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Grab-Uber Merger: CCCS Imposes Directions on Parties to Restore Market Contestability and Penalties to Deter Anti-Competitive Mergers

2018, Singapore, Mergers & Acquisitions

The Competition and Consumer Commission of Singapore (“CCCS”) has issued an Infringement Decision against Grab and Uber (each a “Party”, and collectively the “Parties”) in relation to the sale of Uber’s Southeast Asian business to Grab for a 27.5% stake in Grab in return (“Transaction”). The Transaction was completed on 26 March 2018. CCCS found that the Transaction has led to a substantial lessening of competition in the provision of ride-hailing platform services in Singapore.

CCCS’s Findings

Grab increased prices after removal of its closest competitor

CCCS has examined internal documents of the Parties, and found that Uber would not have left the Singapore market by simply terminating its business if the Transaction had not taken place. Instead, Uber would have continued its operations in Singapore, while exploring other strategic commercial options, such as collaboration with another market player, or a sale to an alternative buyer. The Transaction has removed Grab’s closest competitor in ride-hailing platform services, namely Uber.

CCCS has received numerous complaints from both riders and drivers on the increase in effective fares and commissions by Grab post-Transaction (e.g. via a decrease in the amount and frequency of rider promotions and driver incentives). For example, Grab announced changes to its GrabRewards Scheme in July 2018 which generally reduced the number of points earned by riders per dollar spent on Grab’s trips, and increased the number of points required for redemptions. Indeed, CCCS has found that effective fares have increased between 10% and 15% post-Transaction.

Potential competitors are hampered by exclusivities and cannot scale to compete effectively against Grab

CCCS finds that Grab currently holds around 80% market share. Despite recent entry by several small players, their market shares remain insignificant. CCCS’s investigation found that strong network effects make it difficult for potential competitors to scale and expand in the market, particularly given that Grab had imposed exclusivity obligations on taxi companies, car rental partners, and some of its drivers. Grab’s exclusivities hamper the ability of potential competitors to access drivers and vehicles that are necessary for expansion in the market.

CCCS’s assessment is confirmed by feedback from potential new entrants which indicated that without any intervention from CCCS, it would be difficult for them to attain a sufficient network of drivers and riders to provide a satisfactory product and experience to both drivers and riders so as to compete effectively against Grab.

At the conclusion of its investigation, CCCS has found that the Transaction is anti-competitive, having been carried into effect, and has infringed section 54 of the Competition Act by substantially lessening competition in the ride-hailing platform market in Singapore.

CCCS has imposed directions and financial penalties totalling over S$13 million on the Parties. Read more here.