Commentary: Grab-Uber saga shows even with disruption, comes great responsibility

Commentary: Grab-Uber saga shows even with disruption, comes great responsibility

The Grab-Uber merger has had a substantial impact on consumers and it may not be straightforward for consumers to switch to another transport service.

A man walks past a Grab office in Singapore
A man walks past a Grab office in Singapore, Mar 26, 2018. (Photo: Reuters/Edgar Su)

SINGAPORE: Earlier this week, Singapore's competition watchdog fined Grab and Uber a total of S$13 million over their merger, saying that the deal has led to a substantial erosion of competition in the ride-hailing market.

It is understandable for businesses to want to achieve growth and dominance, but the latest development has shown that they also need to consider their responsibility to consumers and in ensuring fair play.

As part of its investigation findings, the Competition and Consumer Commission of Singapore (CCCS) found that Grab trip fares, net of rider promotions, increased by between 10 and 15 per cent after the acquisition deal. 

It highlighted changes Grab made to its loyalty programme as well as a decrease in the number and frequency of driver promotions and incentives. 

The CCCS also found that Grab currently holds about 80 per cent of the market share, and that the “strong network effect” makes it difficult for potential competitors to scale and expand in the market.

As such, among other things, it has ordered Grab to remove exclusivity obligations on drivers and taxi fleets, and to maintain its pre-merger pricing algorithm and driver commission rates.

While maintaining that the ride-hailing firm completed the merger within its legal rights and “did not intentionally or negligently breach competition laws”, head of Grab Singapore Lim Kell Jay has said that for drivers to have full maximum choice, “all transport players, including taxi operators, should be subjected to non-exclusivity conditions.”

However, according to the CCCS, under competition law, dominant players can have certain measures imposed on them in order to ensure the contestability of the market.

Perhaps, in time, measures such as non-exclusivity conditions should be applied equally to all players in the spirit of fair play and to prevent a repeat of this situation.

READ: Grab, the new ruler in town, and the paradox of scaling a business, a commentary

FILE PHOTO: A view of Uber and Grab offices in Singapore
A view of Uber and Grab offices in Singapore on Mar 26, 2018. (File photo: REUTERS/Edgar Su)

SIMPLY A MATTER OF STRATEGY?

The fact remains that the merger has had a substantial impact on commuters.

Some experts argue that what Grab has done in the Singapore market is a very natural thing for businesses to do.

The incentives it offered consumers initially were merely a strategy many industry disruptors use to acquire a larger market share.

It is to be expected that once this goal has been achieved, prices would rise as companies strive towards building a more sustainable business model.

While prices don’t have to go completely out of hand as industry players, including Grab, can build a suite of services other than ride-hailing to ensure sustainability, price increases certainly wouldn’t be inconceivable.

READ: How oBike, Grab-Uber merger were managed shows we haven't gotten disruption right, a commentary

CONSUMERS MUST HAVE CHOICES

The problem perhaps is not so much that Grab managed to achieve market dominance and tweaked fares accordingly, but that it put in place practices such as exclusivity agreements.

When it comes to fares, one could argue that Grab is well within its right to tweak as it wishes.

If the terms of service change too unfavourably, consumers can choose not to reward Grab for its behaviour if it fails to provide value for money, hopefully leading to a correction.

Insisting that prices and driver commissions remain unchanged may be unrealistic. These should be governed by market forces.

READ: Ride-hailing apps – consumers have to ‘suck it up’ as larger issues are tackled, a commentary

(dn) ITS Uber Grab 6
Two became one, after Grab dethroned Uber.

However, can consumers realistically move away from using Grab today?

According to data released by the CCCS in June, Grab now has a market share of 80 to 90 per cent. ComfortDelGro has a share of 10 to 20 per cent, and all other players share 0 to 5 per cent.

After the CCCS decision, Grab Singapore said that commuters are “free to choose between street-hail taxis and private-hire cars, and it is a fact that private-hire car drivers’ incomes are directly impacted by intense competition with street-hail taxis”.

But if one considers this market alone and CCCS data, it seems consumers’ choices could also be curtailed because of some of Grab’s anti-competitive practices.

In a market devoid of these practices, perhaps taxi services and existing and new ride-hailing apps could give Grab a run for its money more easily. 

But the fact remains that even today, consumers can consider using the services of smaller players or choose other options in the transport ecosystem such as taxis, buses and trains.

In the meantime, some of the measures taken by the CCCS should not be seen as concessions to smaller players or potential new entrants, but rather as levelling the playing field for fair competition.

READ: As reality dawns on consumers, time to question if private-hire cars advance our car-lite drive, a commentary

EVEN DISRUPTORS HAVE A RESPONSIBILITY

The CCCS has said that it will suspend the measures it has imposed on Grab if an "open-platform competitor attains 30 per cent or more of total rides matched in the ride-hailing platform services for one calendar month". The measures will also be lifted if such a market share is maintained for six months in a row.

Ride-hailing firm Grab insists its takeover of Uber's business in Southeast Asia has not
Ride-hailing firm Grab insists its takeover of Uber's business in Southeast Asia has not substantially eroded competition in Singapore. (Photo: AFP/Roslan Rahman)

Some may argue that 30 per cent is too high a threshold especially under the current conditions, and that CCCS intervening in this manner is detrimental to disruption in the long term.

However, allowing anti-competitive practices that discourage new players from entering the market could also clearly be detrimental to disruption.

The CCCS decision should be seen as being largely in the public interest and even friendly to disruptors.

But still, as consumers, let’s not come to expect low fares and fancy deals that last indefinitely.

It remains to be seen if more or large players will enter the market to indeed give Grab a run for its money.

The Grab-Uber saga has shown us that disruption is not smooth-sailing and ultimately, businesses will recalibrate their promises to consumers in order to ensure sustainability.

The CCCS would also do well to communicate what constitutes anti-competitive behaviour and apply rules, such as restrictions on exclusivity obligations, more consistently.

However, businesses too must come to terms with the fact that while exponential growth and dominance are tempting and only logical for them to want to achieve, they have a responsibility in maintaining fair play in a competitive market.

Bharati Jagdish is the host of Channel NewsAsia Digital News' hard-hitting On The Record, a weekly interview with thought leaders across Singapore, and The Pulse, Channel NewsAsia’s weekly podcast that discusses the hottest issues of the week.

Source: CNA/sl

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