Competition watchdog says Grab's plan to acquire Trans-cab will significantly weaken rivals

SINGAPORE: An acquisition of taxi operator Trans-cab by Grab will significantly weaken its rivals, said Singapore's competition watchdog following an in-depth review of the proposed takeover.

In a media release on Thursday (Jul 11), the Competition and Consumer Commission of Singapore (CCCS) added that drivers and passengers could face higher prices if competition constraints on Grab from rival platforms are weakened. 

It could also result in fewer choices for ride-hailing platform services.

"Grab has also recognised that through the proposed acquisition, it will likely be able to significantly save on the incentives that it would have to pay to drivers as compared to if it employed alternative means to increase driver supply," said CCCS.

In its provisional decision, CCCS found that the proposed acquisition is likely to result in a "substantial lessening of competition" in the market for the supply of ride-hail platform services to drivers and passengers. This infringes competition laws in Singapore, which prohibits anti-competitive mergers. 

Grab and Trans-cab have 10 working days to make their representations on the concerns raised, before CCCS decides whether to stop the deal or let it go through.

The acquisition of Singapore's third-largest taxi operator Trans-cab, which has a fleet of more than 2,500 vehicles, was first announced last July. It covers Trans-cab’s taxi and car rental business, maintenance workshop and fuel pump operations.

The two companies previously said that 100 per cent of the shares in Trans-cab will be acquired through Grab's private-hire car rental arm Grab Rentals.

CCCS' REVIEW

The watchdog said that businesses are not prohibited from having a dominant position or trying to protect their market position through "competitive merit", such as by introducing innovative products.

"However, mergers that protect, enhance or perpetuate the dominant position in ways unrelated to competitive merit can be anti-competitive," it said.

The proposed takeover is expected to entrench and strengthen Grab’s already-dominant position in the ride-hail platform market, which would not benefit drivers and passengers, it added.

CCCS also noted that Grab's plan to acquire Trans-cab comes at a time when rival ride-hail platforms face a shortage of drivers.

"The proposed acquisition will significantly weaken Grab’s rival ride-hail platforms by depriving them of an important source of drivers (i.e. Trans-cab drivers)."

It added that data shows drivers who rent from ride-hail platform-owned fleets are less likely to use a platform that is different from the one they have rented their vehicle from.

It also pointed out that there are various strategies that may be used by Grab to induce Trans-cab drivers to increase their usage of Grab’s ride-hail platform.

"The proposed acquisition is thus expected to result in a greater degree of 'stickiness' of Trans-cab drivers to Grab’s ride-hail platform and a potential reduction in usage of rival ride-hail platforms," said CCCS.

"Consequently, rival ride-hail platforms’ access to Trans-cab drivers post-merger is likely to be significantly restricted."

The tendency by drivers to stick to certain ride-hail platforms and shortage of drivers are among the reasons why it may be difficult for rivals to replace any loss of Trans-cab drivers in a  timely manner,  said CCCS.

A merger is therefore likely to affect the ability of rival platforms to fulfil trip requests. Over time, this will make them less attractive to passengers and drivers, CCCS said.

Additionally, an acquisition will also affect the ability of rival platforms to expand the scale of their services.

"This will weaken competitive constraints exerted by rival ride-hail platforms on Grab," said the watchdog.

GRAB AND TRANS-CAB'S RESPONSES

Responding to CNA's queries on Thursday, Grab Singapore's managing director Yee Wee Tang said that the company wanted to support Trans-cab in its digital transformation and help to "improve its drivers' livelihoods" amid shifting consumer behaviours.

"This ruling does not change our determination to do everything that we can to offer affordable, reliable transport options to passengers in Singapore. Consumers will still be able to access both private hire and taxis from multiple taxi companies via the Grab app," said Mr Yee.

"With the high cost of putting vehicles on the road in Singapore, drivers need to see an increase in earnings. Without an improvement in earnings, the availability of good drivers in this industry will decline further."

"We will continue to operate our business as usual," Trans-cab told CNA on Friday morning when asked about its response to the CCCS statement. The company declined to comment on whether it would be making its representations on the concerns raised.

Grab's planned acquisition of Trans-cab follows last year's merger of Strides Taxi and Premier Taxis to form Singapore's second-largest taxi operator.

In 2018, CCCS fined Grab and ride-hailing platform Uber S$13 million (US$9.6 million) over their merger. 

The deal led to a substantial lessening of competition in the market, the watchdog said then, highlighting Grab’s increased prices and changes to its loyalty programme after it bought over Uber's Southeast Asia operations.