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Competition watchdog: Grab-Uber merger ‘lessened competition’ in ride-hailing

The Competition and Consumer Commission of Singapore (CCCS) has provisionally found that the sale of Uber’s Southeast Asian business to Grab earlier this year has led to a “substantial lessening of competition” in ride-hailing platform services. According to the news release, CCCS determined that the sale has removed competition between Grab and Uber, which were each other’s closest competitor.

“The merged entity is likely to be able to increase prices and has in fact done so since the completion of the transaction,” the statement said. It added:

[Grab and Uber] have not been able to show that the transaction gives rise to efficiencies that would outweigh the harm to competition.

As a result, the competition watchdog said that the sale has infringed section 54 of the Competition Act, which prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition in Singapore.

CCCS has also proposed the imposition of financial penalties upon Grab and Uber respectively, as both parties carried out the sale despite having anticipated potential competition concerns and caused a substantial lessening of competition within Singapore’s ride-hailing service platform market.

Meanwhile, in a statement to Marketing, a Grab spokesperson said, “We have considered the CCCS’ Proposed Infringement Decision and disagree with their analysis. The CCCS appears to have taken a very narrow approach in defining competition.”

It added that while Grab is one of the most visible players in transport, it is not the only player in the market.

“CCCS has not taken into account the dynamic developments and intense competition going on over the past few months, from both new and incumbent taxi and ride-hailing players,” the spokesperson added.

The statement added that Grab had also proactively engaged with the CCCS before the transaction was signed and conducted the acquisition “legally and in full compliance with Singapore’s applicable competition laws”.

“We fully cooperated with the CCCS throughout the course of their review, and had proactively proposed voluntary commitments over and above the Interim Measures Directions (IMDs), to ensure consumers’ and drivers’ interests are taken care of, which the CCCS had rejected. Grab has complied with all areas of CCCS’ IMDs including maintaining base fare levels, surge factor and driver commission rates,” the statement read.

This provisional decision and proposed remedies are overreaching and go against Singapore’s pro-innovation and pro-business regulations in a free market economy.

The spokesperson added that Grab will submit its written representations to the CCCS before the deadline, and will take all appropriate steps to appeal against this decision.

In April this year, CCCS banned Grab from taking over operational data from Uber, which can be used to enhance its market position post-merger talks against other transport providers such as ComfortDelGro. This includes data such as historical trip data, the watchdog said.

The statement from CCCS also said that evidence showed that without the sale, Uber would not have exited the Singapore market in the near to medium term. Instead, it would either have continued its operations or merged its Southeast Asian business with other potential buyers that were not its current competitors locally.

Prior to the sale, Uber had also entered into an agreement with ComfortDelGro to introduce UberFLASH, in a bid to compete with Grab. However, the collaboration was withdrawn after the sale of Uber to Grab.

Meanwhile, as taxi booking services have less than 15% market share in Singapore, CCCS found that this posed an “insufficient competitive constraint” to both Grab and Uber.

High barriers to entry and expansion

CCCS also said in the statement that there were high barriers to entry and expansion with regards to ride-hailing platforms. This is due to strong network effects, particularly given that Grab had imposed exclusivity obligations on taxi companies, car rental partners and some of its drivers.

As a result, any new entrant into the ride-hailing industry would likely have to incur a “significant amount” of upfront capital in order to attract drivers and riders. Such expenditure includes driver incentive schemes and rider promotions, in addition to acquiring a sufficient fleet of vehicles and pool of drivers, as well as partnerships with taxi operators.

“In this regard, potential new entrants have provided feedback to CCCS that without any intervention from CCCS, it would be difficult to attain a sufficient network of drivers and riders to provide a satisfactory product and experience to both drivers and riders so as to compete effectively against Grab,” the statement added.

With insufficient competition post-transaction, Grab would be able to raise fares for riders and commission rates for drivers, lower the quality of its services and reduce innovating its product offerings. Consumers and competitors of both Grab and Uber have raised concerns over potential increased fares and commission rates, as well as reduced service quality and innovation.

Additionally, CCCS has also received multiple complaints from riders and drivers in relation to the increase in effective price post-transaction, such as the decrease in frequency of driver promotions and driver incentives. According to CCCS, this reflects Grab’s ability to increase effective prices post-transaction.

Meanwhile, CCCS also noted that the market for the rental of chauffeured private hire cars face barriers to expansion such as significant amount of time and upfront capital expenditure to build a car rental network of sufficient scale, as well as a higher cost of maintaining chauffeured private hire cars.

Thus, such companies may not be able to effectively expand and compete without partnering with a ride-hailing platform.

New proposed measures

The competition watchdog has proposed the removal of Grab’s exclusivity arrangement with any taxi or chauffeured private hire car fleet in Singapore. This is in a bid to increase choices for drivers and riders, as well as improve market contestability.

It also proposed the removal of exclusivity obligations, lock-in periods or termination fees on all drivers who drive on Grab’s platform, or rent from Grab Rentals, Lion City Rentals or rental partners of Grab. Other proposed remedies also include the maintenance of Grab’s pre-transaction pricing algorithm and driver commission rates until competition is revived in the market, as well as requiring Uber to sell Lion City Rentals to any competitor that makes a reasonable offer. This is to prevent Uber from selling Lion City Rentals or any of its assets to Grab without prior approval from CCCS.

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