Watchdog proposes interim measures to maintain competition amid Grab-Uber deal review

SINGAPORE – In an unprecedented move, the Competition Commission of Singapore (CCS) has issued proposed Interim Measures Directions (IMD) to ride-hailing firms Grab and Uber on their merger to “preserve and/or restore competition and market conditions”, said the competition watchdog in a media release on Friday (March 30).

This means that both parties will have to maintain their pre-transaction pricing, pricing policies and product options for “chauffeured personal point-to-point transport passenger and booking services” in Singapore. 

Under the proposed IMD, Grab and Uber will not be able to obtain any confidential information from the other party, including information related to pricing, formulas, customers and drivers, said the commission. Grab will also ensure that Uber drivers joining Grab’s ride-hailing platform of their own accord are not subject to any exclusivity clauses, lock-in periods and/or termination fees.

The CCS also confirmed in its media release that it had commenced an investigation on Tuesday into the “un-notified transaction” between Grab and Uber for the sale of the latter’s South-east Asia ride-hailing business to Grab.

“CCS has reasonable grounds for suspecting that section 54 of the Competition Act has been infringed by the transaction due to substantial lessening of competition in relation to the chauffeured personal point-to-point transport passenger and booking services market in Singapore,” said its statement.

As the commission has not completed its investigations, it has issued the proposed IMD to both firms in order to preserve and/or restore competition and market conditions. Under the Competition Act, CCS has the authority to issue interim directions in relation to mergers “which have not been notified to it but are under investigations”.

“This is the first time CCS has proposed an IMD on any business in Singapore,” said the CCS.

“The Parties will be given an opportunity to make written representations to CCS upon receipt of the proposed IMD. CCS will consider the written representations before making a decision on whether or not to issue the IMD.”

The commission added that any prohibited actions taken by the parties prior to the proposed IMD must be addressed immediately, either by reversing the action, or taking other actions as agreed with CCS.

“The parties have to comply with the IMD unless it is withdrawn by CCS or successfully challenged on an appeal to the Competition Appeal Board,” added the CCS.

Responding to queries from TODAY, Mr Lim Kell Jay, Head of Grab Singapore, said that the firm had “conducted comprehensive due diligence and legal analysis with its advisers before entering into and concluding the transaction”. He added that Grab had informed CCS that it will make a “voluntary notification no later than 16 April 2018”, and that it would continue to cooperate and engage with the commission.

Mr Lim said: “Improving services for commuters and drivers will always be our priority, and we urge the government to allow us to freely compete and complement the dominant taxi business.”

WILL PRICES GO UP?

It has been a busy week for the ride-hailing industry, as Grab announced on Monday that it had acquired Uber’s South-east Asia operations in the largest-ever deal of its kind in the region. The acquisition included Uber’s operations in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

The move had prompted concerns – particularly from users of both platforms – with transport experts stating that a monopoly here could lead to a dominant player abusing its market power and raising prices.

While Grab on Friday assured customers that the firm is “voluntarily committed to maintaining our fare structure and will not increase base fares”, Dr Terence Fan, a transport analyst at the Singapore Management University (SMU) has a different take on the merger.

He said that having a dominant market share could see Grab raise prices significantly in the short term.

“That’s where the CCS comes in…I applaud their effort in taking the interest of consumers in mind,” he added.

Dr Walter Theseira, a transport economist from the Singapore University of Social Sciences (SUSS), also said the “deal raises concerns”.

“The CCS is not saying no, and it is not saying yes,” he said.

“What CCS is saying is ‘We need to do a proper analysis to decide whether the deal can through, and if it does go through, will there be any modifications or ruling or adjustments we need to impose?’”

Dr Theseira added that this was the best timing for the CCS to step in, as it is “better to stop any progress in the deal right now while CCS and the parties have the opportunity to make their case as to why the deal should go through”.

The CCS is taking a “cautious approach” to the merger and the newly proposed IMD, said Dr Fan, as that gives it time to review the case. He added that this is a standard practice that other developed countries, such as the United States, have adopted.

With Grab and Uber given the opportunity to provide a submission of reply, Dr Theseira said that this may result in amendments to the proposed IMD. He also added that if the two companies are able to convince the CCS that their “concerns are not founded”, the IMD may not come into effect.

However, Dr Theseira does not think that scenario will pan out. He said: “There is a serious question about how this deal interacts with the Competition Act, and you really do need to have a proper analysis and review.” ADDITIONAL REPORTING BY LOW YOUJIN