Singapore watchdog fines Grab & Uber S$13m over merger

Grab and Uber have been fined a combined S$13 million by Singapore’s consumer watchdog over their merger, which it says severely damaged competition in the country’s ride-hailing market because it “removed Grab’s closest competitor”.

The case has been running since the day after Grab and Uber announced the merger on 26 March, in which Uber sold its business to Grab in exchange for a 27.5% stake in its rival. The Competition & Consumer Commission of Singapore came to a preliminary decision in July that the deal “substantially lessened competition”. The final ruling fined Uber S$6.58 million and Grab S$6.42 million.

On top of the fines, the CCCS has ordered that Grab release all drivers from exclusively having to drive for the brand; that Grab end any exclusivity agreements it has with any Singapore taxi fleets; that Uber must sell its vehicles leased from Lion City Rental to any potential competitor at fair market value, and not to Grab without CCCS approval; and that Grab maintain its pre-merger pricing algorithm and driver commission rates.

The merger caused consternation among Singaporean consumers, who claim Grab prices shot up once Uber’s rivalry disappeared. Throughout the process, Grab made representations claiming this was not the case.

But the CCCS said in its investigation that ride-hail prices have indeed increased between 10-15% post-merger, and that Grab also changed its rewards scheme to the detriment of consumers because it “generally reduced the number of points earned by riders per dollar spent on Grab’s trips and increased the number of points required for redemption”.

The regulator said Grab had an 80% market share in Singapore, and that its exclusivity arrangements with taxi fleets, car rental companies and drivers “hamper the ability of potential competitors to access drivers and vehicles that are necessary for expansion in the market."

In deciding on the fine, the CCCS took into account “aggravating and mitigating factors” such as the two companies’ cooperation. Under Singaporean law, companies are not obliged to notify the CCCS of a merger, either before or after it is completed. However, it is generally common practice that for deals that might have competition-related complexities, the parties notify the commission ahead of time.

In its ruling, the commission makes plain its aggravation over Grab and Uber’s decision to go ahead without notifying it, saying it even informed both parties on 9 March of its powers to investigate mergers.

“The parties had the option to notify the transaction for CCCS’s clearance prior to its completion,” the commission said in a statement. “However, the parties proceeded to complete the transaction on 26 March 2018 and began the transfer of the acquired assets immediately, thus rendering it practically impossible to restore the status quo (i.e. pre-transaction).”

In a damning indictment, the regulator said the fine is meant to “deter completed, irreversible mergers that harm competition”.

In a statement, head of Grab Singapore Lim Kell Jay said the CCCS ruling took “a very narrow market definition” and that the company “completed the transaction within its legal rights”. Lim added that Grab "should not be the only transport player subjected to non-exclusivity conditions. This is inconsistent with taxi industry practices and does not create a level playing field".

Lim also chose to portray the commission's decision not to unwind the merger, despite that being described as "practically impossible", as showing "a deeper appreciation of Grab’s potential to serve the region".