The merger of ride-sharing companies Grab and Uber's Southeast Asian operations has been found to impede market competition in Singapore and may be disbanded if proposed remedies are found to be insufficient.
Uber in March 2018 agreed to sell its regional business to Grab--a transaction that was not made known to local competition watchdog, Competition and Consumer Commission of Singapore (CCCS), which later launched an investigation to assess a potential infringement of the country's market competition laws.
The commission now has found the merger to have resulted in "a substantial lessening of competition" in Singapore's ride-hailing market.
"CCCS has provisionally found that the transaction has removed competition between Grab and Uber, which were each other's closest competitor. The merged entity is likely to be able to increase prices and has, in fact, done so since the completion of the transaction," it said in a statement Thursday.
It noted that Uber would not have exited the market "in the near- to medium-term" had the transaction not come through, either continuing its operations or merging its Southeast Asian business with other players that were not its current competitions in Singapore.
It added that taxi booking services, accounting for 15 percent of the market, currently posed "insufficient" competition to the two companies. Furthermore, with Grab placing exclusivity conditions on taxi companies, car rental partners, as well as some of its own drivers, the Singapore competition watchdog said barriers to entry for potential market players were high.
"Without any intervention from CCCS, [Grab] could continue to hamper the ability of potential competitors to access drivers and vehicles," the commission said, adding that lack of competition would have enabled Grab to increase fares and commission rates for drivers.
It noted that competitors and customers had expressed concerns over higher fares and reduced service quality, further pointing to complaints it received from riders as well as drivers on price increases since the merger.
It said Grab had failed to show it could achieve higher efficiencies from the merger. It concluded that the ride-sharing company had violated Singapore's competition laws.
CCCS said it had proposed several remedies to "restore market contestability", including the removal of exclusivity obligations and lock-in periods on Grab drivers and rental partners as well as exclusivity partnership agreements with any taxi fleet in Singapore.
The commissions also suggested Uber sold off Lion City Rentals or parts of the latter's assets to potential competitors that proposed a reasonable offer, and not to Grab without prior approval from CCCS.
The competition watchdog said it was seeking public feedback on its proposed remedies to determine if these were adequate in preventing anti-competition practices as a result of the Grab-Uber merger.
In addition, the two companies might be asked to disband and reverse the acquisition if the remedies were found to be insufficient, following public consultation.
CCCS said it was recommending both companies be fined for violating local competition laws, specifically, for pushing through with the acquisition and transfer of assets "despite having anticipated potential competition concerns".
It added that the two companies had 15 business days to respond to its decision.
Grab told local broadcaster Channel NewsAsia it would appeal CCCS' findings, saying that the commission had assumed a "very narrow approach in defining competition". It added that the proposed fines and the commission's decision "over-reaching" and went against the Singapore government's "pro-business regulations in a free market economy".