Grab and Uber may have to revisit deal terms to avoid derailment, say experts

Grab co-founder and CEO Anthony Tan / Photo credit: Grab

It has been two weeks since Grab and Uber revealed their game-changing merger, which will see the US firm exit the ultra-competitive Southeast Asian market in return for a 27.5 percent stake in its local counterpart.

But the long-anticipated deal – which will see Uber cede its regional ride-hailing and food-delivery business to Grab, resembling exits it hashed out with erstwhile rivals Didi in China and Yandex in Russia – is now in a state of limbo. Competition regulators in Grab’s Singapore base, as well as key markets Malaysia, Vietnam, and the Philippines, are among those known to be scrutinizing the merger.

Just yesterday, Singapore’s antitrust watchdog ordered that the integration of Uber’s service into Grab’s should be postponed until May while it carries out its probe, and imposed interim measures on the two companies.

Experts tell Tech in Asia that the “Gruber” marriage is unlikely to be annulled. But regulatory agencies may compel the couple to rewrite their vows if they feel that Grab’s post-merger market share will have too much of a chilling effect on competition.

Notice not required

Integration of Uber’s Southeast Asian services into Grab’s has been further delayed due to competition concerns. / Photo credit: freestocks.org

Singapore’s antitrust regulator – the Competition and Consumer Commission of Singapore (CCCS) – announced on March 30 that it had begun an investigation into the merger, and proposed interim measures requiring Grab and Uber to put their operational integration on hold.

Grab and Uber responded a few days later with their own proposed interim measures. Grab initially hoped to integrate Uber’s service and discontinue the latter’s app on April 8. Partly due to the concerns of CCCS and other watchdogs, the company later postponed the integration date to April 15.

In Singapore, the CCCS agreed to this extended timeframe to consider the two firms’ proposed alternative measures, then further pushed back the date to May 7. It also imposed interim measures that compel Grab and Uber to maintain their respective pre-transaction pricing and product options as well as to refrain from exchanging confidential information with one another while the investigation proceeds.

These developments have left some observers wondering if the two firms did enough due diligence prior to sealing the deal.

Parties to a merger are not generally required to notify CCCS of their proposed consolidation, though they can do so voluntarily if they suspect that it’s covered by Section 54 of Singapore’s Competition Act – which prohibits transactions that may result in a substantial lessening of competition in the marketplace.

The business costs of having to undo certain aspects of the transaction could be very high.

In situations where the parties don’t do this, “the implication is that the CCCS would have to fall back on its other statutory powers of investigation and enforcement to look into potential breaches of competition law,” explains Bryan Tan, a partner at Pinsent Masons MPillay.

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