Monopoly: SG Version

Uber Technologies Inc has agreed to sell its business in Southeast Asia to its regional rival Grab, according to Channel NewsAsia.     

As part of the business transaction, Uber will receive a 27.5 per cent stake in the combined business. 

However, what does all this mean for Uber passengers? 

For starters, it means that it Uber passengers in need of a ride would have to switch to using the Grab app to hail a taxi. 

At an employment level, it also means that more than 500 Uber employees have been put on paid leave for the time being, at very short notice. Uber employees were also given a mere 2 hours' notice to clear out of their office and leave. In addition to that, the Uber employees on paid leave will be on paid leave for 3 months until Grab is able to re-assign them (if possible).

In the long term, it means that Grab will become a monopoly in its business and not have any direct rivals to compete with. As a result, the costs of booking a Grab ride are likely to increase, considering that they no longer have to compete with Uber and their promotion codes, which were available to cash-paying passengers as well.

Furthermore, The Competition Commission of Singapore (CCS), Singapore's competition authority, has yet to receive a notification from Grab and Uber about their Southeast Asia merger. 

The statutory board has said that Singapore's competition law prohibits mergers "that may be expected to result in a substantial lessening of competition".

In the event that the CCS finds that this merger situation is expected to result in such a lessening, it has powers to give directions to remedy the matter.

At this point, I wonder: Why does the CCS have to wait for Grab and Uber to officially send them a notice about the Southeast Asia merger when news outlets have already publicised the issue? Why can't they go ahead and take action against Grab's "reduced competition" here in Singapore?

Just picture it. With the current situation, only taxi companies not working with Grab are going to be Grab's competitors. Other than that, anyone who books a ride will turn to Grab as their first (and probably only) alternative. And as mentioned before, being a monopoly will give Grab the power to adjust their fares according to what suits them and customers have no choice but to go along with the prices, or take public transport. The latter is bound to be unlikely amongst Grab regulars, as public transport costs are going on a rise as well.

Will Grab even offer discount codes anymore? After all, they have no more competition. They have no more reason to offer customers any incentives to convince them to use Grab to book rides. 

Also, what will happen if the CCS deems that the Grab-Uber merger has indeed "lessened the competition"? Will they call for taxi companies to from a new competitor company? Or will they discuss with Uber about modifying the terms of the merger, such that Grab does not become a monopoly?

We shall wait and see.

(cover photo credits to imoney.ph)

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