Vietnamese prosecutor recommends Grab be treated as taxi service

Vietnam’s prosecutors have asked that ride-hailing firm Grab be treated as a taxi operator, and not as a tech firm, in local operator Vinasun’s ongoing lawsuit against the Singapore-based firm.

The procuracy has also suggested that Grab pay Vinasun a compensation of VND41 billion ($1.8 million) to cover the local firm’s business losses.

Headed by the Prosecutor General, the Supreme People’s Procuracy of Vietnam acts as the prosecutor before the People’s Courts.

Vinasun claims it suffered losses of VND41 billion between January 2016 and June-end 2017 due to the entry and rising popularity of e-hailing innovations such as Grab and Uber. Grab acquired Uber’s Southeast Asia operations in March this year.

In a first-of-its-kind case where a traditional taxi company has sued a technology firm for its declining performance, Vinasun filed a lawsuit against Grab and Uber in May 2017. A final verdict on the case, which has been going on since October 2017, is expected on Monday.

Truong Dinh Quy, the deputy CEO of Vinasun, alleged that Grab had an unfair advantage, especially when it comes to pricing, as it was not governed by the transport regulations and taxes imposed on taxi firms.

The Prime Minister issued a legislation, called Decision 24, for a pilot programme on the use of technology in transportation services. Grab is a member under the programme.

“Grab took advantage of Decision 24 to fully operate a taxi business similar to Vinasun’s, including appointing drivers, setting the rates and collecting money to its account,” a Vinasun representative asserted.

Jerry Lim, Grab’s country head for Vietnam, said in response: “The review and evaluation of the transport business activities under the pilot project have been concluded many times by the executive agencies that these are not transport and taxi business activities and Grab in essence has implemented the pilot project well.”

He added that Grab was disappointed with the recommendations made by the procuracy. “We strongly disagree because this issue belongs to the competence of the executive power to determine.”

Currently, the Transport ministry is responsible for the administration and management of the transportation sector.

“There were precedents in the past where the court did not follow the procuracy’s recommendations. The court’s final decision is supreme and often less affected by recommendation from the procuracy,” said Truong Thanh Duc, chairman of Vietnamese law firm Basico.

Grab, as well as Grant Thornton and lawyer Truong Thanh Duc, called Vinasun’s lawsuit “baseless”.

A local company called Cuu Long Valuation Inspection Company (CVIC) has been appointed as the damage assessor for the case, even as Grab proposed international assessors.

CVIC has no known track record of evaluating such damages, and the company has a contractual relationship with Vinasun as the court instructed Vinasun to engage and pay CVIC VND3 billion for damage assessment fees, a source familiar with the case told DEALSTREETASIA.

Grab hired Grant Thornton to make its own assessment, which showed that it was unreasonable to point at Grab as the sole cause to its profit loss, with other factors such as competition from other taxi companies, change in rider behaviour and internal factors affecting Vinasun as a brand also impacting its business performance.

Vinasun had also changed its business model to car franchising, where instead of hiring drivers as employees, it is now franchising vehicles to them. This factor alone has a great impact on its business, Grant Thornton said.

The consulting firm added that Vinasun was “more than capable to compete” as one of the largest taxi companies in Vietnam with its first mover and home advantage.

“This lawsuit is nothing but an attempt by Vinasun to delay the use of technology in the transportation industry and to use the courtroom to influence policy-making for e-hailing to protect its own traditional business model,” said Grab’s Lim.
If the court agrees with the procuracy, according to Duc, it might set a negative precedent in the country.

Commenting on the development, Lam Tran, CEO of Vietnam-based lifestyle membership startup Wisepass, said: “Vinasun had a great market share and fell down by resisting change rather than embracing technology quick enough to respond to the market threat. Their industry was doomed from the beginning and they will likely suffer more in revenue loss by the next 5 years as Grab doesn’t seem likely to stop growing with their super app mimicking WeChat in China.”

Amid intense competition from digital services, Singapore’s GIC fully exited its nearly 8 per cent interest in Vinasun in May 2018. The wealth fund made a bet on Vietnam’s largest taxi company in 2014 with an estimated VND200 billion investment. However, the divestment was valued at only VND75 billion based on Vinasun’s share price.

Vinasun’s current biggest overseas shareholder is TAEL Partners with a 18.3 per cent stake. The investment firm injected around VND383 billion for its ownership, according to Vietnamese stock data portal CafeF. The stake is now worth some VND220 billion on the stock market.