LTA to study impact of Grab-Uber deal, analysts concerned about Grab's dominance

SINGAPORE — In the wake of Grab’s announcement that it will acquire Uber’s business in South-east Asia, the Land Transport Authority (LTA) said on Monday (March 26) that it will “ensure that no one single market player dominates the sector to the detriment of commuters and drivers”. The authority also noted that Singapore’s competition watchdog has the power to review mergers or acquisitions.

Responding to TODAY’s queries, an LTA spokesperson said that it will study the impact of the deal on the point-to-point transport sector. “Separately, we are reviewing the regulatory framework, to license the private-hire car booking service operators,” the spokesperson said, adding that the strategic intent is to keep the private-hire car and taxi industries “open and contestable”.

However, the latest development is still subject to the Competition Commission of Singapore (CCS), which “has the power to review any merger or acquisition that might affect competition in any market in Singapore”, the spokesperson said. 

In a statement, the CCS said that under Singapore’s competition law (Section 54 of the Competition Act), it prohibits mergers that could be expected to result in a “substantial lessening of competition”. In such an event, the CCS has the powers to “require the merger to be unwound or modified”, as well as to “consider issuing interim measures” before the merger is finalised. 

On Monday, after years of rivalry and months of speculation, Grab said that it has bought over Uber’s operations in South-east Asia, including in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, in what is the largest-ever deal of its kind in the region.

As part of the agreement, Singapore-based Grab will be integrating Uber’s ride-sharing and food delivery business into its existing platforms. Uber, which is based in San Francisco, will in turn take a 27.5 per cent stake in Grab.

WORKING CLOSELY WITH REGULATORS

Seeking to allay concerns about the impact of the merger, a Grab spokesperson said that the firm is in “close engagement with the regulators, and will cooperate closely with them to address any questions or concerns they may have”.

“We believe that the merger with Uber will enable a more efficient transportation network. With a larger fleet of drivers (supply) on our platform, passenger transportation needs (demand) will be met faster,” Grab said, adding that bookings will be matched faster and more efficiently. 

Earlier this month, the Singapore Government said that it would review regulations governing the point-to-point transport sector so that no single player will dominate.

Among other things, the review will look into how to license ride-hailing operators and structure the industry, Second Transport Minister Ng Chee Meng said in Parliament. As the regulator, the Government has to “act in good time” to ensure that the market stays open and contestable, even as the taxi and private-hire car industries consolidate, Mr Ng said.

Three months ago, Singapore’s largest taxi operator ComfortDelGro announced a S$642 million tie-up with Uber, which was seen as a move to counter Grab’s partnership with five other taxi firms here. Now, the Grab-Uber deal has put a question mark over this alliance.

ComfortDelGro’s group corporate communications officer Tammy Tan said that the company is reviewing “all aspects of the proposed tie-up with Uber Technologies, which is currently under review by the Competition Commission of Singapore”.

Last December, ComfortDelGro said that it was buying over 51 per cent of Lion City Holdings, Uber’s car-rental arm in Singapore. Lion City Holdings runs Lion City Rentals, which has a fleet of about 14,000 vehicles.

Grab stressed that Lion City Rentals “is not part of the deal” and ComfortDelGro drivers can continue to accept bookings via GrabTaxi. 

NO MORE PRICE WARS, NO MORE DISCOUNTS

Should the Grab-Uber merger go through, Assistant Professor Yang Nan from the National University of Singapore (NUS) Business School said that the market would “essentially have a monopoly operator controlling the majority of on-demand transit fleet and being free in pricing decisions”, adding that prices are expected to rise for riders with decreasing driver profits. 

Noting that those using the ride-hailing services via mobile applications have already received emails from Grab and Uber informing them about the merger, he said: “The emails don’t even have the term ‘subject to regulatory approval’. This shows how confident they are.” 

Similarly, commuters wondered if this would mean the end of cheap and discounted rides with the lack of competition, leaving them at the mercy of Grab to jack up prices in future.

Telling TODAY that she once forked out S$62 for an Uber ride from City Hall MRT Station to Changi on a rainy day, Ms Daisy Ng, in her 40s, who works in the banking industry, said that she might no longer have the luxury to choose the cheapest rides available.

Agreeing, Ms Janet Soh, 56, who is self-employed, said that her biggest concern would be the fewer “promotion codes” offered to riders. These discounts help to cut the cost of a trip to as low as S$8 if she travels from the city to her home in Bedok. 

Mr Eric Toh, 30, who works in the communications field, is expecting “more price surges ahead”. To get to work, he regularly takes Uber from Toa Payoh to Changi, which costs about S$17. If these dynamic fares turn out to be “higher than those of conventional taxis”, Mr Toh might eventually return to booking taxis for its metered fares. 

On such concerns over dynamic and surge pricing, transport analysts such as Professor Lee Der-Horng from NUS pointed out that there should be measures to ensure that the “price mechanism can function as per normal”.

“The Government cannot be blind to this… and must find a way to maintain the necessary visibility of dynamic pricing… to know (when) surge pricing must be triggered, and whether that is necessary… so the commuters’ benefit can be protected,” he explained. 

On talk that new operators may be entering Singapore to challenge Grab, Prof Lee said that it is unlikely in the near future, given the country’s small market. 

TIGHTER REGULATIONS, SCRUTINY NEEDED

Asst Prof Yang’s stand is that the latest deal has to be “blocked by the regulators”. The CCS should also “cut links between the Grab and taxi companies, disband the Uber-ComfortDelGro partnership, and push for price regulations in the on-demand transit market” to ease the “damage” caused by the merger, he said. 

While a “monopoly by itself isn’t necessarily bad” in Singapore’s small market, transport economist Walter Theseira questioned if Grab’s dominant position could “influence the market in ways that go beyond prices”.

Should the merger go through, Grab could have the “sole authority” over the livelihoods of private-hire car drivers, who would be forced to play by firm’s rules.

Dr Theseira, who is senior lecturer at the Singapore University of Social Sciences, pointed out that Grab does not have to account to anyone why and how it blacklists certain drivers, for example. This is unlike a clear system, say, where a driver loses his license due to a “well-defined set of rules”, such as demerit points, and there is the right to appeal. 

Dr Theseira added: “(A company’s) policy can change at a moment’s notice… unlike government regulation which requires an act of parliament or proper process.”

Calling for more insight and transparency, he said that the Government might have to look into more “heavy-handed regulation” in this area. 

Going ahead, Grab seems bent on conquering other markets. It has already branched into the bike-sharing market through its GrabCycle venture, it is driving digital payments by connecting merchants through its GrabPay platform, and its spokesperson said that it is “striving to become one of South-east Asia’s food delivery platforms of choice”. 

Referring to media reports which hinted that it might become the next Alibaba, China’s e-commerce giant, Prof Lee said: “With all its expansions, Grab is going to get hold of a lot of data and might find some more interesting or profitable, value-added service (to offer the market).”