CCCS issues PID against Grab and Uber post-merger

KOTA KINABALU: According to Singapore’s competition watchdog, the merger between ride hailing giants Grab and Uber has led to a heightened barrier of entry into the market which in turn, resulted in an increase in fare prices.

In a statement yesterday, the Competition and Consumer Commission of Singapore (CCCS) announced that it has issued a proposed infringement decision (PID) against both Grab and Uber in relation to the recent merger or sale of Uber’s Southeast Asia business to Grab in consideration of a 27.5 per cent stake in Grab.

The CCCS guided that its investigations into the merger, which commenced on March 27, has indicated that the Grab-Uber merger has infringed on section 54 of the Singapore Competition Act and that it would be seeking public feedback on proposed remedies to address the competition concerns.

“CCCS’s investigation has found evidence that Uber would not have left the Singapore market in the near to medium term in the absence of the Transaction. It would either have continued its operations or merged its Southeast Asian business with other potential buyers who were not its current competitors in Singapore.

“Uber had entered into an agreement to collaborate with ComfortDelGro with the introduction of UberFlash to compete with Grab, and the collaboration was only withdrawn after the Transaction. The Transaction has therefore removed competition between the two closest prevailing competitors in the CPPT platform services market in Singapore,” said CCCS.

The CCCS also found that taxi booking services were unable to provide a sufficient competitive constraints as they have less than 15 per cent market share. Besides that, Grab has also imposed exclusive obligation on taxi companies, car rental partners and some of its drivers – all of which contributes to a higher barrier of entry into the local market.

Potential new entrants have provided feedback to the CCCS that without any intervention from the watchdog, it would be difficult to attain. 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.

Furthermore, without sufficient competition, the CCCS guided that 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.

“In addition, CCCS noted that the market for the rental of chauffeured private hire cars (CPHCs) is characterised by considerable barriers to expansion such as significant amount of time and upfront capital expenditure to build a car rental network of sufficient scale, and a higher cost of maintaining CPHC vehicles as compared to normal rental vehicles.

“Hence, the CPHC rental companies may not be able to expand and compete effectively without a tie-up with a ride-hailing platform. Post-Transaction, Grab would be in a strong position to put in place exclusive arrangements with the CPHC rental companies and the drivers who rent from these companies in order to reinforce its position in the ride-hailing platform services market,” added CCCS.

The mitigate the negative effects of the Grab-Uber merger, the CCCS has proposed several remedies.

These include the removal of exclusivity obligations, lock-in periods and/or termination fees on all drivers who drive on Grab’s ride-hailing platform and/or who rent from Grab Rentals, Lion City Rentals or rental partners of Grab so as to increase choices for drivers and riders and improve market contestability, the removal of Grab’s exclusivity arrangements with any taxi/CPHC fleet in Singapore so as to increase choices for drivers and riders and improve market contestability, the maintenance of Grab’s preTransaction pricing algorithm and driver commission rates until competition is revived in the market, requiring Uber to sell Lion City Rentals (or all or any part of Lion City Rentals’ assets) to any potential competitor who makes a reasonable offer and preventing Uber from selling Lion City Rentals (or all or any part of Lion City Rentals’ assets) to Grab without CCCS’s prior approval.

The CCCS has also proposed that financial penalties would be imposed on Grab and Uber respectively as it has concluded that the two parties have carried out the merger despite having anticipated the concern of substantial lessening of competition within the ride-hailing platform market in Singapore.