Uber’s exit from Southeast Asia is under scrutiny from regulators in Singapore who believe that Grab’s purchase of the U.S. firm’s business in the region may violates competition laws.
Singapore-based Grab, Uber’s chief rival in the region, announced the acquisition of Uber’s Southeast Asian business on Monday. In return, Uber is taking 27.5 percent of the Grab business, which is valued at over $6 billion, in a move that appears to be a win for both parties.
Grab plans to shutter the Uber app in less than two weeks and migrate passengers and drivers to its services. It will also integrate Uber Eats into its nascent food delivery service.
The coming together has already concerned consumers, who believe that prices may rise without two companies competeting head-to-head, and now the Competition Commission of Singapore (CCS) has announced that it is looking into the deal.
The organization said it has “reasonable grounds” to suspect that the deal may fall foul of section 54 of Singapore’s Competition Act.
It added:
CCS is generally of the view that competition concerns are unlikely to arise in a merger situation unless:
The merged entity has/will have a market share of 40 percent or more; or
The merged entity has/will have a market share of between 20 percent to 40 percent and the post-merger combined market share of the three largest firms is 70 percent or more.
That might make the deal a little tricky to explain for Grab, which claims over 90 million downloads and more than five million drivers and agents for its transportation and fintech services.
In a first for Singapore, the CCS said it has proposed an Interim Measures Directions (IMD) that requires Grab to “maintain [its] pre-transaction independent pricing, pricing policies and product options.” The commission also directed Grab to not take confidential information from Uber nor lock Uber drivers into driving for Grab.
The commision defines the space not as ride-hailing — where Grab would appear to hold a significantly dominant position by acquiring Uber’s business — but instead as “chauffeured personal point-to-point transport passenger and booking services.”
In that respect, taxi companies in Singapore — which allow booking by SMS and phone call, and also offer ride-hailing apps in some cases — may be considered competition which might water down Grab’s marketshare. Likewise, Grab’s case may be helped by Singapore carpooling service Ryde’s plan to add private car services in an effort to fill some of the gap post-Uber.
Lim Kell Jay, head of Grab Singapore, argued in a statement that the deal with Uber allows consumers a choice against “the dominant taxi industry” and that Grab has already committed to freezing its prices. He added that Grab would work with the CCS and other authorities over the deal as required.
Five years ago, consumers were not able to flag or book taxis easily as supply was a problem. Grab innovated to improve the point-to-point transport within the overall transportation industry, particularly the availability and quality of both taxi and car services. Improving services for commuters and drivers will always be our priority, and we urge the government to allow us to freely compete and complement the dominant taxi business. To address consumer concerns, we have voluntarily committed to maintaining our fare structure and will not increase base fares. This is a commitment we are prepared to give the CCS, and to the public. We have and will continue to work with the CCS, LTA and other relevant authorities, and will propose measures to reassure the CCS, our driver-partners and consumers.
Grab has conducted its comprehensive due diligence and legal analysis with its advisers before entering into and concluding the transaction. We had engaged with the CCS prior to signing and continue to do so. Even though not required by the law, we have informed the CCS that we are making a voluntary notification no later than 16 April 2018 to continue to cooperate and engage with the CCS.
The CCS said it has the power to unwound or modify a deal if it sees that its completion will substantially weaken competition, but it is unclear what that might mean for a regional business like Grab.
Grab and Uber operate in eight markets in Southeast Asia, but Singapore — which is where Grab is headquartered and registered as a business — is the first country where a competitive agency is pouring over the deal.
from TechCrunch