DON’T MAKE ME, UBER
That a regulator will demand a business to keep going despite the inability to do so is eccentric.
It was just supposed to be a business deal. And in the old days, that would have meant a simple handshake and a smile. Not anymore.
Uber’s pullout from Southeast Asia, including obviously the Philippines, came along with it calls for greater regulation of the industry. In the Philippines, the Philippine Competition Commission enthusiastically assumed that regulatory role.
Coming off its high profile examination of San Miguel’s 2016 asset sale to PLDT and Globe, the PCC then promptly examined Grab’s purchase of Uber (with the latter maintaining a certain stake in the former).
PCC Chairman Arsenio Balisacan stated in a BusinessWorld interview that “once they merge and capture about 80% of the market [a later PCC order would peg the figure at 93.22%], they can do many things. There are many ways by which a firm with so much dominance in the marketplace can play to restrict market competition. And that’s what we want to know. We want to have a firm information on what those potential abuses are.” In doing so, the PCC ordered Uber to keep operating. Grab indicated compliance (until at least April 15), agreeing to shoulder the costs of keeping Uber’s app running, even though doing so is futile considering the absence of real world support.
That foregoing paragraph alone indicates the many complexities about competition and doubts as to the PCC’s proper role in it.
First, the most obvious, is the ridiculous order for Uber to continue operating. That a government regulator will demand a business to keep going despite the inability to do so is eccentric. On the face of it alone, violations of the constitutional right to liberty, property, and contract are evident.
Another is the quite disingenuous declaration regarding market share. The 93.22% number (essentially culled from the LTFRB) seems huge, until it is placed within the context of the country’s total transport infrastructure. While not ideal, that there are taxis, buses, MRT’s, and the option to buy a car, makes any alleged sustained dominance (i.e., by Grab) an uncertainty rather than an inevitability.
Even then, dominance is not the problem, it’s the abuse thereof. Those are two different things and both need to be proven.
My colleague at the University of Asia and the Pacific School of Law and Governance, Alizedney Ditucalan, a learned doctor of laws candidate at Japan’s Kyushu University and whose studies focus on competition regulation, noted in a paper he submitted to the International Academy of Comparative Law 20th General Congress that: “Disruptive innovation often marks in new, better, efficient, and low- cost products and services to consumers. It is worthy to note too that this realization of Schumpeter’s concept of ‘creative destruction’ has also disrupted existing regulatory framework. It can construct tensions between regulation and competition policy, or between social justice goals and efficiency goals.
Innovative business models have however blurred defined legal relationship. It has also disrupted regulatory regimes, which, in some degree, led to regulatory mismatched, regulatory ambiguity, and jurisdictional ‘tug of war’ between sector regulator and competition law authority.
When one talks about disruptive firms, the first thing that comes to mind is the sharing platforms ( Christensen argues however that Uber is not an example of disruptive innovation). Because of network effects in the digital economy, disruptive innovations rapidly grow in ‘sharing’ economy platforms, which enable business undertakings by creating a network for suppliers of services and products with buyers, allowing them to do business outside the traditional marketplace.
The rapid growth of this platform has, however, posed even greater challenge to regulators, that is, striking a balance between the bipolar tension of innovation and policy objectives and social goals. Policy makers and regulators are now confronted with the interplays of competition, consumer protection, and regulation from the perspective of disruptive industry participants and regulatory incumbents (Employee or Independent Contractor? Defining the Relationship of TNVS Participants in the Philippines, 2018; citing Christensen, C.M., The Innovator’s
Dilemma, 1997; and Government Advocacy and Disruptive Innovations, Special Project Report, International Competition Network Annual Conference, 2016).”
Which leads me to this final point: there is something of the Minority Report about all this, whereby the government seeks to restrain or even penalize persons (and Uber and Grab are “persons”) for things that haven’t been done yet but based on assumed prophetic functions. Such power. Considering monopolies aren’t even illegal, at least not in the Constitution.
Again, Ditucalan: “Given the ubiquity of digital market, striking a balance is not an easy task for competition authority or regulatory agency. This requires difficult social determinations. There is a consensus that sharing economy significantly benefits the economy and the consumers by providing more choices, greater convenience and more competitive prices. But the million- dollar question now is: How do we regulate disruptive innovation?”
Unless rigorous answers can be given to address all that, the prudent thing for the PCC to do is restrain itself and allow business to get on with competition.