Deal­ing with a mo­nop­oly

The Star Malaysia - StarBiz - - Short Position -

WHEN e-hail­ing com­pa­nies first ap­peared on our shores, their en­try was greeted with much en­thu­si­asm. Users gushed about be­ing able to take a new car, have fare cer­tainty and book a taxi far more ef­fi­ciently than the tra­di­tional taxi cen­tres were pro­vid­ing.

Taxi com­pa­nies re­volted af­ter their en­try, but the preva­lence of Uber and Grab cars for peo­ple to use via apps made them the pre­ferred choice for many com­muters.

The cheaper fares, although enor­mously sub­sidised, was a big car­rot for peo­ple to use those rides.

Fast for­ward to to­day and we have a sit­u­a­tion where Uber has shut down its busi­ness in Malaysia in favour of tak­ing a stake in Grab. That’s be­cause Grab has en­trenched it­self in many mar­kets in South-East Asia and has raised bil­lions of ring­git from in­vestors to fund its grow­ing op­er­a­tions.

But the process of cre­at­ing a vir­tual mo­nop­oly in the e-hail­ing busi­ness has met with some re­sis­tance, and rightly so.

Mo­nop­o­lies are of­ten frowned upon, as it cre­ates an in­ef­fi­cient mar­ket. If an op­er­a­tor has mo­nop­o­lis­tic power, it of­ten will flex its mus­cles to make more money to the detri­ment of con­sumers.

Reg­u­la­tors will step in when as­sess­ing the sit­u­a­tion, and it was no dif­fer­ent when the deal be­tween Uber and Grab was an­nounced. Politi­cians and reg­u­la­tors took a dif­fer­ent stance than when such com­pa­nies first started op­er­at­ing in Malaysia.

In the past, they un­der­stood the need to have such ser­vices be­cause con­sumers wanted that. Those agen­cies are now us­ing their power to pro­tect con­sumers from be­ing taken ad­van­tage of.

Sin­ga­pore’s com­pe­ti­tion watch­dog stepped in to make sure that peo­ple do not pay the price from the cre­ation of a new mo­nop­oly, and it was re­ported that its mea­sures are meant “to keep the mar­ket open and con­testable”.

What Uber and Grab did was to in­tro­duce com­pe­ti­tion to a reg­u­lated mar­ket and now it is only ap­pro­pri­ate that reg­u­la­tions are used to keep the mar­ket open and fair for con­sumers.

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