China: Gov opens antitrust investigation of Didi-Uber deal

China’s Commerce Ministry has opened an antitrust investigation into Didi Chuxing Technology Co.’s acquisition of Uber Technologies Inc.’s China business, a deal that would add to Didi’s dominance in the country’s ride-hailing market.

After announcing the deal creating a company worth around $36 billion, Didi said last month it didn’t need to apply to regulators because UberChina’s revenue fell short of a threshold triggering an antitrust review.

While industry experts largely expect the deal to go through, the ministry’s announcement Friday reflects Beijing’s resolve to assert authority over a rapidly growing sector that has been operating in a regulatory gray zone. In July, China became the largest market to formally legalize the ride-hailing business with the release of nationwide regulations.

In their antitrust review, Chinese authorities will have to tackle an accounting quirk of Uber and other “sharing-economy” companies that plays down the size of their business. Their net revenue can be negative even in times of brisk commerce as companies deduct payments to drivers and some marketing costs from their revenue.

The accounting method is controversial, said Wang Junlin, an antitrust-law expert with Beijing-based Yingke Law Firm. “This is a new business model in the internet industry.”

Full Content: The Wall Street Journal

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