Grab’s Trans-Cab purchase will significantly weaken rivals, says CCCS in provisional ruling

Ride-hailing giant Grab’s proposed takeover of taxi operator Trans-Cab will significantly weaken rival ride-hailing platforms here, which in turn could lead to higher prices for passengers and drivers, said Singapore’s competition watchdog.

Issuing its provisional decision on the proposed acquisition after an in-depth review, the Competition and Consumer Commission of Singapore (CCCS) said on July 11 that Grab’s purchase of Singapore’s third-largest taxi operator will deprive other ride-hailing platforms of an important source of drivers at a time when the industry is facing a driver crunch.

CCCS found that the proposed takeover is likely to entrench and strengthen Grab’s already-dominant position in the ride-hailing market, to the detriment of drivers and passengers.

Hence, the deal is likely to result in a substantial reduction of competition in the market, thereby infringing Section 54 of the Competition Act, which prohibits anti-competitive mergers.

Grab and Trans-Cab now have 10 working days to offer solutions to deal with the concerns raised, before CCCS makes its final decision on whether to block the deal or let it through.

The Straits Times broke the news on July 20, 2023, that Grab was proposing to buy Trans-Cab.

Helmed by GrabRentals, Grab’s car-rental arm, the deal includes about 2,000 cabs and more than 300 private-hire vehicles that Trans-Cab owns, as well as Trans-Cab’s vehicle workshop and fuel-pump operations.

The deal was expected to close by the fourth quarter of 2023, but CCCS raised concerns about the takeover in October 2023 after a preliminary two-month review, citing the potential for the move to raise the barriers to expansion and entry for rival platforms.

The antitrust regulator then initiated a second, more in-depth review in January.

CCCS said on July 11 that Grab has a dominant position in the ride-hailing market, and while this is not prohibited, “mergers that protect, enhance or perpetuate the dominant position in ways unrelated to competitive merit can be anti-competitive”.

The watchdog said data it analysed indicated that drivers who rent from vehicle fleets owned by a ride-hailing platform tend to use that platform more, compared with drivers who do not rent from such fleets.

CCCS also said Singapore-based Grab may employ various strategies to induce Trans-Cab drivers to increase their use of Grab’s platform.

Hence, the proposed takeover is expected to result in a greater degree of “stickiness”, which could reduce Trans-Cab drivers’ use of other platforms and thus significantly restrict rival platforms’ access to these drivers after the merger.

CCCS said it may also be difficult for rival platforms to replace any loss of Trans-Cab drivers from their platforms in a timely way, given factors such as driver shortages, and the high cost of fleet ownership and expansion as well as driver incentives.

Hence, the proposed deal is likely to affect the ability of rival platforms to fulfil trip requests and, over time, make them less attractive to passengers and drivers.

The proposed takeover could also affect the ability of rival platforms to expand the scale of ride-hailing services offered, the watchdog added.

“This will weaken competitive constraints exerted by rival ride-hail platforms on Grab,” it said, adding that because of this, drivers could face higher commissions and fees, while passengers may have to contend with higher fares and fewer options.

The CCCS also noted that if the takeover goes through, Grab recognised it would likely make significant savings on the driver incentives it would have to pay, compared with other means of boosting driver supply.

As at May, Trans-Cab operated 2,067 taxis, or about 15.5 per cent of the 13,330 cabs here. In comparison, Singapore’s largest taxi firm ComfortDelGro, which has its own ride-hailing platform Zig, had 8,635 cabs, or about 64.8 per cent of the market.

Grab Singapore managing director Yee Wee Tang said the latest CCCS ruling does not change the company’s determination to offer affordable and reliable transport options.

“Consumer behaviours are shifting, and we wanted to support Trans-Cab in its digital transformation and help to improve its drivers’ livelihoods,” he said in an e-mailed statement.

“With the high cost of putting vehicles on the road in Singapore, drivers need to see an increase in earnings. Without (this), the availability of good drivers in this industry will decline further,” he added.

Grab did not answer questions on whether it remains committed to the deal, and whether it plans to make further submissions to CCCS.

Trans-Cab founder and chairman Teo Kiang Ang told ST that he did not have an opinion on the provisional ruling. “We will continue to operate as usual,” he said in Mandarin.

In their earlier submissions to the regulator, Grab and Trans-Cab had said the merger would not substantially lower competition in the platform and ride-hailing rental markets.

They argued that there were minimal overlaps between the two companies; drivers were free to use Grab or any other ride-hailing platform; and the number of drivers on Grab’s app was not expected to rise significantly with the takeover.

Grab had also said both companies intended to abide by regulations that promote open competition and prohibit anti-competitive behaviour.

Mr Teo, meanwhile, had told ST that he did not think the deal would have much of an effect on competition, because his company does not have a majority in the taxi market.

Industry observers have said that even if the proposed deal is approved, Grab may call for a revaluation of its offer, which is said to be worth more than $100 million.

This is because Trans-Cab’s fleet would have aged and, by then, vehicle certificate of entitlement prices might have fallen substantially, pulling down the value of its existing vehicle fleets.

This is not the first time Grab has come under antitrust scrutiny.

In 2018, CCCS fined Grab and United States ride-hailing firm Uber a combined $13 million for their merger, which the watchdog found to be anti-competitive.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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