Uber-Cornershop deal sparks clash among Mexico regulators

Mexican telecommunications regulator IFT and competition regulator Cofece cannot agree on who should rule on the recent fusion between Uber and grocery-delivery app Cornershop.

This is the first time the federal entities battle over a service provider since both of them were created in 2013.

On November 16, IFT requested the merging documents that Uber submitted to Cofece on October 16. But the move was publicized only on Monday, first by daily El Economista.

The telecom regulator considers the merger of the ride-sharing app and Cornershop subject to its regulations given the vast use of telecom services they utilize, public documents on IFT's website show.

However, Cofece has regulated the food-delivery app business from the start.

Both entities monitor, promote and ensure competition and market participation. But IFT regulates the internet, radio and telephony and mobile companies.

If IFT becomes the Uber-Cornershop merge regulator, the decision will create a new precedent in the future operation of mobile platforms, and it will spark a debate over who should regulate the app business.  

BACKGROUND

Uber announced on October 11 that it was acquiring majority ownership of Cornershop – with presence in Mexico, Chile, Peru and Canada – for an undisclosed amount. 

On October 25, Cofece informed IFT about the platforms’ fusion.

In 2018, Walmart said it offered Cornershop US$225mn to buy its app, but Cofece opposed the deal, and on June 5, Walmart withdrew its proposal.

Currently, Uber is waiting for the regulators' approval to complete the process, the company said in a statement. 

Among the companies involved in the deal are Uber, Cornershop, Accel XX and Accel Growth Fund.

IFT POSITION

During the discussion of the acquisition, which was made public on the regulator’s site, IFT head of economic competition unit, Georgina Cary Santiago Gatica, said the companies merger requires scrutiny because it involves a vast amount of data management and other telecommunication services. 

The apps also store sensitive user data and their activities are subject to regulation.  

“For these reasons – in addition to its intrinsic relationship with the networks of telecommunications, with telecommunications service providers and internet service providers – the Economic Competition Unit recommends the [IFT board] pronounce itself as the competent authority to know, analyze and, if appropriate, resolve on the Uber-Cornershop fusion,” Santiago Gatica said. 

The decision to request the fusion documents was decided unanimously by the seven IFT commissioners. 

“The influence or the effect of competition that these platforms can have on the markets cannot be explained without technical analysis, an analysis of the technological evolution that involves these platforms since they have to do with artificial intelligence, big data or deep learning,” IFT commissioner Mario Germán Fromow Rangel said during the discussion. 

"And something very important, the effects on net neutrality, it has to do with the emergence of technologies such as 5G," he said. 

Uber's decision to buy Cornershop will be a challenge to Rappi, a food-delivery app that grew its user subscriptions by 20% in 2018, according to El Economista.