China’s blockbuster taxi-app merger is likely to stand despite a 99% market share

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China’s two largest taxi-hailing apps, former archrivals Didi Dache and Kuadi Dache, announced on Valentine’s Day that they are planning to merge. Since the combined company will have a market share of approximately 99%, the competition is not feeling very rosy about the deal.

Yidao Yongche, another ride-hailing app, has filed an anti-monopoly complaint against the proposed merger with China’s commerce industry. Lu Chuanwei, CEO of Yidao, told Chinese media that the merger would wipe out the competition and harm consumers.

But analysts don’t expect the complaint to make much progress (paywall), since China’s anti-regulators often leave dominant domestic companies alone. Chinese monopoly law says that companies that wish to merge must be reviewed by regulators if their combined revenue is more than 2 billion yuan (about $320 million). Didi and Kuaidi, both private companies, say that their turnover does not reach that threshold.

The potential merger came as a surprise since Didi is backed by Tencent, and Kuadi by Alibaba, and their battle over driver subsidies and passenger discounts was seen as another front in the Chinese internet companies’ burgeoning rivalry. But as the New York Times points out, the tie-up may be more about weakening the competition rather than fostering cooperation. The two brands will remain separate, but the deal should help both companies cut costs and introduce more services, according to their joint announcement.

That could be bad news for other apps like Uber, which is still relatively new in China, and possibly for traditional taxi drivers, who have been increasingly demonstrating against car-hailing apps that use private drivers. According to iiMedia Research, 172 million people use Chinese taxi-hailing apps, and 99.8% of them have used either Didi or Kuadi or both.

The two companies said they would explain how exactly their “strategic merger” will work after the Chinese New Year holiday this week. Cheng Wei, Didi Dache’s CEO said in a statement on Valentine’s Day, “A lot of people will proclaim that they believe in love again.”

Additional reporting by Zheping Huang.

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