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The Competition and Consumer Commission of Singapore says the merger has led to Grab increasing prices for riders

 

Re-posted from e27.

· singapore,ride-sharing,business

The Competition and Consumer Commission of Singapore (CCCS) has released a statement today saying that the Grab and Uber merger in March this year has led to a “substantial lessening of competition” in the online ride-hailing industry.

Its investigations, which started in April, found that the merger has allowed Grab to increase prices of its ride-hailing and services and there was evidence to suggest it had done so since the completion of the merger. These include a reduction of the frequency and value of rider promotions and driver incentives, as well as an increase in driver commision rate.

The watchdog also found evidence that Uber would not have left the Singapore market, at least in the near to medium term, if the merger had not taken place. Uber had previously inked partnerships with external parties in order to level the playing field with Grab. These included a tie-up with local taxi company ComfortDelGro to for its UberFlash service, which is now void after the merger.

Local taxi companies only hold 15 per cent of the online ride-hailing market, said CCCS, and other competitors — particularly new potential entrants — face hurdles accessing a substantial pool of drivers and vehicles because Grab has “imposed exclusivity obligations on taxi companies, car rental partners, and some of its drivers”.

To woo them away from Grab would require these new players to put up significant capital, which includes driver incentives and ride promotions. (something only established ride-hailing companies can afford to do so now).

Because of these negative effects, CCCS warn that it could “unwind” the Grab-Uber deal unless sufficient measures are put in place to address these issues. Some of its proposed remedies include removing exclusivity obligations, lock-in periods and termination fees for all Grab drivers or those who rent from Grab’s fleet or partners.

The watchdog is also asking Grab to revert to its pre-merger pricing algorithm and driver commission rates until there is sufficient competition in the market.

Regarding Lion City Rental, Uber’s car rental business, CCCS wants the company to sell it to a Grab competitor. This move will help facilitate stronger competition in the market and decreases Grab’s chance of monopolising vehicle rental fleets.

A Grab spokesperson released a media statement to e27, refuting CCCS’s analysis and claimed that its proposed remedies go against Singapore’s pro-innovation stance. Here is the statement in full:

We have considered the CCCS’ Proposed Infringement Decision and disagree with their analysis. The CCCS appears to have taken a very narrow approach in defining competition. While we are one of the most visible players in transport, we are not the only player in the market. CCCS has not taken into account the dynamic developments and intense competition going on over the past few months, from both new and incumbent taxi and ride-hailing players.

Even though not required by the law, we had informed the CCCS that we were making a voluntary notification, as well as proactively engaged with the CCCS before the transaction was signed. We conducted the acquisition legally and in full compliance with Singapore’s applicable competition laws.

We fully cooperated with the CCCS throughout the course of their review, and had proactively proposed voluntary commitments over and above the Interim Measures Directions (IMDs), to ensure consumers’ and drivers’ interests are taken care of, which the CCCS had rejected. Grab has complied with all areas of CCCS’ IMDs including maintaining base fare levels, surge factor and driver commission rates.

This provisional decision and proposed remedies are overreaching and go against Singapore’s pro-innovation and pro-business regulations in a free market economy. We note that the provisional decision is not final nor effective yet, and we will submit our written representations to the CCCS before the deadline. We will take all appropriate steps to appeal against this decision.”

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