Monopoly concerns
On May 25, customers of Uber received an email announcing the transition of its services over to Grab by April 8. Meanwhile, Grab also announced it had completed its purchase of Uber’s Southeast Asia operations. The deal has captured public attention as Grab and Uber are two technology-based taxi firms with large user bases in Vietnam, especially in Hanoi and Ho Chi Minh City.
According to Nguyen Minh Duc, a legal expert at the Vietnam Chamber of Commerce and Industry (VCCI), Grab and Uber are not only two powerful taxi companies in Vietnam but have also competed fiercely with each other previously in terms of promotions for customers and revenues for drivers.
Such competition offered great benefits to both consumers and drivers. But when their operations are combined, many will raise the question as to whether the merger violates the competition law, which guarantees a certain degree of competition and protect consumers’ rights. In addition, many are concerned that the merger will lead to a monopoly to the detriment of consumers.
Nguyen Manh Hung, Vice Chairman of the VINATAS, a consumer rights protection body, also agrees with the VCCI legal expert. He said that with an incentive revenue-sharing policy for drivers, Uber and Grab have attracted a large number of drivers to register as their partners, many of whom had to borrow heavily in order to purchase their cars.
When the two taxi firms unify their operations, Uber drivers must either join the new company or quit their jobs. However, both options are troublesome because when there are no competitors and the number of driver increases sharply, it is likely that Grab will increase its share of the revenue and eat into the drivers’ profits. For riders, the merger also means fewer promotions and benefits than in the past.
Tran Hong Quan, a driver, said that he began working for Grab six months ago and previously his income was relatively stable. Therefore a month ago, he decided to invest in a new car to offer a better customer experience. But the registration is now much more difficult, he complained.
Quan said that “Perhaps the number of drivers transitioning from Uber to Grab is so large that registration has become more difficult. The merger is making us anxious because the commission rate could be higher.”
He added that “Since I have invested a large sum on the new car, if the commission rate is too high, the profits will be reduced and I don’t know when I will be able to recover the investment.”
Le Thi Cam My, a consumer, said that “Because of my jobs, I have to travel by taxi a lot. In the past, using Grab or Uber instead of traditional taxis saved me a great deal thanks to many the promotional programmes. When the two companies merge, these promotions will end and the costs will grow.”
Consumer rights protection
After Grab announced its acquisition of Uber’s Southeast Asia operations, Singapore said it would launch an investigation into the deal concerning the potential infringement of competition rules. Malaysia and Philippines also followed suit with similar concerns.
In Vietnam, the Department of Competition and Consumer Protection under the Ministry of Industry and Trade (MOIT), also asked Uber and Grab to provide the documents concerning the acquisition before April 3 in order to assess the deal in accordance with the competition law.
According to MOIT Deputy Minister Do Thang Hai, Grab already replied to the Department of Competition’s request and the Department also invited Grab representatives for a meeting on April 6.
He said that this is a transaction between two companies and if their market share is between 30-50%, they must report to the MOIT, and if the market share is over 50%, the merger is not permitted under competition law. Based on Grab’s report and the result of the meeting, the MOIT will decide whether the deal violates the competition law or not and whether the deal will be able to go ahead.
“With Grab, Uber, or any other brands of enterprises, no matter what models they are operating under, their operations must follow the competition law. That means they are not allowed to engage in unfair competition and infringe consumers’ rights. If violations are discovered, the Ministry of Industry and Trade will deal with them in line with the law”, Deputy Minister Hai said.
In another development, after the announcement of the Grab-Uber deal, the local transport market began to witness a number of interesting changes. The bus operator Phuong Trang announced its decision to invest US$100 million in a ride-hailing app, while taxi company Mai Linh announced its new fare policy and a solution to make it easier for customers to call a taxi through a single nationwide telephone number.
Nguyen Minh Duc considered this as a positive development as it could encourage consumers to use the services offered by Phuong Trang and Mai Linh, helping them regain a market share, since Grab might cut its promotional programmes in the early phase of the merger.
But Duc noted that if an app is to work effectively, it needs a large number of both drivers and customers. For example, when users open an app but can’t find a car, they will immediately close the app and open another one. The scenario is also similar when drivers want to find customers.
That is why when Grab and Uber first launched in Vietnam, their first step was to offer huge promotions to gain customers as quickly as possible. And when their presence is big enough, steps will be taken to generate profits. This tactic requires substantial capital to maintain promotions, a hurdle that traditional taxi companies need to overcome.
