Update: Singapore competition regulators impose penalties on Grab, Uber

A Grab taxi in SingaporeA Grab taxi in Singapore

Singapore’s competition regulator on Monday issued an infringement decision against ride-hailing firms Grab and Uber, saying the sale of Uber’s Southeast Asian business to Grab led to a substantial lessening of competition.

The Competition and Consumer Commission of Singapore, or CCCS, said that after examining the two companies’ internal documents, it found that Uber would not have left the Singapore market by simply terminating its business if the transaction hadn’t taken place.

“Instead, Uber would have continued its operations in Singapore, while exploring other strategic commercial options, such as collaboration
with another market player, or a sale to an alternative buyer. The transaction has removed Grab’s closest competitor in ride-hailing platform services, namely Uber,” CCCS said. “The transaction is anti-competitive,” it said.

Grab Singapore said on Monday it was glad that it wasn’t required to unwind the Uber deal, but it didn’t agree with the CCCS decision.

“Grab completed the transaction within its legal rights, and still maintains we did not intentionally or negligently breach competition laws,” Lim Kell Jay, head of Grab Singapore, said in a statement.

“It is unfortunate that the CCCS is taking a very narrow market definition in arriving at its conclusion,” he added, noting that riders are still free to chose between street-hail taxis and private-hire cars.

Uber’s chief international business officer, Brooks Entwistle, said his company was disappointed by the CCCS decision.

“We believe it is based on an inappropriately narrow definition of the market, and that it incorrectly describes the dynamic nature of the industry, among other concerns. We are reviewing the decision carefully and will consider our options, including an appeal,” Entwistle said in an emailed comment.

Higher prices?

After the removal of the closest competitor, Grab increased prices, CCCS said.

It added that it received “numerous” complaints from riders and drivers about Grab’s effective increases in fares and commissions, via fewer promotions and driver incentives, since the deal, with regulators finding fares effectively increased by 10 percent and 15 percent post-deal.

Grab disputed that it had raised prices, but said it would continue to submit weekly pricing data to CCCS for monitoring. The ride-hailing company said it would stick with its pre-transaction pricing model, pricing policies and driver commissions.

CCCS noted that Grab also now holds an around 80 percent market share, with the entry of several small players not able to affect the market significantly.

“Strong network effects make it difficult for potential competitors to scale and expand in the market, particularly given that Grab had imposed exclusivity obligations on taxi companies, car rental partners, and some of its drivers,” CCCS said. “Grab’s exclusivities hamper the ability of potential competitors to access drivers and vehicles that are necessary for expansion in the market.”

Remedies and Penalties

Singapore’s regulators imposed remedies to less the deal’s impact on riders and drivers and also imposed financial penalties on Uber and Grab to deter any future completed, irreversible mergers that could harm competition, it said.

The remedies included ensuring Grab drivers can use any ride-hailing platform, without exclusivity, removing Grab’s exclusivity arrangements with any taxi fleet and maintaining Grab’s pre-merger pricing algorithm and driver commission rates.

Grab said that it has advocated for industry-wide regulations to allow drivers to freely choose which platform or operator they want to drive with, but it added that all transport players, including taxi operators, should be subject to non-exclusivity conditions.

“Grab should not be the only transport player subjected to non-exclusivity conditions,” Grab’s Lim said in the statement.

CCCS also required Uber to sell the Lion City Rentals vehicles to any potential competitor with a reasonable offer, and prevented Uber from selling the vehicles to Grab without prior CCCS approval.

“This prevents Grab and Uber from absorbing or hoarding Lion City Rentals vehicles to inhibit the access to a vehicle fleet by a new competitor,” CCCS said.

It also imposed financial penalites of S$6.58 million on Uber and S$6.42 million on Grab, the statement said.

This article was originally published on Monday 24 September 2018 at 17:34 SGT; it has since been updated to include a comment from Uber. 

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