The Philippine Competition Commission flagged competition concerns in the ride-hailing market following Grab’s takeover of the Southeast Asian unit of Uber, saying the merger led to price increases and service deterioration.
The PCC said in a statement its Mergers and Acquisitions Office found that the acquisition by Grab Holdings Inc. and MyTaxi.PH Inc. of Uber B.V. and Uber Systems Inc. on March 25 had resulted in a “substantial lessening of competition” in the ride-hailing market.
The statement of concerns noted that Uber would receive shares equivalent to 27.5 percent of the ownership in Grab’s entire operations.
It noted that during the public hearing on April 5, Uber admitted that given the merger, it would no longer compete with its erstwhile rival in the Southeast Asian market, including the Philippines.
The PCC said it found compelling grounds to take Grab to task for its virtual monopoly of both the driver and customer base after the merger.
It said with the migration of Uber drivers to Grab, Grab now had 93 percent of registered vehicles under the transport network vehicle service sector. It also absorbed most of the customer demand previously served by Uber.
Results of the commissioned surveys indicated that ride-hailing passengers were a “captive market” as more than a majority of them were not likely to shift to other modes of public transportation but would continue to choose TNVS even when faced with price increase.
Despite the increase in Grab’s supply of drivers, price monitoring data before and after Uber’s app shutdown on April 16, 2018 showed an upward trend in Grab fares and frequency of surge-pricing after the shutdown.
Passenger surveys and interviews pointed to more driver cancellations, forced cancellation of rides, and longer waiting times.
The PCC said these harms to passengers were a result of the loss of competition previously posed by Uber on Grab.
The PCC said while it assessed the possibility of other transportation network corporations entering the market to provide competition to Grab, the entry of competitors would not be “timely, likely, and sufficient” because it would take a significant amount of time and cost to build a driver and rider base sufficient to contest the incumbent.
It said the business model of TNCs relied on being able to match successfully the supply of drivers with the demand of riders.
The commission said with no constraint from a potential entrant, the ability and incentive of Grab to exercise its market power to the detriment of ride-hailing passengers was even stronger.
The issuance of the SOC is part of the motu propio review launched on April 3, 2018 that scrutinized the deal for the effects of Grab’s newly acquired market status arising from the merger.
Under the rules, Grab and Uber were given time to file their comment on the SOC.
The review will culminate in either the decision of approval or blocking of the deal.
Commitments and remedies to address the identified anticompetitive concerns may also be considered as covered by the Philippine Competition Act, according to PCC.