Singapore’s Competition and Consumer Commission (CCCS) announced yesterday (July 25) that the planned acquisition of taxi operator Trans-cab by ride-hailing platform Grab will no longer proceed.
According to a press release, both Grab and Trans-cab informed the CCCS on Monday (July 22, 2024) of their decision to cancel the proposed deal.
CCCS had initiated a detailed review of the acquisition earlier this January after preliminary findings suggested that it might create barriers for competing platforms. The acquisition was first announced last July.
Earlier this month, the watchdog warned that the merger could lead to a spike in prices for Grab drivers and passengers if competition from rival platforms were 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With the termination of the proposed acquisition, the parties have withdrawn their application to CCCS for a decision, and CCCS has accordingly ended its assessment of the proposed acquisition.
Competition and Consumer Commission of Singapore in a media statement published 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”.
An unfair advantage?
Under competition laws, any merger that may result in or is expected to result in a substantial lessening of competition in Singapore is prohibited. If CCCS finds a merger substantially lessens competition, it can mandate that the merger be unwound or altered.
The ride-hailing giant announced last July that it was acquiring Trans-cab, Singapore’s third-largest taxi operator with a fleet of over 2,500 vehicles. The acquisition would include Trans-cab’s taxi and car rental business, maintenance workshop, and fuel pump operations.
100 per cent of Trans-cab shares were to be acquired via Grab’s private-hire rental arm, Grab Rentals, with an estimated value of S$100 million.
In an article by CNA, Trans-cab’s general manager, Jasmine Tan, noted the need to digitize the business due to the change in consumer behaviours, and expressed confidence in the deal with “full assurance that Grab will do their best to safeguard the livelihoods of our taxi drivers”.
Grab also previously shared its plans to launch an enhanced application integrated with Trans-cab taxis, which would allow drivers to manage earnings and bookings from both Grab and Trans-cab’s call centre on a single platform.
However, CCCS raised concerns that the merger might compel Trans-cab drivers to favour Grab’s platform over competing platforms. Drivers renting from a platform-owned fleet are less likely to use other platforms, it added.
CCCS also noted that the acquisition could potentially allow Grab to reduce driver incentives, strengthening its already dominant market position at the expense of drivers and passengers.
Associate Professor Raymond Ong from the National University of Singapore’s Department of Civil and Environmental Engineering suggested that without measures to curb market dominance, such mergers might no longer be feasible.
“I believe the ride-hailing and taxi industry is likely to remain status quo,” Dr Ong told CNA. “This [the merger] could also prompt smaller market players (private-hire vehicle and taxi) to consolidate instead of one that involves a dominant player.”
Grab’s not backing down
In response to CNA’s queries, Grab reiterated its previous statement that it “wanted to support Trans-Cab in its digital transformation and help to improve its drivers’ livelihoods” amid shifting consumer behaviours.
“Consumers will still be able to access both private hire and taxis from multiple taxi companies via the Grab app,” said the tech firm, arguing that the merger could simultaneously boost driver earnings and reduce passenger fares.
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 responding to CNA’s queries
This proposed acquisition between Grab and Trans-cab followed the merger of Strides Taxi and Premier Taxis last year to form Singapore’s second-largest taxi operator.
Not their first failed deal
However, this was not Grab’s first acquisition deal that fell through. In 2018, CCCS fined Grab and Uber S$13 million for their merger, which inevitably reduced market competition and increased prices.
The company also considered a potential 2022 acquisition of Prime Taxi, the smallest cab operator in Singapore.
Following yesterday’s announcement, CCCS acknowledged 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.”
Featured Image Credit: Bryan van der Beek/Bloomberg, Wikimedia Commons