Sunday, 8 April 2018

What Competition Commission Singapore should really be tackling instead of Uber/Grab Merger

Many of us are probably aware of Uber/Grab's merger; some of us may also be aware of Competition Commission Singapore's (CCS) decision to commence investigation into the merger on grounds of a "substantial lessening of competition". It is good that CCS is attempting to preserve a competitive landscape for us consumers, however this whole episode raises one question.

Before Uber and Grab arrival into Singapore

Prior to the arrival of Uber and Grab, Singapore already had a taxi industry that competed intensively among themselves. Under the Public Transport Council (PTC) and LTA's mandate, taxi companies were also forced to adopt a unified taxi fare structure where only some parts of their fare could be varied. All in all, there was a fair and transparent competitive landscape in Singapore, that was until...

Arrival of Uber and Grab in Singapore

The arrival of Uber and Grab was probably the best gift to the public. Their entry intensified the competition to the extent consumers switched from taxi to private hire vehicles as they were cheaper and a readily available source to the "constantly missing" taxis. Taxi companies were forced to reduce rental rents and gave subsidies to keep taxi drivers from moving over. In basketball terminology, it was like Uber/Grab showing other teams (taxi companies) how to shoot 3-pointers when all along the rest of these taxi companies had been only capable of shooting two pointers. 

Are we barking up the wrong tree?

Right now, because Uber is leaving, CCS is worried about a substantial lessening of competition. While that is definitely true, it begs the question whether taxi companies have even been competing at all against Uber and Grab these few years. 

The Private Hire Vehicle (PHV) and Taxi industry belong to the same segment of the transportation industry. This means the PHV had competitors all along, which were the dominant Taxi Companies. 

Grab and Uber were focused on competing against the fare system of the taxi industry; their dynamic pricing system was better than the regulated fare system, which was set forth by LTA and PTC. 

Hence the whole episode shows how outdated and noncompetitive the current taxi fare structure is due to technological progress. It is worrying that despite Uber/Grab's entry for such a long time, our taxi companies have not adapted to be competitive at all. In fact, taxi companies like CDG are still making profits from renting out taxis. In my opnion, such taxi companies should do more to help their drivers.

Just because Grab is the only team left who can do three pointers, it doesn't mean that 3 pointer shots should be banned.

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