese government.

Alibaba

The high-profile merger of China’s two largest taxi-booking apps, announced on Valentine’s Day, is now under threat after a smaller rival filed a complaint to the Chinese government alleging the deal would result in a monopoly.

Small taxi-hailing firm Yidao Yongche filed its complaint on Monday to the commerce ministry and the powerful National Development and Reform Commission (NDRC).

It argued that the merger between Kuaidi Dache and Didi Dache – backed by internet business giants Alibaba and Tencent respectively – would result in a mega-company that would control a combined 90 per cent or more of market share in the domestic taxi-booking business.

The complaint comes at a sensitive time for the Chinese government, analysts say, amid concerns from foreign investors that the anti-monopoly law could be used to curb foreign business expansion and protect local businesses in the world’s number 1 economy.

Last week, US firm Qualcomm, the world’s largest supplier of mobile chips, agreed to pay a record fine of 6.088 billion yuan (HK$7.68 billion), ending a 14-month Chinese government investigation into the firm’s anti-competitive practices.

Qualcomm said last Tuesday that it reached a resolution with the NDRC, China’s top economic policy planner and the main investigator for monopoly-related cases. The State Council, or the country’s cabinet, is directly in charge of the commission.

If Qualcomm must pay such a big fine because of anti-monopoly, then what about local companies like Didi and Kuaidi?
Mergers and Acquisitions lawyer

“If Qualcomm must pay such a big fine because of anti-monopoly, then what about local companies like Didi and Kuaidi?” said a mergers and acquisitions lawyer who declined to be named due to the sensitivity of the issue.

“If the Chinese government doesn’t do anything with a case like Didi and Kuaidi, then foreign investors will definitely feel China’s anti-monopoly law is not a fair law for everybody,” the lawyer said.

The merger of Kuaidi and Didi comes after taxi-hailing app leader Uber’s attempt to expand into China, a lucrative market with more than 1.3 billion people and a rapidly increasing number of middle-class consumers.

Uber, an American company, has teamed up with Baidu, known as the “Google of China”, to facilitate the expansion. Baidu became a shareholder of Uber under the deal.

Yidao Yongche’s chief executive, Zhou Hang, in an interview last year with local media, said he wanted to spend two years pushing his fledgling company to “exceed Uber” in terms of valuation.

Zhou said Yidao had about two million active users in more than 50 cities across China. By comparison, Didi Dache – run by Liu Qing, the daughter of Lenovo founder Liu Chuanzhi, who turned his firm into the world’s number 1 personal computer maker – said in a report last month that it had 150 millions users as of last year.

Kuaidi, meanwhile, is estimated to have nearly 80 million users.

Uber is now valued at around US$40 billion and is slated to make one of the most hotly anticipated IPOs this year on Wall Street. After their merger, Kuaidi and Didi are also expected to list abroad to raise funds for their expansion.

 

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