By Lara Climaco i FilAm Star Correspondent
Ride-sharing platforms Grab and Uber have been fined PHP 16 million by the Philippine Competition Commission (PCC) for proceeding with their merger when the agency had ordered them to keep the status quo for the duration of its anti-trust review.
PCC initiated the review in April after Grab and Uber announced their merger in Southeast Asia, with Grab as the surviving entity in the region. The move elevated Grab to a virtual monopoly status in the Philippines, with 93 percent market share in a burgeoning ride-sharing industry. PCC eventually cleared the merger in August despite competition concerns it had flagged such as price increases and service deterioration, upon Grab’s voluntary commitment to abide by service quality, fare transparency, pricing and related performance metrics.
However, last October 17, PCC announced its decision to penalize Grab and Uber for violating key provisions of its interim measures order (IMO), making it difficult for the Agency to conduct its merger review. Finding Grab and Uber committing 10 acts of violation, PCC imposed maximum penalties. Fines range from PHP 50,000 to PHP 2 million for each violation of the Philippine Competition Act. Grab was ordered to pay PHP 8 million while Uber, PHP 4 million of the total PHP 16 million in penalties. PCC said it imposed a lower penalty on Uber because the latter had to comply with a cease and desist order from the Land Transportation Franchising and Regulatory Board during the review period.
Grab bore the brunt of the penalties for its failure to maintain pricing policies, rider promotions, driver incentives, service quality and related conditions, PCC said in its press release announcing the October 11 resolution against Grab and Uber.
“From a competition perspective, the lower rate of increase in rider promos post-IMO could be interpreted in two ways. On one hand, it may be an indication of less aggressive behavior by Grab for purposes of promoting exclusivity through rider promos. On the other hand, it could be a sign of Grab exercising its increased market power over riders in light of Uber’s exit from the market. The failure of Grab and Uber to maintain rider promos at the pre-transaction level creates the possibility for alternative conclusions which caused difficulty on the part of the Commission in its review of the transaction,” PCC said in the resolution.
After subjecting Grab’s data to a regression analysis and structural break tests, PCC confirmed that not only did rider promos and incentives to drivers decline, Grab’s pricing also started increasing. Prior to the merger with Uber, Grab’s charges were on a flat or declining trend, according to PCC .
“We note further that in addition to the prejudice caused to the Commission’s review of the transaction, respondents’ violations, resulting in increased difficulty in booking rides, longer wait times, increased driver cancellations and decrease in completed rides also caused direct harm to riders,“ it was stated in the PCC resolution.
Grab is subject to third-party monitoring for 12 months on its voluntary commitments to PCC. International audit firm Smith & Williamson was appointed earlier this month to track and audit the transport network vehicle service.
PCC has warned that “unwinding of the transaction” or disallowing the Grab-Uber merger in the Philippines is one of its options.