Competition watchdog fines Grab, Uber S$13 million over 'anti-competitive' merger

SINGAPORE — Handing down its decision on the Grab-Uber merger after a six-month review, the Competition and Consumer Commission of Singapore (CCCS) on Monday (Sept 24) imposed more than S$13 million in financial penalties on the two ride-hailing firms, deciding that the deal is "anti-competitive".

Saying that Uber would not have left the Singapore market if not for the merger, and riders and drivers have since complained about increased fares and commissions, the CCCS set out remedies to cushion the impact on these groups, to open up the market and level the playing field for new entrants.

These include removing Grab's exclusivity arrangements with any taxi fleet, maintaining Grab's pricing algorithms and drivers' commission rates before the merger, and requiring Uber to sell vehicles from its car-rental arm Lion City Rentals to any potential competitor that makes a "reasonable offer based on fair market value".

Monday's decision came nearly three months after the competition watchdog released its provisional findings on the transaction, which took place in March.

Pronouncing that the deal has "substantially" reduced competition and infringed Section 54 of the Competition Act, the CCCS said in a statement that the financial penalties are to "deter completed, irreversible mergers that harm competition".

Grab will have to pay a fine of about S$6.4 million, and Uber about S$6.6 million. This was after the commission took into account the "turnovers of the parties, the nature, duration and seriousness of the infringement, and aggravating and mitigating factors, such as whether the parties were cooperative".

In a statement issued following the CCCS’ decision, Grab said that it will abide by the remedies set out by the commission. However, head of Grab Singapore Lim Kell Jay said: “It is unfortunate that the CCCS is taking a very narrow market definition in arriving at its conclusion that the (merger) has led to a substantial lessening of competition.

“Commuters are free to choose between street-hail taxis and private-hire cars, and it is a fact that private-hire car drivers’ incomes are directly impacted by intense competition with street-hail taxis."

 The ride-hailing firm maintained that it completed the merger within its legal rights and “did not intentionally or negligently breach competition laws”. 

Separately, Uber issued a statement saying it was "disappointed" with the CCCS' decision, adding that it is reviewing the decision and will consider its options, including an appeal.

As part of its measures, the commission is preventing Uber from selling vehicles from its subsidiary Lion City Rentals to Grab without its approval. "This prevents Grab and Uber from absorbing or hoarding Lion City Rentals vehicles to inhibit the access to a vehicle fleet by a new competitor," the CCCS said.

Presently, Grab holds a market share of about 80 per cent. Despite the recent entry of several small players, their market shares remain "insignificant", the CCCS added.

Still, it noted that it may vary, substitute or release Grab from the measures imposed if it finds that they are no longer necessary in preventing the substantial reduction of competition. 

For example, it would suspend the measures if an "open-platform competitor attains 30 per cent or more of total rides matched in the ride-hailing platform services for one calendar month". The measures will also be lifted if such a market share is maintained for six months in a row, the CCCS said.

CCCS chief executive Toh Han Li said that the final decision was a “calibrated” one and the measures were “not over-reaching”. Allowing the merger to happen without any conditions will not be helpful to other large businesses seeking to enter the market. “It will only be helpful to one player… That’s also not pro-business,” he said.

Contrary to CCCS’ findings that Grab's effective fares have increased after the merger, Mr Lim insisted that the company has not raised fares, and is committed to “fair pricing” and “will continue to adhere to our pre-transaction pricing model, pricing policies and driver commissions”.

On non-exclusivity arrangements, Mr Lim noted that for drivers to have full maximum choice, “all transport players, including taxi operators, should also be subjected to non-exclusivity conditions”, adding that Grab has long advocated industry-wide regulations that allow drivers to freely choose and work with the platform or operator they want.  

Grab believes it should not be the only transport firm subject to non-exclusivity conditions, as this is inconsistent with taxi-industry practices and does not create a level playing field, Mr Lim reiterated. 

Asked if taxi firm ComfortDelGro, for instance, is allowed to strike exclusive arrangements, CCCS' Mr Toh acknowledged concerns raised about the requirement imposed on Grab being “one-sided”. But he noted that under Singapore’s competition laws, dominant players can have certain measures imposed on them, and the commission has done this in other cases. 

“The argument is that you’re already dominant, you have market power and if you’re able to impose exclusive agreements, it would really have a significant impact on competition in the market and make it very difficult for everyone else,” he said. 

In the long run, transport economist Walter Theseira said that it was “absolutely the right thing to do” to eliminate exclusivity arrangements as much as possible across the industry, because these put drivers at a “severe disadvantage” vis-a-vis companies. Right now, the requirement for Grab to do away with such arrangements makes the entry of other players possible, added Associate Professor Theseira, who is with the Singapore University of Social Sciences.

In reaching its decision, the CCCS considered Grab and Uber's written representations, feedback from industry players, stakeholders and the public, as well as all available information and evidence.

The Land Transport Authority (LTA) said on Monday that it supported the CCCS' decision on the Grab-Uber merger, saying "the conditions within the infringement decision are in line with LTA’s ongoing review of the regulatory framework for the point-to-point sector, which aims to keep the sector open and contestable".

HOW THE MERGER AFFECTED COMPETITION

• After Grab acquired Uber, the ride-hailing company increased its fares, excluding rider promotions, by 10 to 15 per cent, the commission found.

• Since Grab had imposed exclusivity obligations on taxi firms, car-rental partners and some drivers, the CCCS said that potential competitors are finding it hard to expand here, particularly in amassing a sufficient pool of drivers and commuters to compete effectively against Grab.

BACKGROUND ON THE MERGER

On March 26, after months of speculation, Grab announced its acquisition of Uber's South-east Asia operations, including in Singapore.

As part of the deal, Grab, which is based in Singapore, will take over Uber's ride-sharing and food-delivery business in South-east Asia. The American ride-hailing firm will, in turn, take a 27.5 per cent stake in Grab, and its chief executive officer Dara Khosrowshahi will join Grab's board.

Hitting back at the watchdog's provisional findings in July, Grab criticised the commission for taking a "very narrow approach in defining competition". It also said that the provisional findings and proposed remedies were "over-reaching", and went against "Singapore's pro-innovation and pro-business regulations in a free-market economy". In the same month, co-founder Anthony Tan said that he was "extremely" confident that the company could work through the issues flagged by the CCCS.

In recent months, Grab's top executives have expressed hope that the ride-hailing firm could work through the regulatory difficulties it has faced since the high-profile acquisition.

At a panel discussion on start-ups and innovation in Hanoi about two weeks ago, Grab's co-founder Tan Hooi Ling said of the firm's relationship with governments: "Some conversations go well, some conversations don't, but... as long as we're both willing to listen and adjust our practices accordingly for the greater good of the people we're ultimately serving, we'll get there."