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Ride-hailing players must serve public

From a corporate perspective, it has all the hallmarks of a win-win arrangement. The proposed takeover of ride-hailing company Uber Technologies' South-east Asian business by its rival Grab - with Uber getting a 27.5 per cent stake in Grab's business - will benefit both companies. Should no impediments arise for the deal in a city-state that occupies a top rank for ease of doing business, as rated by the World Bank? From the perspective of the two leading market players, the merger makes obvious sense. Uber's CEO said the transaction would put it "in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don't", For Grab, it stands to have one less major competitor to worry about. For start-ups burning cash in a battle for market share, reducing competition is a vital consideration. Uber made this plain in an internal memo: "One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors". In South-east Asia, the competition between Uber and Grab has been brutal, with both offering heavy discounts and freebies to commuters. Neither company has turned a profit.

At play is the all too familiar textbook dynamic of monopolistic competition, where competitors slug it out to gain market share. So, will consumer interest be harmed by the proposed merger? That is what the Competition and Consumer Commission of Singapore (CCCS) wants to assess. The competition watchdog says it has "reasonable grounds for suspecting that Section 54 of the Competition Act has been infringed by the transaction". That section prohibits mergers that could lead to what the CCCS describes as a "substantial lessening of competition in Singapore".

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A version of this article appeared in the print edition of The Straits Times on April 04, 2018, with the headline 'Ride-hailing players must serve public'. Print Edition | Subscribe