Why did Cofece authorize the concentration of Cornershop and Uber?

In October 2019, Uber Tehnologies (Uber) and Cornershop Global LLC (Cornershop), among other companies and individuals related to the operation, notified Cofece of their intention to concentrate.

However, the Federal Telecommunications Institute (IFT) requested the submission of the file to analyze it, arguing its competence in the matter.

The foregoing generated a jurisdictional conflict between Cofece and the IFT that was resolved on May 21, 2020 by the First Collegiate Circuit Court in Administrative Matters Specialized in Economic Competition, Broadcasting and Telecommunications, with residence in Mexico City and jurisdiction in all Mexico.

The Court declared Cofece competent, due to various considerations, among which are the following:

1) The notifiers are not telecommunications concessionaires, but use them to provide their services through a digital platform.

2) The services provided are not telecommunications, but logistics and intermediation between users, drivers and delivery men.

3) The notifiers use the Internet as an input, which does not constitute the service of the platforms nor does it represent the source of their income.

Uber

The company is a public company that in Mexico participates in the following services:

1) A mobile application that connects passenger users with driver users (Rides Business), through Uber Rides.

2) A mobile application for on-demand delivery of food prepared and sold by restaurants and distributed by delivery users (Eats Business), through Uber Eats.

Cornershop

The company is an on-demand delivery platform that allows users to order and buy groceries and goods from local supermarkets and retail stores (Groceries Business), through the application of the same name.

Although there is no coincidence between the main activities of Uber and Cornershop, the Cofece explored the potential effects on the competition process due to the loss of potential competition derived from Uber’s entry into the Groceries market through an acquisition and not through development from your own platform.

The possible loss of competitive pressure due to common shareholdings was also analyzed, and mainly from conglomerate effects; focusing on creating an ecosystem where Uber could transfer the network effects it has on its offerings to the Groceries Business or vice versa.

As a result of Cofece’s analysis, it was considered that there are other agents that exert competitive pressure on the Groceries Business; in addition to potential competitors who could offer a competitive offer in said service in a relatively short time; Therefore, it was concluded that the possible loss of a potential competitor and the possible relaxation of competition due to common shareholdings are not relevant; at the same time that Uber could not establish a profitable strategy to package its services in order to displace competitors or prevent them from entering the market.

Finally, the Plenary of the Cofece considered that the Groceries Business has shown great dynamism, therefore, denying the operation would be counterproductive for the development of the market.

Thus, given that there were not enough elements to conclude that the operation would represent significant risks to the process of competition and free competition, Cofece authorized the concentration by which Uber would acquire the majority of Cornershop’s business in Mexico.