Has the Grab-Uber merger really driven up fares in Singapore?
RIDE-HAILING companies Grab and Uber struck a deal (merger) earlier this year, with Uber selling its Southeast Asia (SEA) business to rival Grab in March in exchange for a 27.5 percent stake in the Singapore-based firm.
Soon after, several governments in the region — led by Singapore’s Competition and Consumer Commission — raised concerns about how the transaction would impact the economy, jobs in the region, consumers, and mobility as a whole.
Although successive discussions with executives at Uber and Grab didn’t offer many answers, the governments decided to wait, watch, and analyze how it plays out.
However, Singapore Competition and Consumer Commission — again leading the pack — has concluded that the merger has negatively impacted the market and driven up prices for consumers.
As a result, the regulator has decided to levy a fine of SGD13 million (US$9.5 million) on Grab, the merged entity. Further, it has ordered the company to open up the market to competitors by removing the restrictions it placed on its driver partners — individuals and taxi fleets.
Finally, it has also ordered Uber to sell its car rental business to any rival that makes a reasonable offer. If it intends to sell to Grab, permission must be sought from the Competiton and Consumer Commission.
“Regulator said effective fares on Grab rose 10 to 15 percent after the deal, and that the firm now holds a Singapore market share of around 80 percent,” according to Reuters.
A decline in market share to benefit Grab?
Grab has also been told to maintain its pre-merger pricing algorithm and driver commission rates, which are expected to protect consumers against excessive price surges, and drivers against increases in commissions that they pay to Grab.
However, the Competition and Consumer Commission of Singapore said it would suspend the measures on an interim basis if a Grab rival was able to garner over 30 percent of total rides in the ride-hailing services market in a month.
The measures will be removed altogether if a rival attained 30 percent or more of total rides matched in the market for six consecutive months.
Opening up the market and freeing up driver partners to sign-up with other apps, therefore, will not only benefit existing (but struggling) players in the industry, such as Ryde, Kardi, and TADA, and give them a chance to eat into the 80 percent market share that Grab currently commands, but will also help Grab comply with the ruling.
Of course, Uber and Grab have a month to appeal the Singapore regulator’s decision. But the initial ruling is a strong motivator for the regulators in Vietnam and the Philippines who are evaluating and deliberating over the decision themselves.