A deal for ride-hailing platform Grab to take over taxi operator Trans-cab will no longer go ahead, said Singapore’s competition watchdog on Thursday (Jul 25).
The Competition and Consumer Commission of Singapore (CCCS) said it was notified by Grab and Trans-cab on Monday that the two parties would not be proceeding with the proposed acquisition.
CCCS started an in-depth review of the deal in January after an initial review had found that the tech firm’s proposed acquisition might create barriers for rival platforms. The proposed acquisition was first announced last July.
The watchdog said earlier this month that drivers and passengers could face higher prices if competition constraints on Grab from rival platforms are weakened.
“With the termination of the proposed acquisition, the parties have withdrawn their application to CCCS for a decision, and CCCS has accordingly ended its assessment of the proposed acquisition,” said the competition watchdog on Thursday.
It added that Grab and Trans-cab “expressed their respect for the regulatory process and their appreciation to CCCS for the thorough review”.
ALREADY-DOMINANT POSITION
Under competition laws, any merger that may result, or expected to result, in substantial lessening of competition in Singapore is prohibited.
In the event that CCCS finds that a merger situation has resulted in the substantial lessening of competition, it can require the merger to be unwound or modified.
In July last year, Grab announced it was acquiring Singapore’s third-largest taxi operator Trans-cab, which has a fleet of more than 2,500 vehicles. The acquisition would have covered 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 would be acquired through Grab’s private-hire car rental arm, Grab Rentals.
Trans-cab general manager Jasmine Tan said then that the company recognised the need to digitise the business due to shifting consumer behaviours, and that it had entered the deal with “full assurance that Grab will do their best to safeguard the livelihoods of our taxi drivers”.
Meanwhile Grab said it planned to launch an enhanced application that will be integrated with the mobile display units in Trans-cab taxis, enabling drivers to manage their earnings and receive bookings from the Grab platform as well as Trans-cab’s existing call centre, all through a single platform.
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03:01 MinMarket watchers warn that ride hailing fare prices could increase, if ride hailing platform Grab does take over taxi operator Trans-Cab. Singapore’s competition watchdog has said in their first phase of evaluation,…see more
But CCCS said this year that the merger may give Grab the leverage to induce Trans-cab drivers to use Grab’s ride-hail platform over rival platforms, adding that 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.
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In addition, the acquisition would likely allow Grab to significantly reduce the incentives it would have to pay to drivers, compared to if it employed alternative means to increase its driver supply.
As a result, the proposed takeover would be expected to entrench and strengthen Grab’s already-dominant position in the ride-hail platform market, which would not benefit drivers and passengers, CCCS said.
One analyst thinks that such mergers may no longer be viable without measures being incurred to limit market dominance.
“I believe the ride-hailing and taxi industry is likely to remain status quo,” Associate Professor Raymond Ong told CNA.
“This could also prompt smaller market players (private-hire vehicle and taxi) to consolidate instead of one that involves a dominant player,” said Dr Ong, from the Department of Civil and Environmental Engineering at the National University of Singapore.
GRAB ADAMANT
Responding to CNA queries on Thursday, Grab reiterated its statement from earlier this month that it “wanted to support Trans-Cab in its digital transformation and help to improve its drivers’ livelihoods” as consumer behaviours shift.
“Consumers will still be able to access both private hire and taxis from multiple taxi companies via the Grab app,” the tech firm said, arguing that the merger can both increase driver earnings and reduce fares for passengers at the same time.
“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.”
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.
Following Thursday’s announcement, CCCS noted Grab’s “commitment to operating in compliance with competition laws and their intention to contribute positively to the competitive landscape in Singapore”.
“CCCS encourages businesses with acquisition plans to engage CCCS at an early stage of the process if they assess that their plans are likely to raise competition concerns,” it said.
Source: CNA