Dealing with a monopoly
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.