April 16, 2018 / 3:56 AM / 3 months ago

Breakingviews - Singapore ruling gives Uber deal yellow light

SINGAPORE (Reuters Breakingviews) - Singapore is tapping the brakes on Southeast Asia’s ride-hailing mega-merger. Antitrust regulators won’t halt U.S. giant Uber’s deal with $6 billion local rival Grab, but have limited data-sharing and driver exclusivity contracts, at least while they review. That’s a sign of potholes ahead.

A ComfortDelgro taxi passes Uber and Grab offices in Singapore March 26, 2018. REUTERS/Edgar Su - RC19CDD8AF70

    This region of 650 million people, many of them keen smartphone users, makes an alluring market. But competing for paper-thin margins took its toll on Uber in terms of cash and manager hours burned. Last month it drew a line, and agreed to hand over its Southeast Asian operations to Grab in exchange for a 27.5 percent stake.

   This is one of the highest profile transactions to land on the desk of the Competition and Consumer Commission of Singapore in years. So far its stance looks robust. That matters because the CCCS sets the tone not just in Singapore but for the wider region as well, at a time when major tech players here are expanding into food, payments and more.

    Interim measures released on Friday are the closest indication yet of what the final decision might look like. They scrap exclusivity deals with new drivers and fleets, bar Grab from taking historic trip data from Uber and require pricing policies to remain unchanged. It’s easy to see why: earlier this month, a Grab outage in Singapore sent Uber fares surging.

    The restrictions are not crippling. There is already a delicate balance between consumers and drivers on price, for example. Helpfully for Grab, the antitrust regulator appears to think taxis, which account for 785,000 trips a day in Singapore, are part of the market. That’s more generous than considering only ride-hailing, which Grab and Uber dominate.

    But if Singapore, a wealthy, albeit small, market of 5.6 million people, has questions, larger markets may ask more. Concerns evident in the interim decision – how to protect the gains that have accrued to consumers from ride-hailing - are tricky to address. Price limits are a blunt tool, and monitoring policy is tough. More steps may be necessary.

    Regulators can hardly compel Uber to return. They need to figure out how to attract new entrants like Indonesian rival Go-Jek while preserving competitive tension. Barriers to entry here may be low in theory, but less so in practice, and scale is everything - ask Uber.

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