Chinese regulator: Uber, Didi deal failed to get approval

There may be trouble brewing for the Uber-Didi Chuxing deal announced Monday.

A Chinese regulator says the two ride-hailing giants failed to seek the necessary approval for Uber to sell its business in the country to rival Didi Chuxing, Reuters reported Tuesday. Uber, which has lost $2 billion struggling to compete with Didi in China, surrendered the market to its rival in exchange for a $7 billion stake in Didi.

But a potential snafu was revealed at a news briefing by Mofcom, China’s commerce ministry.

Reuters reports: “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.]

With Didi claiming to control more than 87 percent of China’s private car market, and Uber claiming to control one-third (the two companies contest each other’s math here) the sheer enormity of these companies could raise the specter of antitrust issues.

Didi says regulatory approval isn’t necessary because neither company makes a profit, according to Reuters.

There are plenty of smaller ride-hailing companies that are likely rooting for the deal between the two enormous industry competitors to fail. San Francisco-based Lyft, for example, earlier this year announced a partnership with Didi that was supposed to help the smaller startup compete with Uber. The team-up allows Chinese users of Didi to request a Lyft when they are traveling in the U.S.

So an Uber-Didi merger could be awkward for Lyft.

Lyft told Fortune that the company will evaluate its partnership with Didi over the next few weeks.

Photo: In a 2015 photo, a taxi driver waits at a newly installed Didi Station, a roadside stop for taxis booked by the Chinese car-hailing app Didi Kuaidi, which has since changed its name to Didi Chuxing, in Shanghai. (Chinatopix via AP) 

 

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