Grab Holdings Inc has confirmed it is challenging Malaysia Competition Commission (MyCC)’s proposal to levy a US$21 million fine on the ride-hailing giant.
Grab, along with subsidiaries GrabCar Sdn Bhd and MyTeksi Sdn Bhd, was accused last year of enacting restrictive clauses on its partner-drivers by not allowing them to advertise on behalf of the company’s competitors on their vehicles.
According to Lawyer Datuk Lim Chee Wee of Skrine Advocates & Solicitors, representing MyCC, “the hearing of Grab’s application for leave to challenge MyCC’s proposed decision is now fixed for March 9 before Justice Datuk Nordin Hassan.”
The Singapore-based unicorn became the undisputed market leader in ride-hailing after acquiring Uber’s business in Southeast Asia. In exchange, Uber staked a 27.5% claim in Grab and CEO Dara Khosrowshahi joined Grab’s board.
The Uber-Grab merger immediately prompted fines of up to US$9.42 million and US$310,661 by anti-competition watchdogs in Singapore and the Philippines respectively.
Singapore claimed that the merger drove prices up, while the Philippines believed that consumers suffered a dip in quality of service rendered and the merger was completed too soon.
It is unlikely however, that Grab would have any issues footing the bill of the fine, also its heftiest so far in Southeast Asia, should the fine materialise.
Grab recently raised an eye-watering US$7.5 billion, with a new US$300 million injection from independent investment firm Invesco and US$1 billion from Toyota last year as part of its Series H. The ride-hailing app has lofty goals of becoming Southeast Asia’s first superapp.
Based on Malaysia’s Competition Act, any business acting as a monopoly or dominant market player is not an infringement of the law, until it abuses its market position.
In fact, MyCC has clarified that the pending investigations are in response to complaints lodged against Grab, not due to its post-Uber monopoly.
The ride-hailing business’ reaction so far has been that of mild indignation.
Describing MyCC’s decision as “surprising,” a Grab spokesperson affirms that the company has always complied with Malaysia’s competition laws.
“We are surprised. While our legal counsels are studying the proposed decision, we believe it is common practice for businesses to decide upon the availability and type of third-party advertising on their respective platforms, tailored according to consumers’ needs and feedback,” the spokesperson says.
UMNO Youth Strategic Director Wan Agyl Wan Hassan has publicly taken the side of Grab, questioning the MyCC probe and observing that the government watchdog has no authority on the merger.
“As long as they are operating under the Grab platform, it is understandable that they will refuse to allow any other kind of advertisement or promotion,” he further added.
In a two-sided marketplace like the ride-hailing world where large network effects can be a win-win situation for both partner-drivers and riders, monopolies may well emerge as an inevitable outcome.
Even more interesting is the horizontal shareholding apparent in the global ride-sharing business.
Japanese conglomerate Softbank might well have the world’s biggest foothold in the business. It is currently the largest shareholder of Grab and Uber, and also owns significant stakes in India’s Ola and China’s Didi.
It remains to be seen if this form of horizontal shareholding, where the same investors hold shares in different companies in the same industry, would have anti-competitive effects, as recent studies might have found.
Moreover, whether or not government regulation, or overregulation, ultimately serves the interests and welfare of gig workers and customers is also debatable.
For now however, one can only hope that Grab’s diplomatic and conciliatory stance in dealing with governments across Southeast Asia will help it play the long game in this region.
Photo from Grab’s official website.