Singapore fines Uber, Grab $9.5 million
For merger infringement
SINGAPORE (Reuters) – Singapore's anti-trust watchdog fined ride-hailing firms Grab and Uber a combined S$13 million ($9.5 million) over their merger deal, and ordered Uber to sell vehicles from its local leasing business to any rival that makes a reasonable offer.
US-based Uber Technologies, Inc. sold its Southeast Asian business to bigger regional rival Grab in March in exchange for a 27.5 percent stake in the Singapore-based firm.
The deal invited regulatory scrutiny in the region, with the Competition and Consumer Commission of Singapore (CCCS) – in a rare move – launching an investigation just days after the deal was announced.
The CCCS on Monday said it had finalized several measures to lessen the impact of the transaction on drivers and riders, and open up the market for new players. It also said it found the merger substantially reduced competition in the market.
The regulator said it has fined Uber S$6.6 million and Grab S$6.4 million to deter future completed, irreversible mergers that harm competition. It also ordered Grab to remove its exclusivity arrangements with drivers and taxi fleets.
"Mergers that substantially lessen competition are prohibited and CCCS has taken action against the Grab-Uber merger because it removed Grab's closest rival, to the detriment of Singapore drivers and riders," CCCS Chief Executive Toh Han Li said in a statement.
The regulator said effective fares on Grab rose 10 to 15 percent after the deal, and that the firm now holds a Singapore market share of around 80 percent.
It told Grab to maintain its premerger pricing algorithm and driver commission rates.
It also ordered Uber to sell vehicles of its Singapore-based Lion City Rentals to any potential competitor who makes a reasonable offer based on fair-market value, and prohibited Uber from selling those vehicles to Grab without regulatory approval. Lion City's fleet totalled 14,000 vehicles as of December.
Uber said it believed the CCCS's decision was based on an "inappropriately narrow definition of the market, and that it incorrectly describes the up of exports at Novatek's Yamal LNG terminal and at US LNG terminals.
Deliveries of LNG from the Northern Russian Yamal facilities have created extra demand on ships because Arcticclass vessels lifting cargoes transfer the LNG to conventional carriers in Europe for onward journeys.
Deliveries from US terminals to Asia pass through the Panama Canal, taking longer than cargoes from second largest producer in the world, Australia.
Wood Mackenzie estimates it takes 1.9 ships to carry 1 million tonnes per annum (mtpa) of LNG from the US Gulf to Japan compared to 0.7 ships from Australia.
These factors have prompted many shippers to book ships on multi-month or multi-year charters, locking in rates before they rise but cutting the availability of vessels for others.
"If you're at $85,000 now (for shipping day rates), you could easily see $115,000 to $120,000 in the winter," said Jefferies energy shipping analyst Randy Giveans. dynamic nature of the industry, among other concerns." It said it would consider appealing.
Grab said it completed the transaction within its legal rights, and maintained it did not intentionally or negligently breach competition laws.
It added that it had not raised fares since the deal, and said for drivers to have full maximum choice, all transport players, including taxi operators, should also be subjected to non-exclusivity conditions.
It said it would abide by remedies set out by the CCCS.
Ship deficit Underpinning the rates is a worry there may not be enough ships in coming years to match rising output, including from US terminals, which are expected to add 84 mtpa by 2023, turning the country into the world's second largest exporter.
Iain Ross, the chief executive of LNG shipping company Golar LNG, said this month the forecast of a 23 percent rise in LNG production over two years would require 100 extra vessels. But only 66 were scheduled to be delivered in time, he said.
"It's no longer possible to go out today and order a vessel for delivery before 2021," he said. "It seems to us (there is) a structural change in the sector that will (be) driving demand."
But Wood Mackenzie said shipping firms should be wary of ordering too many more vessels now because of the potential for a glut of LNG at some point between 2020 and 2025, as new projects coming onstream may find there are not enough buyers.