The Philippine Competition Commission (PCC) has approved a new set of voluntary commitments undertaken by ride-hailing firm Grab as a continuing condition for the agency’s clearance of Grab’s acquisition of Uber in the Philippines in 2018.
In its decision, the PCC maintained to bind Grab to a set of conditions aimed at addressing lingering competition concerns in the ride-hailing market, over a year after Grab’s takeover of its biggest competitor.
Any breach of the conditions will subject Grab to fines of up to P2 million per breach, additional remedies, or nullification of the decision conditionally clearing the transaction.
Grab’s extended undertaking shall be effective for 1 year from 1 November 2019 in relation to all commitments other than the non-exclusivity commitments. The latter, which have implications on new entrants, shall be effective for four years.
The commitments are broadly categorized into non-exclusivity, service quality, and price-related commitments:
Service quality commitments
To recall, the PCC subjected the merger of the country’s two biggest ride-hailing apps to conditions in clearing the transaction on August 10, 2018. These conditions were part of the voluntary commitments undertaken by Grab to address the competition issues raised by PCC.
Grab’s undertaking was for a period of one year, during which the PCC monitored Grab’s compliance with its commitments.
PCC found it necessary to extend and amend Grab’s undertaking after considering the continued lack of viable competition and the lingering competition concerns arising from the transaction.
Grab’s prevailing market dominance, its ability to increase prices profitably, the inadequacy of its service quality, and the existence of significant entry barriers have all contributed to the objectionable conditions for the dominant player to operate without competitive constraints from real rivals.
The commitments set out under the extended undertaking are designed to maintain market conditions as if a competitor of adequate scale is present to set a competitive constraint on Grab. They are also meant to prevent Grab from making it more difficult for new players to enter and grow in the ride-hailing market.
While the extended undertaking maintains the basic framework of the initial undertaking, it introduces more streamlined commitments and metrics to hold Grab in check and to easily monitor its compliance.
The PCC said it stands to guard against any breach or non-compliance through an appointed impartial third-party trustee to independently monitor Grab on its commitments.
In the event that Grab breaches its monthly average fare cap commitment, PCC shall fine Grab P2 million per month. As additional deterrence, the agency also introduced the disgorgement system wherein Grab shall return to its riders its commissions in excess of the System-Wide Average Fare Cap for the affected month.
This mechanism ensures the affected riders will directly be given a rebate through their individual GrabPay accounts within 30 days from Grab’s receipt of PCC’s notice of breach. The disgorged amount to be refunded shall be in proportion to the fares paid by the riders during the relevant month.
The PCC has resolved to impose a total fine of P23.45 million on Grab for breaching its pricing commitments during the 1st to 3rd quarters of the initial undertaking.
This covers P11.3-million penalty for the first quarter, P7.1 million for the second quarter, and P5.05 million for the third quarter. The disgorgement mechanism shall be applied on the third quarter fine that will kick off the refund of P5.05 million to affected Grab riders.