By Bernie Cahiles-Magkilat
The Philippine Competition Commission (PCC) yesterday cleared the merger-acquisition deal of transport network company (TNC) Grab and Uber subject to a minimum of six months and maximum of one year monitoring on their compliance of their voluntary commitments approved by the authority.
In a press conference, PCC Commissioner Arsenio Balisacan said Grab has agreed to comply with six voluntary commitments on service quality, fare transparency, pricing, removal of “See Destination” feature; driver/operator non-exclusivity commitment; and incentives monitoring.
“PCC binds Grab to these conditions in order to clear the Uber acquisition,” said Balisacan.
“Make no mistake, competition authorities do not take promises lightly,” stressed Balisacan as he emphasized that “any breach of the conditions will subject Grab to fines of up to P2 million per breach, or even the unwinding of the transaction.”
On service quality, Grab has committed to bring back market averages for acceptance and cancellation rates before the transaction, and response time to rider complaints.
On fare transparency, Grab will revise its trip receipt to show the fare breakdown per trip, including distance, fare surges, discounts, promo reductions, and per-minute waiting charge (if reinstated by Land Transportation Regulatory Franchising Board).
On pricing, Grab shall not have prices that have an “extraordinary deviation” form the minimum allowed fares. Grab will be penalized equivalent to 5 percent of Grab’s commissions, or up to 2 million, in the identified trips with extraordinary deviation that do not have sufficient justification.
Commissioner Stella Luz Quimbo noted that Grab’s prices have risen between 25-35 percent after the merger.
Quimbo explained that Grab is allowed up to 22 percentage points deviation only. Beyond that, Grab would be called to explain for extraordinary deviation in pricing. The deviation is some sort of flexibility for the TNC to adjust prices taking a wide range of deviations as long as this does not go beyond the 22 percentage points relative to the average pricing of the company prior to the merger in April this year.
Commissioner Amabelle C. Asuncion said the intent is to ensure that the fares of Grab now should be within or not far from the pricing of Grab and Uber pre-merger. A higher deviation rate means higher pricing for customers.
The TNC also agreed to remove the “See Destination” feature for drivers with low ride acceptance rate. Grab is expected to achieve the average acceptance rate of 65 percent by the end of the fourth quarter this year from the 45 percent rate as of June this year.
Grab has also committed to achieve an average 5 percent average cancellation rate, which is slightly lower than 6-7 percent pre-merger average for entire market for Grab and Uber prior to the merger.
In addition, Grab shall not introduce any policy that will result in drivers and operators being exclusive to Grab. Current Grab drivers/operators are allowed to register/operate under other TNCs through a multi-homing scheme.
Since incentives may result in drivers remaining exclusive to Grab, and thus affect its competitors’ conditions of entry, and the ability to expand, the Commission shall monitor and evaluate Grab’s incentives on the basis of mandatory quarterly reports.
Grab will also nominate 3 monitors in 15 days, which it will pay but not more than P12 million, that PCC will choose and approve. The selected third-party monitor, which could be local or foreign, will conduct a quarterly review of Grab’s compliance against its commitments.
Grab also has an option to seek for an earlier release from the commitment, either on a specific commitment or all of it prior to the expiration of the one year monitoring period.
Commissioner Johannes Bernabe also explained that the voluntary commitments was a result of the Statement of Concerns arising from the merger. He, however, said that PCC insisted on the removal of the “See Destination” feature while Grab also pushed for the improvement commitment.