Ruling Grab-Uber deal anti-competitive may hurt innovation, investor interest: Grab investor

IF Grab's acquisition of Uber's business in Singapore is found to be an infringement of the competition act, it could "hurt innovation" and "limit investor interest" in Singapore and South-east Asia, said GGV Capital, an early investor in ridehailing platform Grab.

The comments made by the California-based venture capital firm and lead investor in Grab's Series B funding round in May 2014 come after the Competition and Consumer Commission of Singapore (CCCS) in early July proposed measures to address a potential monopoly in the ridehailing sector due to Grab's buyout of Uber's South-east Asian business.

In a recent interview with The Business Times, GGV Capital's managing director Foo Jixun said: "CCCS' decision forces unnatural competition in the sector. If CCCS wants to promote innovation, it will have to allow market forces to decide. If a merger happens in the market, it's only because there is a right price-performance consideration."

Mr Foo noted that M&A (merger and acquisition) activity does not mean an end to competition. In China for instance, even with the consolidation of ridehailing giants Didi Dache, Kuaidi Dache and Uber China, as well as travel apps Ctrip and Qunar, the "landscape for innovation continues and competition doesn't stop".

He added: "If CCCS stands by its anti-competitive ruling, the message sent to the market will be that Singapore is not a market forces-driven environment but one where regulations could come into play and force unnatural behaviour, or not allow things to happen. This will limit investor interest in Singapore and the region."

On Friday, Grab announced that it has submitted a written response to Singapore's competition authority to explain why it "disagrees with the CCCS finding that the Grab-Uber deal has led to a substantial lessening of competition", and why some of the measures proposed by CCCS are "unwarranted".

Among the arguments made by Grab is that CCCS has adopted an overly narrow definition of the ridehailing market in its assessment of competition. Grab said: "Contrary to CCCS' market definition, Grab operates in a market that is much broader than chauffeured point-to-point transport platform services and taxi-booking services."

A relevant 'market' under competition law comprises all products and services which consumers would consider to be substitutes in response to a slight price adjustment in one product or service, said Grab. Its competition should therefore include on-demand private-hire cars, on-demand taxis, street-hail taxis, and even public transport, Grab argued.

CCCS had said in its statement that taxi-booking services pose an "insufficient competitive constraint" to Grab and Uber with a market share of less than 15 per cent, and barriers to entry and expansion in the ridehailing sector are high due to "strong network effects" that are perpetuated by Grab imposing exclusivity obligations on taxi and car rental partners.

"Without any intervention from CCCS, it could continue to hamper the ability of potential competitors to access drivers and vehicles," CCCS had added.

In its response, Grab said that CCCS' one-sided imposition of exclusivity conditions "goes against the spirit" of increasing choices for drivers and riders. While CCCS had proposed that Grab removes all exclusivity arrangements with drivers, taxi operators and rental fleet partners to "increase choices for drivers and rides", it is allowing all other players and new entrants to maintain or form such exclusivity arrangements, said Grab.

"Drivers should be free to drive for any platform, and that maximum choice for drivers can only be achieved if exclusivity standards are lifted and prevented industry-wide," Grab said.

Grab added that prior to CCCS' proposed ruling, the ridehailing company had voluntarily proposed to lift its exclusivity arrangements, subject to this being applied evenly across the industry. "Current market realities unfortunately do not reflect this, for instance, taxi operators are still able to restrict their drivers' ability to receive fixed-fare jobs on other platforms," said Grab.

ComfortDelGro, for instance, does not allow its taxi drivers to pick up jobs through JustGrab, Grab's primary ridehailing service through which riders book a private-hire car or taxi at a fixed fare.

In other arguments, Grab said that it has kept its fares and driver commissions unchanged after the Grab-Uber deal and that it is fully compliant with antitrust regulations because Singapore's unique voluntary notification regime does not require businesses to notify the CCCS for M&A.

It added that it trusts CCCS will take appropriate measures to ensure a level-playing field "without unduly favoring or disadvantaging any particular player".

Grab Singapore head Lim Kell-Jay on Friday also said that while Grab does not agree with some of the measures proposed by CCCS, it is committed to working with the commission to "improve upon its proposed remedies to ensure a vibrant and dynamic transport sector".