ComfortDelGro-Uber tie-up: Watchdog has good reason for caution
Competition Commission set to decide by month's end on proposed ComfortDelgro-Uber alliance
The Competition Commission of Singapore (CCS) is expected to decide by the end of the month whether to approve an alliance between two of Singapore's largest ride providers - ComfortDelGro and Uber.
It is doing a second round of feedback gathering on the impact of ComfortDelGro's proposed 51 per cent acquisition of Uber-owned Lion City Holdings.
If there are concerns, the commission will go into its second phase of deliberations, which will be more extensive.
The regulatory watchdog has good reason to be cautious.
The deal will create a giant with a fleet of more than 27,000 - 13,500 Comfort and CityCab taxis and 14,000 Lion City private-hire cars. This is out of a total fleet of 24,400 cabs and 50,000 private-hire cars in Singapore.
Other than directly owning 14,000 private-hire cars through Lion City, it is not known how extensively Uber has tied up with rental firms which supply cars to drivers.
The American group's hold on the private-hire market, vis-a-vis Grab's, is thus unclear.
But it is clear that a ComfortDelGro-Uber tie-up will tilt the balance in favour of the two groups.
It will thus erode competition - something that is potentially undesirable to both drivers and commuters in the long run.
As with most industries, size works to the advantage of the dominant player, which can give it an unfair advantage over other players.
In competition law, this could be described as abusive dominance if the dominant player, whether tacitly or overtly, prevents rivals from competing.
"If such abuses are not stopped, potential competitors will not be able to enter the market or grow in size, industries will be less competitive and customers will lose out eventually," the CCS says on its website.
Even before the proposed alliance with Uber, ComfortDelGro already had a taxi market share of around 60 per cent, according to fleet size.
The other taxi operators - in earlier years, essentially only SMRT and a small fragmented fleet of owner-operators - could not compete with Comfort in any effective way. Comfort will dwarf them all again if it joins hands with Uber.
In 2001, the Government liberalised the market. Barriers were lowered to allow new entrants. Trans-Cab, Premier and Prime entered the fray. That created some competition for drivers and Comfort started dishing out more incentive payments and welfare to its cabbies.
But nothing else changed. Cabby rental rates continued to be revised upwards and commuters still complained about not being able to get a cab when they needed one.
This was because even though there were newcomers, the dominant player continued to call the shots when it came to changes that mattered - such as rental rates and fares.Things took a dramatic turn when Uber and Grab entered the scene in 2013.When Grab partnered all the other smaller operators to offer commuters alternative ways to get a ride, creating a combined fleet size which almost equalled ComfortDelGro's, the giant had met its equal for the first time.
While Grab partnering the smaller cab firms had resized the market, it left Uber with a weakened position.
Uber had no choice but to knock on Comfort's doors. Being equally weakened, ComfortDelGro had no choice but to sleep with the enemy.
If the ComfortDelGro-Uber deal is allowed, the market will revert to its David-Goliath imbalance. But unlike the biblical outcome, Goliath almost always wins in the marketplace.
The current situation offers a level of competition never seen before in the rides market here. It should be preserved as it is, even if regulatory measures to enhance safety and policies to ensure fair tax treatment for all players can be improved.