Uber's appeal over anti-competitive Grab merger dismissed, $6.

58m fine upheld

SINGAPORE - Ride-hailing firm Uber will have to pay a $6.58 million penalty after its appeal against a
2018 decision that it had breached competition laws here was dismissed last month.
An appeal board chaired by senior counsel Andre Yeap upheld the fine and other measures imposed
by the Competition and Consumer Commission of Singapore
(CCCS), which had found that Grab and Uber's merger in March 2018 was anti-competitive. The board,
which made its decision on Dec 29, 2020% also ordered Uber to pay CCCS's costs for the appealed.
The Uber-Grab merger and the potentially anticompetitive consequences of the battle for ride-hailing
dominance.
On March 26th, news broke that ride-hailing giant Uber agreed to sell its Southeast Asian operations
to its local competitor Grab. The move may sound familiar, as Uber previously retreated from the Chinese
market by selling its operations to Didi Chuxing. From a competition law perspective, these acquisitions
raise questions of both merger control and restrictive agreements, which are explored in this blog post.

The global ride-hailing wars

Ride-hailing businesses such as Uber are engaged in a fierce legal and commercial battle with
traditional taxi companies. However, competition between ride-hailing apps is just as intense: in its quest
for global domination, Uber has been battling Didi in China, Yandex in Russia, and Grab in Southeast
Asia.
Competition in these markets has known a similar pattern. First, Uber burns through great amounts of cash
as it aggressively tries to capture an emerging market. Then, Uber ends the expensive price war by selling
its operations to/partnering up with the local competitor.
This process first played out in China. Uber lost $2 billion in two years fighting its rival Didi. In
2016, the two companies came to an agreement: Didi bought Uber's brand, business, and data in the
country, while Uber received a 17,7% stake in the combined company (plus a $1 billion investment from
Didi). Additionally, Didi founder Cheng Wei and Uber founder Travis Kalanick joined each other's
boards. Interestingly, Didi had earlier invested in the ride-hailing apps Lyft (U.S.), Ola (India) and Grab,
which meant that Uber ended up holding stakes in not one but four competitors.
Uber took a slightly different route in Russia. In this market, it had to compete with Yandex, Russia's
largest technology company, which also operates a ride-hailing business. Rather than exiting the market,
Uber merged its operations in Russia with those of Yandex in a joint venture (59,3% owned by Yandex
and 36,6% by Uber). The merger was approved by the Federal Antimonopoly Service of the Russian
Federation in 2017.
Uber's current retreat from Southeast Asia is closely following its Chinese precedent. After
struggling to compete with local rivals, Uber made a deal with Grab, the biggest among them. Grab is
acquiring all of Uber's operations in the region, which makes it the dominant ride-hailing platform in a
market of 634 million people. In return, Uber gets a 27,5% stake in Grab and Uber's CEO Dara
Khosrowshahi will join its board.
The largest ride-hailing businesses thus not only hold shares and board seats in each other's
companies (Uber and Didi), but also in smaller competitors (such as Grab and Ola). One important player
remained undiscussed: the Japanese conglomerate Softbank. It is the largest shareholder of both Uber and
Grab, and has invested significant amounts in Didi and Ola (leading some to speak of a Softbank
'Family').
Anti-competitive effects of ride-hailing mergers and horizontal shareholding
These ride-hailing battles, and especially the subsequent consolidation, raise two interesting legal
questions. Firstly, should the effects on competition of these mergers not be scrutinized more thoroughly?
Secondly, does the resulting overlap in shareholders of these companies not create the risk of anti-
competitive effects?
 1. Mergers
Uber offers a platform where drivers and riders can find each other. Given the presence of two user
groups, it operates a so-called two-sided market'.
Such markets are characterized by positive indirect network effects, which implies that the value for users
on one side of the market depends on the number of users on the other side. With regard to Uber, riders
benefit from having more drivers available (shorter pick-up times) and drivers benefit from have more
riders available (less downtime between rides). These indirect network effects offer one argument for
allowing mergers of ride-hailing platforms: bigger can mean better.
However, there are also downsides to a merger between competing ride-hailing businesses, as
explained by Harvard Business School professor Edelman: “Free of competition from each other, neither
company will see a need to pay bonuses to drivers who complete a target number of rides at target quality.
Nor will they see a reason to offer discounts to passengers who direct their business to the one company
rather than the other. And with drivers and passengers increasingly dependent on a single intermediary to
connect them, Grab will be able to charge a higher. markup — a price increase that harms both sides.”