SINGAPORE
By KELLY NG
Today-July 5
Ruling that the Grab-Uber merger has led to a “substantial lessening of competition” and price hikes in Grab rides, the Republic’s competition watchdog said it may ask the firms to unwind their merger if the merged entity cannot restore competition in the ride-hailing space.
The Competition and Consumer Commission of Singapore (CCCS) also proposed that Grab and Uber be fined for entering into the deal “despite having anticipated potential competition concerns”.
Releasing its adverse findings on Thursday (July 5), some three months after it launched an investigation into the sale of Uber’s South-east Asia ride-hailing business to Grab, the CCCS proposed several remedies to restore competition in the market. They include removing exclusivity obligations and lock-in periods for drivers and maintaining Grab’s pricing algorithm and commission rates prior to the merger.
In its media release, the CCCS also laid out that on March 9 — more than two weeks before Grab’s announcement of the transaction on March 26 — it had notified both parties in writing of the Republic’s merger notification regime and the commission’s powers to investigate, give directions, and impose penalties on each party.
The watchdog added that both companies could have sought the CCCS’ clearance and advice, but instead, on March 26, they “proceeded to complete the transaction and began the transfer of the acquired assets immediately”. They did so “despite their own view that the outcome would be irreversible, thus rendering it practically impossible to restore the status quo pre-merger”.
Investigations also revealed that the deal included a mechanism for both sides to “apportion eventual antitrust financial penalties”, CCCS added.
The merger, which CCCS had previously referred to as an “un-notified transaction”, had sent lawmakers in Singapore, Malaysia, and the Philippines scrambling to assess the deal’s impact on their markets.
As part of the deal, Grab — which is based in Singapore — will take over Uber’s ride-sharing and food-delivery business in South-east Asia. Uber will, in turn, take a 27.5 per cent stake in Grab, and its chief executive Dara Khosrowshahi will join Grab’s board.
“CCCS has provisionally found that the transaction 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 CCCS said.
To restore market contestability and to mitigate adverse effects from the deal, the remedies CCCS proposed included removing exclusivity obligations, lock-in periods and termination fees on all Grab drivers and those who rent from Grab Rentals, Uber’s car rental arm Lion City Rentals and Grab’s other rental partners.
Uber should also sell Lion City Rentals, or any part of the entity’s assets, to any potential competition who makes a reasonable offer, the commission said. However, it added Lion City Rentals must not be sold to Grab without its approval, to prevent competitive disadvantages to Grab’s potential competitors, and to facilitate a new entrant’s access to a vehicle fleet.
The watchdog also suggested removing Grab’s exclusivity arrangements with any taxi or private-hire car fleet in Singapore to increase choices for drivers and riders.
Under an exclusive partnership inked with SMRT last year, Grab has access to the latter’s current and future taxi and private car fleet — which stood at just over 2,900 vehicles in October 2017. This means that SMRT cab drivers can only accept ride bookings from Grab, ruling out other rival booking apps.
Grab should also maintain its pricing algorithm and driver commission rates prior to the merger, until competition is revived in the market so as to “alleviate the adverse pricing effects on riders and drivers arising from the (merger)”, said the CCCS.
Grab and Uber have 15 working days from Thursday to make their representations to the commission. On Thursday, the commission also launched a public consultation on its proposed remedies, and whether they are “sufficient and workable to address the harm to competition” resulting from the merger. Members of public can share their feedback on the CCCS website from now till July 19.
The commission will make its final decision after considering Grab’s and Uber’s representations, as well as feedback from the public.
In a separate statement on Thursday, the Land Transport Authority (LTA) said it supports the competition watchdog’s proposed infringement decision, as well as its proposed remedies to restore market contestability. They will ensure that the ride-hailing sector “remains open and contestable”, and that “no single operator “dominates the market to the detriment of commuters and drivers”, the LTA added.
Ruling that the Grab-Uber merger has led to a “substantial lessening of competition” and price hikes in Grab rides, the Republic’s competition watchdog said it may ask the firms to unwind their merger if the merged entity cannot restore competition in the ride-hailing space.
The Competition and Consumer Commission of Singapore (CCCS) also proposed that Grab and Uber be fined for entering into the deal “despite having anticipated potential competition concerns”.
Releasing its adverse findings on Thursday (July 5), some three months after it launched an investigation into the sale of Uber’s South-east Asia ride-hailing business to Grab, the CCCS proposed several remedies to restore competition in the market. They include removing exclusivity obligations and lock-in periods for drivers, and maintaining Grab’s pricing algorithm and commission rates prior to the merger.
In its media release, the CCCS also laid out that on March 9 — more than two weeks before Grab’s announcement of the transaction on March 26 — it had notified both parties in writing of the Republic’s merger notification regime and the commission’s powers to investigate, give directions, and impose penalties on each party.
The watchdog added that both companies could have sought the CCCS’ clearance and advice, but instead, on March 26, they “proceeded to complete the transaction and began the transfer of the acquired assets immediately”. They did so “despite their own view that the outcome would be irreversible, thus rendering it practically impossible to restore the status quo pre-merger”.
Investigations also revealed that the deal included a mechanism for both sides to “apportion eventual antitrust financial penalties”, CCCS added.
The merger, which CCCS had previously referred to as an “un-notified transaction”, had sent lawmakers in Singapore, Malaysia, and the Philippines scrambling to assess the deal’s impact on their markets.
As part of the deal, Grab — which is based in Singapore — will take over Uber’s ride-sharing and food-delivery business in South-east Asia. Uber will, in turn, take a 27.5 per cent stake in Grab, and its chief executive Dara Khosrowshahi will join Grab’s board.
“CCCS has provisionally found that the transaction 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 CCCS said.
To restore market contestability and to mitigate adverse effects from the deal, the remedies CCCS proposed included removing exclusivity obligations, lock-in periods and termination fees on all Grab drivers and those who rent from Grab Rentals, Uber’s car rental arm Lion City Rentals and Grab’s other rental partners.
Uber should also sell Lion City Rentals, or any part of the entity’s assets, to any potential competition who makes a reasonable offer, the commission said. However, it added Lion City Rentals must not be sold to Grab without its approval, to prevent competitive disadvantages to Grab’s potential competitors, and to facilitate a new entrant’s access to a vehicle fleet.
The watchdog also suggested removing Grab’s exclusivity arrangements with any taxi or private-hire car fleet in Singapore to increase choices for drivers and riders.
Under an exclusive partnership inked with SMRT last year, Grab has access to the latter’s current and future taxi and private car fleet — which stood at just over 2,900 vehicles in October 2017. This means that SMRT cab drivers can only accept ride bookings from Grab, ruling out other rival booking apps.
Grab should also maintain its pricing algorithm and driver commission rates prior to the merger, until competition is revived in the market so as to “alleviate the adverse pricing effects on riders and drivers arising from the (merger)”, said the CCCS.
Grab and Uber have 15 working days from Thursday to make their representations to the commission.
On Thursday, the commission also launched a public consultation on its proposed remedies, and whether they are “sufficient and workable to address the harm to competition” resulting from the merger. Members of public can share their feedback on the CCCS website from now till July 19.
The commission will make its final decision after considering Grab’s and Uber’s representations, as well as feedback from the public.
In a separate statement on Thursday, the Land Transport Authority (LTA) said it supports the competition watchdog’s proposed infringement decision, as well as its proposed remedies to restore market contestability. They will ensure that the ride-hailing sector “remains open and contestable”, and that “no single operator “dominates the market to the detriment of commuters and drivers”, the LTA added.
