On Tuesday the 27th of March, 2019, Uber bought out its main competitor in the MENA region Careem for a sum of $3.1 billion. At first glance, this may not strike consumers as a decision that should be of significance to them, especially since the apps will still function separately as they always have. A closer look however will reveal a web of monopolies and capitalist policies that plague our market and do nothing but weaken our local economies.
A monopoly, as defined by the Business Dictionary, is “a market situation where one producer controls supply of a good or service, and where the entry of new producers is prevented or highly restricted.” Monopolization can happen in one of two processes: vertical integration and horizontal integration. Vertical integration is when one company owns and supports the entire supply chain from its assembly to its retail. Horizontal integrations, the one that the Uber x Careem case applies to, is when larger companies weed out their competition by buying smaller companies.
One obvious drawback of monopolization is that monopolies soon become the sole supplier of a good or service that people need, which means that the little hypothetical consumer choice that one has is now gone. This could lead to inferior qualities of goods and services since companies will no longer have competition that will drive them to supply better qualities. It could also lead to price-fixing which is very relevant when it comes to taxi services, and it is when the company can fix any price it wants on the service ignoring any supply and demand economic theory because again, the consumer has no choice. It could be said that since Careem and Uber will function as separate brands the competition will still be there, providing us with a small margin to opt for a cheaper ride, but an Uber spokesperson has confirmed that 3 of the 5 Careem board seats will be overtaken by Uber representatives and the remaining 2 will remain filled by Careem’s CEO Mudassir Sheikha and co-founder Magnus Olsson.
Local start-ups and companies are almost always at a disadvantage concerning funding and pricing when it comes down to international companies swooping in with their $120 billion value to sweep the local chain from the market for a meager price. This news comes at the same time that a smaller taxi services company named Jeeny is “temporarily” stopped in Jordan following pressure from government agencies according to a statement that they released to their users.
Stephan Goetz, professor of agricultural and regional economics at Penn State and director of the Northeast Regional Center for Rural Development said that “small, locally owned businesses and startups tend to generate higher incomes for people in a community than big, non-local firms, which can actually depress local economies.” His research showed that while both local and non-local businesses provide jobs, local start-ups provide innovation on the local level that builds the infrastructure of a community and region.
That is not to say that monopolies in certain industries are not useful, especially when it comes to state-based commodities like water and electricity, in which case it is more beneficial to have one distributor. In taxi services like Uber and Careem, however, when companies can fix their own prices that are already way above the acceptable bracket for most of the population, it pays to have more choices. Economic deliverance will not come in the form of large international companies on a white stallion, rather by investing in regional ideas and companies that will maintain market competition and prevent a seemingly inevitable total monopoly.