Singapore’s competition watchdog strikes: Grab-Uber merger fined S$13 million

By ahmadzulizwan, 24 September 2018

The sale of Uber’s operations in South East Asia to Grab has not been well received by Singapore’s Competition & Consumer Commission (CCCS). After being told by the commission in early July that the merger has substantially lessened competition, the two parties have been fined a total of S$13,001,702 (RM39.3 million) yesterday. Of that, S$6,582,055 is imposed on Uber while the remaining amount of S$6,419,647 is for Grab.

The fine came after an investigation initiated on the basis that the merger may have infringed section 54 of the Competition Act. Among CCCS findings, upon written and oral consultation with Grab and Uber, as well as feedback from industry players, stakeholders and the public, are:

Grab increased prices after the closest competitor was removed
Internal documents examined by CCCS revealed that Uber would not have left the Singapore market if the sale transaction had not happened. Instead, Uber would have continued operations (in Singapore) while still exploring its strategic options.

Drivers and riders have also complained on the increase in commissions and effective fares after Grab took over Uber’s operation in the country. Grab even changed its GrabRewards scheme in July 2018 which reduced the number of points earned by riders per dollar spent and increased the number of points required for redemptions. CCCS found that effective fares increased between 10 per cent and 15 per cent post Grab’s acquisition.

Potential competitors are hampered by exclusivities and cannot scale to compete effectively against Grab
CCCS reveals that Grab now has an 80 per cent market share (far above the 40 per cent threshold for merged entities), despite attempts by other small players to compete. Part of the reason is that Grab had imposed exclusivity obligations on taxi companies, car rental partners, and some of its drivers. This move makes potential competitors lose access to drivers and vehicles needed to expand.

On top of the fines, CCCS has issued directions to correct the lessened competition; including by making sure Grab allows its drivers free use of any ride-hailing platform and not exclusively Grab.

Grab must also remove its exclusivity arrangements with any Singapore taxi fleet. Pre-merger pricing algorithm and commission rates must also be reinstated. Uber must also sell vehicles of Lion City Rentals to any potential competitor who makes a reasonable offer based on fair market value. Also, Uber must not sell these vehicles to Grab without CCCS’s approval.