Singapore fines Grab-Uber $9.5M over 'anti-competitive' merger

Competition and Consumer Commission of Singapore says ride-sharing operator Grab adopted anti-competitive actions following its merger with Uber's regional operations, and fines each company more than S$6 million for the infringement.
Written by Eileen Yu, Senior Contributing Editor

Grab and Uber have each been fined more than S$6 million for impeding market competition in Singapore, which have included moves to increase rider fares and driver commissions.

The Competition and Consumer Commission of Singapore (CCCS) said it had issued financial penalties to both companies to "deter completed, irreversible mergers that harm competition". Uber had been ordered to pay S$6.58 million (US$4.83 million), while Grab would have to fork out S$6.42 million (US$4.71 million) in penalties.

Numerous complaints from local drivers and riders were lodged regarding spikes in fares and commissions Grab had imposed, following its deal to acquire Uber's Southeast Asian operations, according to a statement issued Monday by the country's competition watchdog.

The agreement prompted CCCS to launch an investigation to assess whether the move had infringed on Singapore's market competition laws, which it later found to be the case. Grab in March 2018 announced it was acquiring Uber's regional business and giving the US ride-sharing company a 27.5 percent stake in return.

The deal, CCCS noted, had resulted in "a substantial lessening of competition" in the provision of such services in Singapore. Amongst the complaints it received, the government agency noted that Grab in July 2018 made sweeping changes to its rewards scheme that slashed the points riders would earn and increased the number they needed for redemptions.

Grab's fares also were found to have climbed between 10 percent and 15 percent following the Uber deal, said CCCS. It added that, upon assessing internal documents from both companies, it determined that Uber would not have exited the Singapore market if the Grab deal had not been inked.

Instead, the US operator would have continued its local operations while seeking out other strategic business options, such as collaborating with another market player or selling to an alternative buyer.

CCCS said the transaction effectively removed Grab's closest competitor in the ride-hailing market, specifically, Uber.

It added that with an estimated 80 percent market share, Grab's mandate for exclusivity from its partnership agreements with taxi companies, car rental partners, and some of its drivers made it difficult for other competitors to access drivers and vehicles. These would have been essential for smaller providers to scale and expand in the local market.

Feedback from potential new market entrants confirmed these companies would face difficulty accessing the necessary network of drivers and riders to compete against Grab, if CCCS did not intervene, it said. It described the transaction between Grab and Uber as "anti-competitive" and to have "substantially" lessened competition in the local ride-hailing market, thereby, infringing on section 54 of Singapore's Competition Act.

CCCS's chief executive Toh Han Li said: "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. Companies can continue to innovate in this market, through means other than anti-competitive mergers."

In addition to the financial penalties, the competition watchdog issued several remedies Grab must take to open up the market and level the playing field for new players as well as "lessen the impact of the [Uber] transaction" on drivers and riders.

For one, Grab drivers must be free to use any ride-hailing platform and not be forced to use Grab exclusively. Any exclusive agreements with taxi fleets in Singapore also should be removed, CCCS said. Grab's pre-merger pricing algorithm and driver commission rates also must be maintained, in order to protect riders' interests against excessive price surges and drivers' against spikes in commissions owed to Grab.

In addition, Uber would have to sell the vehicles of Lion City Rentals, its local car rental business, to any competitor with a reasonable offer. This not only would prevent the company from selling these vehicles to Grab without CCCS's prior approval, but also from hoarding and inhibiting access to them.

According to the competition watchdog, the financial penalties were calculated based on various components including both parties' turnover, seriousness of the infringement, and mitigating factors such as whether the companies were cooperative.

It said it would "suspend" all remedies required of Grab if another market player, which held no control with Grab, attained and held on to at least 30 percent of the ride-sharing market for no less than a month.

Grab denies breaching competition laws

In its response, Grab described CCCS's decision as "unfortunate" and assuming a "very narrow market definition". Its Singapore head Lim Kell Jay said commuters remained free to choose between street-hail taxis and private hire cars and that it "advocated" regulations that enabled drivers to freely choose the platform on which they drove. This, though, then should apply to all market players, he noted.

Lim said in the statement: "For drivers to have full maximum choice, all transport players, including taxi operators, should also be subjected to non-exclusivity conditions. Grab should not be the only transport player subjected to non-exclusivity conditions. This is inconsistent with taxi industry standards."

Pointing to the Land Transport Authority, he noted that the country's regulatory framework pertaining to point-to-point transport currently was under review and it hoped this meant the non-exclusivity issue would be addressed.

He also dismissed suggestions it raised its fares since the Uber transaction and said it would "continue to adhere to our pre-transaction pricing model, pricing policies, and driver commission".

He reiterated Grab's previous stance that the company's deal with Uber was within its legal rights, adding that it "did not intentionally or negligently breach competition laws".

Grab in August raised another US$1 billion in its latest round of funding, pushing its overall amount raised to US$2 billion. Its investors included Toyota Motor, which previously forked out US$1 billion to facilitate further development in connected cars and mobility. The Japanese automotive manufacturer was given a seat on Grab's board as well as an executive officer role in the company.

Grab said the funds would go towards growing its portfolio of online-to-offline (O2O) services and drive its ambition to be an "everyday super app", in which it aimed to facilitate essential services consumers needed daily, including transport, food, and payments.

Apart from its ride-sharing service, the company's current crop of offerings include its GrabPay mobile payment platform, GrabFood food delivery service, and GrabExpress parcel delivery service.

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