Grab hailing in Asia
By Atty. Amabelle C. Asuncion
November 20, 2019
The “non-millennials” might still remember those hilarious movie scenes where a long queue of passengers competing for a cab on the street would inevitably be beaten by an attractive woman flashing her shapely legs. Within minutes, a cab would dash to pick up the lady, leaving the others to wait and compete again for the next cab.
Today, hailing a ride has taken a form beyond imagination. It does not even require one to stand on the street in fear of being defeated by that svelte figure. All it takes is a downloadable app that can track the rider, quote the fare in advance, and pick up the rider, wherever he is. Some of these apps even operate in various countries. One can almost literally book a ride anywhere in the world. At a time where mobility is in itself a commodity, these ride-hailing apps are a gift of this millennium.
In the Asean region, there are several ride-hailing apps: Grab, Uber, Go-Jek, Bluebird, MyCar, JomRides, MULA, Riding Pink, Dacsee, Oway Ride, Hello Cabs, PassApp, ExNet, to name a few. Among these, Grab and Uber operated across Asia, including the Philippines, Singapore, Malaysia, Indonesia, Thailand, Vietnam, Myanmar, and Cambodia. In any of these countries, a passenger has the option of hailing a ride using either the Grab or the Uber app, considering factors like price and service quality.
However, the two merged in March 2018, combining the two strongest competitors into one. This sent ripples across the Asean competition authorities, which faced the problem of having a market with less competition, to the detriment of the riding public. Investigations were opened to the extent allowed by the respective laws of the jurisdictions.
The Philippines, Singapore, and Vietnam reviewed the transaction under their merger control regime and assessed whether the merger resulted in substantial lessening of competition. Indonesia did not consider the transaction a merger under their law, characterizing it only as an asset transfer with no change in control. However, they monitored the price and the competition in the online transportation market. Thailand’s merger control rules only became effective in December 2018. Malaysia does not have a merger control regime so it investigated instead Grab’s abuse of market dominance. Myanmar’s competition law took effect in 2017 but the competition authority was only formed in October 2018. Cambodia has yet to pass a competition law.
Singapore found that Grab and Uber competed in the market for chauffeured point-to-point transport booking/matching platform services. This market covered all point-to-point transport services that could be hailed through a platform, which included taxis that could be hailed in this manner. Given this, the Singapore competition authority assessed that the merged entity likely gained the ability to increase price. In addition, it could tie and enforce exclusive arrangements on the drivers of their chauffeured private hire car rental services. Thus, Singapore found Grab and Uber to have infringed the prohibition against anti-competitive mergers and imposed a total of SG$13 million in fines against both entities. It also enjoined Grab to maintain the premerger pricing, pricing policies and product options and remove all exclusivity arrangements.
In Vietnam, the competition authority found that the transaction resulted in an economic concentration having at least 50 percent market share post-transaction, in violation of their law. However, Grab contested the determination of the relevant market and the competition council rejected the findings of the competition authority.
In Malaysia, the competition authority provisionally found that Grab abused its dominant position in the e-hailing market by preventing its drivers from promoting and advertising the services of competitors. These had the effect of distorting competition in the relevant market by creating barriers to entry. A fine of MYR86 million is proposed by the competition authority and a daily fine of MYR15,000 if Grab fails to take remedial actions.
In the Philippines, a statement of concerns was issued finding that the transaction resulted in the merged entity being a virtual monopoly and having the ability and incentive to increase prices post-merger. Barriers to entry were also identified. To address these concerns, Grab offered commitments not to deviate from their pricing behavior premerger, not to impose exclusivity on its drivers, and to maintain service quality.
These commitments were to be effective for a year, ending in August 2019. Prior to the expiration of the term, however, the commitments were extended and amended due to the continuing concerns on the lack of effective competition in the market for on-demand car-based private transportation online booking service through a mobile ride-hailing application.
Under the extension, Grab commits to observe a monthly average fare cap so that its fares for the monitoring year starting November 1, 2019, are not unreasonably higher compared to premerger fares. If Grab breaches this commitment, it will refund to the riders their corresponding commission on the excess fare. Furthermore, Grab will not impose exclusivity on its drivers or structure incentives that tend to make drivers exclusive to Grab. Grab has to abide by this commitment for the next four years so as not to foreclose possible entrants.
From the actions taken by the various Asean jurisdictions, it cannot be gainsaid that the Grab-Uber merger raised significant concerns on competition in the market—however, the relevant market was defined by each jurisdiction. This merger concretely illustrated how a cross-border transaction could really affect competition in various markets to the disadvantage of consumers. As it also revealed the constraints faced by competition authorities, it further highlighted the necessity of a whole-of-government kind of effort for the effective implementation of competition law and policy. Surely, it is a convenience to be able to hail a Grab ride almost anywhere in Asia. However, the old movies of passengers competing for a cab have ceased to be funny. It is the undeniable responsibility of the government to ensure that the 21st-century digital market is one where it is the cabs/apps that compete for the patronage of consumers.
Before her appointment to the Philippine Competition Commission, Commissioner Asuncion was engaged in corporate and commercial practice and served as chief legal counsel of a top company and a corporate partner of a law firm. She was also previously involved in legislative, law and policy reform, advocacy, and adjudication work. Commissioner Asuncion has a Master of Laws degree (with distinction) in International Legal Studies from Georgetown University Law Center in Washington, D.C., and is admitted to the New York bar.
(Originally published on Business Mirror’s Competition Matters column on November 20, 2019 here.)