Ride-hailing firm Grab Philippines said it will respect the findings of the Philippine Competition Commission (PCC) and will pay the P16.15-million fine it was ordered to pay.
The penalty imposed by the PCC is a result of certain deviations from Grab’s voluntary commitments during the fourth quarter of the initial undertaking last year after it acquired the local operations of rival Uber Philippines.
Grab, however, pointed out that the fare-in-range monitoring scheme is highly technical and does not apply to the current market conditions.
“Given the current lack of TNVS supply, worsening traffic conditions, and the ever-growing commuter demand, Grab’s fares remain to be compliant with the LTFRB’s fare matrix,” the company said in a statement.
The PCC order, which was released on Friday, Dec. 13, comes on the heels of the audit report submitted by Smith & Williamson, an independent monitoring trustee tasked to examine Grab’s compliance with its voluntary commitments on price, service quality, and non-exclusivity for one year or until August 10, 2019.
The fine is the latest in a string of penalties faced by Grab for violating its commitments. Each violation incurs an administrative penalty ranging from P50,000 to P2 million as provided by the Philippine Competition Act. With the merger of the country’s two biggest ride-hailing apps, Grab’s violations are indicative of its exercise of market power in the absence of a competitor of adequate scale in the market.
For the fourth leg of the initial undertaking, PCC imposed a fine P14.15 million for Grab’s extraordinary deviation on its pricing commitment, and P2 million for exceeding driver cancellations at 7.76% instead of the committed 5%.
Grab Philippines, however, said the violations in its commitments were caused by the lack of TNVS supply to service the steadily growing commuter demands, coupled with the worsening traffic situation.
“TNVS is initially intended to augment the mass transportation system in the country, at the current rate, the TNVS is now carrying the heavy load of serving commuters which the current mass transport system is unable to accommodate,” Grab said.
Grab said it will be disbursing the total computed administrative penalty of P14.15 million to the GrabPay Wallets of those passengers who took Grab rides from May 11 – August 10, 2019 in compliance to the order of the PCC.
The disbursement will happen no later than February 10, 2020, with a corresponding communication to the relevant passengers five days prior to the disbursement. The additional P2-million admin penalty related to the breach of committed driver cancellation rate will be paid to the PCC.
Grab said that while it is hopeful in fulfilling its commitments to the PCC, it argued that “as a platform, pricing will still be influenced by factors such as lack of supply, and the traffic situation.”
For violating its pricing commitments to PCC, Grab was earlier fined P11.3 million in the first quarter; P7.1 million in the second quarter; and P5.05 million in the third quarter. Fines for the third and fourth quarters will be refunded to qualified Grab riders.
The PCC underscored that the disgorged amount shall be paid by Grab and shall not be passed on to its drivers or riders.
“The ride-hailing market has seen profound changes in the past year as a result of Grab’s acquisition of Uber. With the commitments in place, PCC aims to maintain pre-transaction market conditions and will discipline any tendency to exercise monopolistic power with corresponding penalties,” said PCC chair Arsenio M. Balisacan.
Grab’s pricing commitment to PCC is separate and independent from the fare structure of the Land Transportation Franchising and Regulatory Board (LTFRB). While LTFRB has imposed a fare matrix for all transport network vehicle services, the PCC binds Grab to its voluntary commitments, including keeping its fares within a range as if a competitor like Uber were present in the market.
As such, PCC fines Grab for fares that deviated from its pricing commitments, even if the same is not considered overcharging based on the fare matrix imposed by LTFRB.
As the initial undertaking lapsed, PCC found that there remains insufficient competition in the ride-hailing market. On October 31, Grab signed a new set of voluntary commitments as a continuing condition for the antitrust authority’s clearance of Grab’s acquisition of Uber in the Philippines in 2018.
The agency also looks to other players that can sufficiently complete with the current dominant firm in the ride-hailing market.
“More than a year after the Grab-Uber merger, the PCC instituted these measures to address the persistent impact of a virtual monopoly in this sector. The game-changer, however, will come in the form of a new player with strong financial muscle to enter the ride-hailing market and an environment that allows existing players to grow. Until then, the commitments stand for the benefit of the riding public,” Balisacan added.