SINGAPORE - The Competition Commission of Singapore (CCS) is expected to decide by the end of the month whether to approve an alliance between two of Singapore's largest ride providers - ComfortDelGro and Uber.

The CCS is doing a second round of feedback gathering on the impact of ComfortDelGro's proposed 51 per cent acquisition of Uber-owned Lion City Holdings. If there are concerns, the commission will go into its second phase of deliberations, which will be more extensive, and likely to take longer to complete.

The regulatory watchdog has good reason to be cautious. The deal will create a giant with a fleet of more than 27,000 - 13,500 Comfort and CityCab taxis and 14,000 Lion City private-hire cars. This is out of a total fleet of 24,400 cabs and 50,000 private-hire cars.

Other than directly owning 14,000 private-hire cars through Lion City, it is not known how extensively Uber has tied up with rental firms which supply the remaining 36,000 cars to drivers.

The American group's hold on the private-hire market, vis-a-vis Grab's, is thus unclear. But it is clear that a ComfortDelGro-Uber tie-up will tilt the balance in favour of the two groups. It will thus erode competition - something that is potentially undesirable to both drivers and commuters in the long run.

The pair is already launching UberFlash, a ride-hailing app which offers cabbies potentially higher earnings with dynamic fares. During low-demand hours, fares are likely to be slightly lower than current taxi fares. But when demand is high - say, on rainy days, the morning rush hour or when trains break down - fares can surge three times higher.

SIZE MATTERS

As with most industries, size works to the advantage of the dominant player, which can give it an unfair advantage over other players. In competition law, this could be described as abusive dominance if the dominant player, whether tacitly or overtly, prevents rivals from competing.

"If such abuses are not stopped, potential competitors will not be able to enter the market or grow in size, industries will be less competitive and customers will lose out eventually," the CCS said on its website. It makes it clear that being dominant, by itself, is not anti-competitive. But the potential for abuse exists.

For example, a dominant supermarket chain, upon learning that a rival is eyeing a recently vacant property, could offer the landlord much higher rental to keep competition out. Or a leading motor insurer might cultivate a network of workshops to reject vehicles covered by other insurers.

Even before the proposed alliance with Uber, ComfortDelGro already had around 60 per cent share of the taxi market, according to fleet size. The other taxi operators - in the earlier years, essentially only SMRT and a small fragmented fleet of owner-operators - could not compete with Comfort in any effective way. It will dwarf them all again, if it joins hands with Uber.

LIBERALISATION

In 2001, the Government liberalised the market. Barriers were lowered to allow new entrants. Trans-Cab, Premier and Prime entered the fray in the following years.

That created some competition for drivers, and Comfort started dishing out more incentive payments and welfare to its cabbies.

But nothing else changed. Cabby rental rates continued to be revised upwards, and commuters still complained about not being able to get a cab when they needed one (despite the overall fleet having grown by a third since liberalisation).

This was because even though there were newcomers, the dominant player continued to call the shots when it came to changes that mattered - such as rental rates and fares. Attempts by the smaller players to introduce differential pricing, or a variation of peak and off-peak fares, failed. Invariably, they would revert to Comfort's model.

In time, there would be no change unless Comfort changed.

ENTER UBER, GRAB

Things took a dramatic turn when Uber and Grab entered the scene in 2013. For the first time, taxi drivers and commuters had a viable alternative. And ComfortDelGro started to face competition - for real.

When Grab partnered all the other smaller operators to offer commuters alternative ways to get a ride, creating a combined fleet size which almost equalled ComfortDelGro's, the giant had met its equal for the first time.

So, what the 2001 liberalisation failed to do in more than 10 years, the disruptors did in under four. While Grab partnering the smaller cab firms had resized the market, it left Uber with a weakened position. The US company had no choice but to knock on Comfort's doors.

Being equally weakened, ComfortDelGro had no choice but to sleep with the enemy.

DAVID AND GOLIATH

If the ComfortDelGro-Uber deal is allowed, the market will revert to its David-Goliath imbalance. But unlike the biblical outcome, Goliath almost always wins in any marketplace.

The current situation offers a level of competition never seen before in the rides market here. It should be preserved as it is, even if regulatory measures to enhance safety and policies to ensure fair tax treatment for all players can be improved.