S$13 Million fine for Grab-Uber Merger on Mid-Autumn

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Both Grab & Uber was fined a total of S$13 million for the anti-competition merger, announced by Competition and Consumer Commission of Singapore (CCCS) yesterday.

Uber was fined S$6,582,055 while Grab was fined S$6,419,647 million respectively, adding up to a total of S$13,001,702.

What Happened

US-based Uber sold its Southeast Asian business to Grab for a 27.5% stake in Grab in return. The above transaction was completed on 26 March 2018. After that, CCCS found that the Transaction has led to a substantial lessening of competition in the provision of ride-hailing platform services in Singapore.

It is also found that Grab increased its prices after the removal of its closest competitor, Uber.  Grab trip fares have increased by between 10% and 15% after the acquisition deal. Apart from the rise in fares, Grab also reinvented its reward system in July 2018, reducing the number of points earned by riders per dollar spent, as well as a decrease in the number and frequency of driver promotions and incentives.

What changes were there in GrabPay?

  • GrabPay for rides: x16 points redemption reduced to x4.5

  • More points needed to redeem trip fare rewards

Also, CCCS finds that Grab currently holds around 80% market share. Therefore, despite recent entry by several small players, their market shares remain insignificant. CCCS’s investigation found that 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. Grab’s exclusivities hamper the ability of potential competitors to access drivers and vehicles that are necessary for expansion in the market.

So What’s Next

CCCS has issued directions to the both Uber and Grab to lessen the impact of the Transaction on drivers and riders and to open up the market and level the playing field for new players. It is said via the press release that Grab will remove all exclusivity arrangements with drivers and taxi fleets. They will not purchase any Lion City Rental vehicles without CCCS’s approval and would revert all product/service pricing to pre-merger levels.

Head of Grab Singapore, Lim Kell Jay mentioned after the Infringement Decision against Grab and Uber saying, he was glad the deal was not unwound but insisted it was legal and Grab did not “intentionally or negligently” breach laws. He also mentioned that Grab will continue to adhere to their pre-transaction pricing model, pricing policies and driver commissions” and will submit weekly pricing data to CCCS for monitoring. While Uber’s Chief International Business Officer Brooks Entwistle said it was “disappointed.”

The Land Transport Authority said it supports the CCCS’ decision.