Singapore’s anti-trust commission on Monday fined Grab and Uber a combined $9.5 million, ruling that the former’s takeover of the latter’s Southeast Asia operations had substantially decreased competition in the ride-hailing market.
The Grab-Uber deal announced in March involved the US ride-hailing giant picking up a 27.5 per cent stake in Grab in return.
The Competition and Consumer Commission of Singapore has imposed a fine of $4.8 million on Uber and a $4.7-million fine on Grab. That might be small change for Uber, still one of the most highly valued startups in the world, and Grab, which is in the midst of raising a $3-billion funding round.
“Mergers that substantially lessen competition are prohibited and CCCS has taken action against the Grab-Uber merger because it removed Grab’s closest rival, to the detriment of Singapore drivers and riders. Companies can continue to innovate in this market, through means other than anti-competitive mergers,” said CCCS chief executive Toh Han Li in a statement.
Grab, very sensibly, chose to focus on the positives. “Today, we are glad that the CCCS has completed its investigations on the Grab-Uber transaction and did not require the transaction to be unwound,” it said in its statement.
Not to be left behind, archrival Go-Jek also chimed in. “We are glad that the Commission has come to the same conclusion that we have – that new entrants into the market are facing a very high barrier to entry. We’re encouraged to see the measures being taken to level the playing field – it will have a significant effect on our strategy and timeline,” said a company spokesperson.
Here’s what CCCS said in its verdict and how Grab has responded so far
In its verdict, the anti-trust watchdog noted that Grab had hiked effective prices after the Uber transaction by 10-15 per cent. “CCCS has received numerous complaints from both riders and drivers on the increase in effective fares and commissions by Grab post-Transaction,” it said.
In its own statement issued after the verdict, the ride-hailing firm contended that it has not raised fares since the transaction. Why the difference of opinion? It’s a matter of nuance – while Grab may not have increased fares, it has been steadily chipping away at rider promotions and modifying its rewards policy. For a Grab or former Uber user in Singapore, that nuance may not mean much.
The changes to its rewards policy, first announced in July without notice and aimed at reducing reward points earned per dollar spent on transport, were also noted by the CCCS. Faced with flak from its customers, Grab had to postpone the implementation of the changes to after September 30.
The competition commission noted that Grab’s 80 per cent market share and exclusivity contracts with taxi companies, car rental partners, and some of its drivers mean there is no level playing field for competitors and new entrants.
That observation drew a retort from the Singapore-headquartered firm. “Grab believes it should not be the only transport player subjected to non-exclusivity conditions. This is inconsistent with taxi industry practices and does not create a level playing field,” said Grab Singapore head Lim Kell Jay.
The Competition and Consumer Commission of Singapore had initiated an investigation into the anti-trust allegations the day after the deal was announced. It followed that up with a provisional verdict in July that found the deal to have significantly lessened competition in the market. It had also proposed remedies such as removal of any exclusivity contracts and asking Uber to sell its car rental business to a potential competitor making a reasonable offer. The key difference in the final verdict is the financial penalty.
Before CCCS, there was PCC
The CCCS verdict follows that of the Philippine Competition Commission (PCC) in August. The Philippine anti-trust authority asked Grab to make voluntary commitments to address the competition concerns raised by it.
The commitments pertain to service quality and pricing and include bringing back market averages for acceptance and cancellation rates before the Uber transaction, becoming more transparent in breaking down the fare for users and not having prices with an “extraordinary deviation” from the minimum allowed fares.
The PCC noted said that any breach of the conditions will subject Grab to fines of up to P2 million ($368,744) per breach, or unwinding of the transaction.