Uber, Grab Singapore Fine Shines Spotlight on M&A Notice Rules

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By Lien Hoang

Singapore’s first-of-its-kind fine Sept. 24 against Uber Technologies Inc. and rival Grab marks a test case for competition regulation in Southeast Asia and Singapore’s relatively new law.

Uber didn’t ask permission before it sold its the Southeast Asian business to ride-hailing company Grab in March, which gave the company 80 percent of the ride-hailing market in Singapore.

Companies don’t need prior approval from Singapore’s Competition and Consumer Commission when they merge under the law, which went into effect in 2007 and has seen several revisions since. They still could be punished after the fact if their deal harms competition. The regulator relies on voluntary notifications of mergers and consumer complaints for its antitrust reviews.

“This would be the first time penalties are imposed in the case of a merger,” Burton Ong, associate law professor at the National University of Singapore, told Bloomberg Law.

At issue is whether Grab and Uber, which are being fined S$13 million ($9.5 million), are competing only with other ride-hailing apps, or with a broader market that also includes taxis and other forms of transportation. The antitrust regulator generally intervenes if a post-merger firm controls 40 percent or more of a market.

“CCCS, I take it, has disagreed with the internal assessment and, I suspect, disagreed with the relevant market,” Gerald Singham, deputy managing partner at Dentons Rodyk & Davidson LLP, told Bloomberg Law. “When you try to come up with the threshold, you have to define what market you’re talking about.”

Brooks Entwistle, Uber’s chief international business officer, said in a statement that his company will consider appealing the commission’s decision. “We believe it is based on an inappropriately narrow definition of the market,” Entwistle said.

Note to Others

Singapore is the first to levy a fine in the case, and its treatment of the market leader affects other ride-hailing startups in the region. The regulator banned exclusivity contracts with other drivers and taxis, saying the ban was necessary because “it would be difficult for [competitors] to attain a sufficient network of drivers and riders.”

Indonesia’s Go-Jek plans to enter the Singapore market this year and already added Vietnam to its roster, saying this month it now has 35 percent of the motorbike-hailing business in Ho Chi Minh City. Other new players include MiCab in the Philippines and Diffride in Malaysia.

For other companies contemplating a merger or acquisition in Singapore, the lesson from Uber and Grab could be, “Better safe than sorry.”

Even though companies aren’t obligated to secure CCCS approval ahead of time, they may want to do so voluntarily to reduce the risk of penalties, Ong said.

The commission’s decision “sends the message to other would-be mergers that might not be competitive that they need to take the merger regime seriously,” he said.

Antitrust commissions in Southeast Asia, most of which are less than two decades old, have been dogging the two ride-hailing companies ever since Uber ceded eight markets in the region to Grab. Vietnam is focused on outstanding taxes, while the Philippines gave consent to the merger in August once Grab agreed to price controls and service quality metrics, such as response time to customer complaints.

Complaints

The Singaporean regulator said it “received numerous complaints from both riders and drivers on the increase in effective fares and commissions” and demanded that Grab keep the pricing algorithm it had before buying Uber’s operations.

When Singapore officials said in July they were considering fines, they also threatened to unwind Uber’s sale to Grab. But the antitrust agency said that would be impossible now because the two parties moved so quickly to finalize the deal.

Grab didn’t immediately respond to a request for comment but has said it didn’t raise prices or commissions directly. Rather, passengers and drivers might have seen fees rise because incentives expired.

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