ASIA CONFERENCE ON BUSINESS AND ECONOMIC STUDIES

ASIA CONFERENCE ON BUSINESS AND ECONOMIC STUDIES 137 Uber Case and Some Implications with Two Side Business Truong Trong Hieu University of Economics and Law Vietnam National University – Ho Chi Minh[.]

Uber Case and Some Implications with Two-Side Business

Truong Trong Hieu

University of Economics and Law Vietnam National University – Ho Chi Minh City PhD Candidate, Yokohama National University, Japan

Abstract

In digital economies, especially in an era of 4.0 industry, technology absolutely plays a central role for establishing business models Two-side business of course consumes technological applications much

However, successfully decisive elements evidently stand outside technology but inside itself business model

Take Uber business model for case analysis, the paper points out these advanced feature, which are also drawn

down in theory of two-side markets; big two-group of users’ data, indirect network effects as well as its

non-neutrality of the price structures For business operators, especially Uber’s competitors, it reveals that a deep

utilization of technology is clearly important but insufficient For competition policy and regulation,

competition authorities need to pay more attention on evaluation of market power as well as anti-competitive

impacts in questions of two-side business models EU Court judgement on Uber, given its authority boundary

and in an initial step, provided a good clue for Uber’s field of trade It still leaves an enough consideration on

the fashion of business activities which competition commissions in South-East countries in turn make

progress for such evaluation in the current merger case between Uber and Grab The assessment must respect

to both sides, a capacity where Grab is likely to become monopolistic in these markets as well as merits and

efficiency the two-side platform can bring to For this achievement, the paper provides a significant

explanation on application of some economic efficiency theories, particularly the Kaldor-Hicks efficiency,

according to OECD (2009) proposal that customer welfare need to be balanced among both sides of market

Keywords: Uber, two-side business, competition, economic efficiency, and customer welfare

1 Introduction

There is an undeniable fact that technology has played a significant role on development process Indeed, this recognized trend has long history theoretical analyses, which occasionally determined technological

changes as endogenous growth rather than neutral or exogenous effect, especially after Paul A Samuelson’s

review and development in 1965 (Samuelson 1972:160) As a result, there has been a deep variation in the

conomy form which has been transferred into the knowledge based economy in recent years, and countiously

reachs to the digital economy now pertaing to the progress of 4.0 industry

More important, technology is a crucial ground in process of convergence In the macro economics, countries own and utilize much advanced technology will develop more, and it means that the low-level

economies can reach the same growth ratio as, or even higher than, previous developed ones In the micro

economics, firms and companies easily justify the market with their rich intellectual properties Therefore, it

is no exaggeration to say that the digital economy is time for evolutionary business fashions of “app” In actual,

we do not find difficulty in telling this story with many leading cases such as Facebook, Google, Airbnb, or

Uber

One of feasible new models of business that attracts more attention is two-side business To respect with the success of good representatives as Google, Airbnb or Uber, we can recognize that two-side business can

stand still without any innovative technologies The dependent path achievements of Google, Airbnb or Uber

show that they benefit a lot from internet, technological application and especially effective interactions in the

4.0 environment However, there is a remaining fact that many actors engaged into business with their useful

“apps”, even into such new model of business in certain cases, was left behind In Vietnam, for example, many

taxi with their “apps” as Mai linh and Vinasun face challenges in competing with Uber This reality leads to

some doubts about benefit of technology, and questions what genuine strengthening for the market

dominance is In addition to technological application, that only one influentially visual factor can be recalled

is the newly effective model of business itself

It means that along with beneficial technology such a model in turn provides much advantages and successful players are those who can exploit the leverage of style’s characters In other words, the market

power of dominant two-side business firms need to be explained by their business fashion Several

publications relevant to two-side business pointed out the features of big two-group of users’ data, indirect

network effects as well as its non-neutrality of the price structures Take Uber for case analysis, there are

identified similar factors on its achievement Almost all competition authorities acknowledge the issues,

however, they still encounter a challenge of looking up adequate evaluating frames of two-side business

market concentration

For that situation, this paper will call for a consumption of Kaldol-Hick efficiency standard to overcome such an obstacle in final For that goal, this writing will be divided into five sections The following section

will devote a space for literature review on two-side business as well as its model’s advantages Section three

leads to analyze the Uber case, from the factual business activities and its competitive pressure to significant

points on the Court of Justice of the European Union (herein after as “EUCJ”) decision then some remained

challenges in the current merger case between Uber and Grab in Southeast Asian markets Section four will

follow with a circumstance by some proposals in OECD approach The final section would be Conclusion

where some remark findings should be noted with research limitations which need to be for further study

2 Two-side business: Its features and decisive elements

Back to history, we can identify the fact that two-side platform is not a new design really Originally, similar mechanisms existed for long, such as “village matchmaker” or “insurance exchange” in Ancient Athens It is

just one more decade to generate such as business model as “a diverse set of diverse set of industries” whose

sided features “have important economic implications” (OECD 2009:23) As a result, the theory on

two-side business has recently emerged Rochet and Tirol are initiate frontier and become outstanding

representatives for this establishment Their research contributions were primitively published since about

2000 (Rochet and Tirole 2002) then officially braced by a seminal article in 2003 and in progress followed by

subsequent papers in 2006 and 2008 (Rochet and Tirole 2003; Rochet and Tirole 2006; Rochet and Tirole 2008)

The study has been further contributed soon after that by Armstrong (Armstrong 2006; Armstrong and Wright

2007), Caillaud and Jullien (Caillaud and Jullien 2003), Evans (Evans 2003; Evans and Noel 2007; Schmalensee

and Evans 2007), Parker and Van Alstyne (Parker and Van Alstyne 2005) and ongoing others (OECD 2009:23)

The theory of two-side business presents central questions of competition policy According to Rochet and Tirol, it is easily for two-side platforms seeking the market power due mainly to their advanced model Under

OECD literature review (OECD - Competition Committee 2009:23–25), some valuable features of two-side

business can be drawn down First, the two-side business makes coordination of “interdependent demands of

two distinct groups of customers” Of course, these customers need to interact with each other Second, the

platform can “internalize the indirect network externalities across these two groups”, and third, resulting in a

price resort in which the customers in the different sides can face to dissimilar price (OECD 2009:24) Among

them, the “indirect network externalities” plays a core pillar strengthening platform’s power

For the first fundamental element, the existence of two distinct groups of customers, the relevant theory identifies that they must be those who needs to communicate to others coming from opposite side However,

they cannot make contact by themselves That is why they have demands of a two-side platform where they

can rely on to “intermediate transactions” We can find out this characteristics on the model of exchange

platform, the Apple Store, or even a free to the air television channel who “uses content to attract viewers then

sells access to those viewers to advertisers” (OECD 2009:29)

For the second fundamental element, the existence of indirect network effects, it means that the value a customer in one side can benefit depends on the increasing number of customer in the other side Take a search

platform of Google for an interesting instance, we can recognize that it is more useful to advertisers if Google

has a large number of researchers Similarly, users looking to buy somethings reach more advantages if there

are more advertisers displaying their products Of course, this kind of effects happens when the platform

matters and take advantage of it

The indirect externalities mechanism anyway reveals the importance of users’ data In other words, the more users the platform attracts the more value the platform gains In steads of maintaining an ignorance of

interesting indirect network effects, the platform finds all ways of adding customers and might need to utilize

many traditional types of marketing It is certainly challenging and cost the platform a lot in advance But the

platform easily fails with only the belief that it also holds a strongly similar “app” and no much enough

motivation to adventure its business model curiosities

In fact, the third fundamental element is a substantial strategy to seduce users and then gain merit for its platform Under approach of “non-neutrality of the price structure”, the two-side platform steals from this

side to offset for lost revenue in the other It means that the price set up for this group of customers depends

on the one for the opposite Of course, the platform will provide the lower cost for the group that it would like

to increase the quantity which in turn allures the rest side who might concern a rising number of customers in

the opposite in priority Interestingly, the amount of latter group of customers after that become attraction to

the former group

This effective process does happen frequently And the platform never loses its motivation to maximize its profit under the applicable best choice One research conducted in 2011 shows that the platform tends to fully

increase the fee on the side of product sellers at expense of a full sellers’ surplus and charges or even subsidizes

on a side of buyers That is because “increasing the buyer-side fee may discourage innovation and that, when

all sellers innovate, a higher seller-side fee may stimulate innovation in equilibrium” Certainly, under

effective two-side business fashion, the platform has sufficient conditions to “serve buyers with all levels of

willingness-to-pay even at a positive optimal price” (Lin, Li, and Whinston 2011:22)

It is a worthy note that such price structure can be designed on the basic conditions that customers in two groups are in distinction or “heterogeneous” (Ambrus and Argenziano 2009), but in closed beneficial

relationship However, they cannot interact and compensate directly because of high transactions costs Or

even in the case they can make a deal together, the platform with its justifications by the ownership of

big-data of customers’ potential partners can restrict or give a better option on platform In doing so, moreover,

the two-side platform also finds a room for applying some levels of pricing discrimination

For these outstanding features, two-side business easily brings market power to two-side business platforms, and result in more concentration on the two-side markets (OECD 2009:43) More extremely, some

analysis pointed out that “market power is more harmful in two-sided markets than in standard markets”

(Weyl 2009:43) Of course, this circumstance often comes with a risk that strong players there can abuse their

market dominance or even monopoly attacking on competition or social welfare On OECD’s theoretical

literature review, there are also some specific discipline on this specific type of market

One of them is an act of anti-competitive pricing Under two-side business characterized by indirect externalities mechanism non-neutrality of the price structure, a platform consequently proposes two different

prices for two group of customers on two-sides It would be a lower price, or even zero or no payment with

some monetary gifts, on one group and a higher price on the other On the classical background of the lower

price can be charged as predatory pricing and the higher price can be determined as excessive pricing To

pertain to a complicated definition of market in two-side business model, the risky situation can be more

illustrated by substantial chances of typing, exclusive dealing, or some kinds of coordination among

competitors

Another central concern is to merger regulation The achieved policy question there is “whether the operation will create or enhance market power or facilitate its exercise” With a respect that “markets where

two-sided platforms operate tend to be concentrated”, the mergers among platforms there “raise a special

interest among competition authorities” (OECD 2009:43) Under an assumption that the post-merger platform

will be much stronger, it has evidence to say that several harmful impacts could be created seriously The

question whether the economics of scale in mergers maintain interests or the customer welfare tends to be

stolen is extremely the case

However, there is an alongside question whether the general principles in simple competition policy can

be still adequate to evaluate competitive impacts under two-side business fashion It is clearly that two-side

platforms will be able to disappear or at least not persistently characterized by indirect externalities

mechanism non-neutrality of the price structure when competition agencies impose prohibitions on their

course of prices The badly similar outcomes can be emerged on the merger regulation if competition actors

just have extreme care of stronger post-merger platforms’ expense at market or customers without enough

consideration on efficient allocation of resources or expansion and deep consumption of big-data’s gains

The Nobel Prize in Economic Science found Jean Tirole’s analysis of market power and regulation attractive, then awarded him in 2014 One of his important theoretical research contributions is to provide a

unified theory relevant to competition policy and regulation on some newly specific markets such as platform

markets His achievement reveals a significant balance approach on a situation of dominant firms in which

there are something good such as reducing costs or encouraging innovation, but something bad sometimes

such as permitting dominant firms’ excessive profits or distorting competition Tirole, according to industry’s

specific conditions, therefore mentions much about production chains as well as transactions’ efficiency as a

case of mergers By his analysis, “it is doubtful whether undercutting should be banned” because the

conclusion that “setting prices below production costs is one way of getting rid of competitors” is not

“necessarily true of all markets” (Nobel Media 2014a; Nobel Media 2014b)

Jean Tirole’s researches as well as other further studies, which are mainly covered in OECD review, offer the new perspective for competition regulation on two-side business model More specifically, Attila Ambrus

and Rossella Argenziano in 2003, with more subsequent added in 2008, much concentrate on the network

externalities and customers choices with respect to how much customers “care about the externality” In order

words, they try to point out how much customers value if there are a lot of consumers from the other side of

the market on the same platform As a result, the analysis concludes that this business fashion normally “can

lead to asymmetric market structures, with multiple differently priced networks coexisting in the market”

Especially, under the “attractiveness” customers in one group generate for the other group and vice versa as

well as their transactions’ marginal cost, even in heterogeneity, “consumers simultaneously choose networks

or decide to stay out of the market” (Ambrus and Argenziano 2009:3,30) Interestingly, Bardey, Cremer, and

Lozachmeur in their analysis model of a given price structure proves that customers in both sides (customers

and providers) “value the same index of quality”, and “the common network externality has a cumulative

effect on prices” with the relevant recognition that “its effect on one side’s price is, partially or entirely, shifted

to the other side of the market” (Bardey, Cremer, and Lozachmeur 2014) If these two-side market’s benefits

are in ignorance, what will happen instead of backfire That is partially why there are more extreme in

interference to two-side markets than to others (Weyl 2009:42)

3 Uber case analysis

3.1 The fact

In addition to Google, Youtube, Facebook and many exchange channels, Uber has officially launched in San Francisco (US) in 2009 (Uber website 2018) then in up to 632 cities worldwide now (Uber website 2018)

Its quick development really makes many people surprise with a given slogan that “taxi company without

any car” Logically, this deep traditional firms on market Uber seeks into under hardship conditions Many

old taxi firms cannot explain about Uber’s hit as well as why they have been left behind even they had longtime

justifying on the market This also make local policy makers confused in front of the question whether Uber

need to be allowed or prohibited While the theory on two-side business can be used for proving the Uber’s

success and dominance, it is also new and even strange to a few one

Many discussions simplified Uber business basing on the general advances of technologies, especially just emerging 4.0 economy They base their consideration on the Uber’s ownership of Uber app However, this

argument hit stones when many old taxi companies has decided to consume technology and internet

Interestingly, these taxi companies did not waste much time and cost to build and launch their apps In actual,

they introduced their apps suddenly after Uber app jumped It means that it is not so difficult to achieve

similar technology applications; and the utilization of such apps easily becomes a leading trend in digital

economies, but the merits players gain is obviously different

As a recognition of Vinasun, a professional driver taxi firm in Vietnam, the trade war among it and other non-professional drive taxi apps is exactly a race of financial investment Accordingly, many traditional taxi

companies have a weak position in competing to new ones For that situation, Vina decides to make the new

business strategy which deeply consume technological application, increase subsidy shared to drivers,

provide beneficial policy covering whole social insurance and even count down its target revenue as well As

a result, Vinasun has gotten in stuck still (Nguyen Manh 2018) It facts reveal that technology is important but

still insufficient

In comparative approach, there are many evidences showing that Uber’s differences are its pathway backing to deeply exploit traditional business strategies These are especially current marketing and business

management regimes Of course, it must have an uncommon style applied In marketing, Uber seemingly

affirms that: To have money to have all After calling for mass investment from venture and capital funds,

Uber does not forget to deposit into new markets More important, Uber also brings a new culture to its

coordinative drivers and customers, which many analysis names as sharing economy In Vietnam, for

example, Uber has many marketing campaigns Its PR contents spread beyond itself label, not only focus on

both its firm, brand and its managing team but also provide information for the newly useful option for

travelling in the world of technology dominance in general

It should continuously concern about Uber business management The most interesting proof is that Uber provide a system of “star” ranking for drivers as well as customers It is not for Uber’s policy on its incentive

to users but for users to know their coordinators’ ranking point then make their decisions Traditional taxi

firms may have some incentive to drivers in their salary or revenue distribution model but they in previous

provide no room for drivers and customers to show their satisfied levels and basing on it to make their own

recommend together It is eventually that Uber’s respect boosts motive of users in one side in front of the

pressure coming from their coordinators in the other side Aa a result, this design tries to maximize a marginal

of demands and usefulness

It still questions that whether Uber seek the leading position on the market by solely such modernization strategies As mentioned, some arguments base Uber’s achievement on the philosophy of sharing economy,

and thereby just look at its advantages, a selected examples of Kim, Baek, and Lee (2018) and Geissinger,

Laurell, and Sandström (2018) However, it should concern about the changes in this concept pertaining to

long time variation of society, especially economic infrastructures In order words, to regard to the versions of

the said model brings more meaningful than such as model itself That is because the current version might

be far different from the original that could be ruined as well Uber might be initiate from but clearly

distinguishing with some roots of sharing economy (Truong Trong Hieu 2017) To philosophize with

something like sharing, the analysis gets in stuck in finding the nature of Uber current practice

One of the distinctions is the economic target of Uber as well as users To apply the effective structure of price like discrimination performance sometimes, Uber always want to gain as much profits as possible

Strangely, there are more and more taxi drivers left their old companies where they can acquire enough labor

protection and retire insurance under regulation to coordinate with Uber without guarantee of social welfare

Of course, drivers with Uber need to have their owned cars In practice, such cars may be not under their

ownership, with much leisure time as sharing economy sophisticated They in actual invest, purchasing or

hiring or make partnership with third coordinators They are also not drive Uber in their free time, for

example, after their formal working, but ride cars as professionally full-time job (Truong Trong Hieu 2017;

Duy Pham 2018) For that way, it is hard to conclude that they run to Uber regardless of money Therefore,

these facts cannot locate on the origin of sharing economy

More important, in Uber fashion of business, Uber itself has strong power enough to interdependently make and control drivers’ business and customers’ consumption Uber itself at the outset produces price

structures Moreover, customers on both sides cannot independently decide who he or she would like to deal

To look up and stare at “secret spots” on the app’s monitor, passengers decide whether they make a contact

or not If they have connected, Uber in its turn send a deal to a driver it selects, then return its option to such

a passenger Drivers as well as passengers are able to make their final decision only after that point of time

(Truong Trong Hieu 2017) However, Uber and other technology taxi companies intentionally argued that

they just supply the apps or products like services relevant to technology application Some discussions also

point out that Uber is not a transportation firm, or it does not provide communicate services Its partners in

one side, group of drivers, contribute such business activities to the customers in the other side However, this

argument conflicts to the fact that drivers themselves cannot decide prices for their services Uber designs it,

which drivers must comply EU court outlined this significant point for its judgement also (EUCJ 2017:para

39)

Along with other preeminent non-professional driver taxi services like Grab, Uber business activities bring much competitive pressure to traditional taxi firms In Vietnam, for example, two leading taxi firms, Mailinh

and Vinasun, have faces many obstacles In the middle of the year 2017, there are totally about fourteen

thousand drivers of these two companies quit In detail, Mailinh, the biggest firm with about thirty thousand

drivers after twenty-five years engaging in market, lose about 20% of personnel; and Viansun, the following

fourteen years old firm, has nearly a haft of its drivers withdrawn, resulting in many stagnant cars By contrast,

there has been an immediate increase in number of cars connected to Uber and Grab, which exceeds

twenty-one thousand and account for nearly 60% of cars in ten technological taxi providers in Vietnam Moreover, it

should be noted that many drivers leave Mailinh and Viansun for such technological taxi platforms.(Phuong

Dong 2017; Ngoc Lan 2018; Ha My 2017) Vinasun at the end decided to bring a legal action against Grab to

the Court in the beginning of 2018 Vinasun made claims for Grab unfair practice (very low price) which causes

about forty-two billion VND.(The Hung 2018; Ai Nhan - Tuyet Mai 2018) Even, the lawsuit was suspended

due to a lack of evidences for causation in Feb 2018, the case labels a remark signal on such a tighten tension

According to traditional taxi companies, Uber has taken advantages by turning it out of legal restriction

They frequently squall why Uber business activities are not charged as taxi services, which results in a practical

situation where Uber does not meet regulatory requirements as traditional taxi firms, such as car quota,

drivers’ quality, or recognized taxi logo in municipal areas Traditional taxi companies condemn Uber as an

attack on transportation regulation on the one hand and call for much more adequate consideration from

policy makers on the other hand They at the end respect for a fair play from Uber, their newly strongly rivals

3.2 EUCJ’s decision

Not only in Vietnam but many countries where Uber launch its business traditional taxi companies find difficulties in front of technology taxi platforms and then make claims for a respected equally legal treatment

among them In Spain, the Association of professional taxi drivers in Barcelona took a legal action against Uber

Systems Spain’s “misleading practices and acts of unfair competition”(EUCJ 2017:para 13) before the Spain’s

Commercial Court (Commercial Court No 3, in Barcelona) In order to classify Uber services as “unfair

practices”(EUCJ 2017:para 15), however, the court need to determine “whether the services provided by that

company are to be regarded as transport services, information society services or a combination of both”(EUCJ

2017:para 15)

For that achievement, Spanish Court brought the case before the Court of Justice of the European Union, for two main reasons First, Uber Systems Spain bases its services on the internationally common technical

system provided by Uber Netherlands who locates in Netherlands That is why such practices shall be

regulated by EU law Second, the legal process emerged in Spain called for an interpretation of the EU law

which is relevant to EU’s courts’ functions As a result, EUCJ admitted the files and then provided a final

judgement on Dec 20, 2017

Before making the sentence, EUCJ took a deep analysis It first regarded to the smartphone application provided by Uber with the respect that this application is indispensable for both the drivers and the persons

because “without which (i) those drivers would not be led to provide transport services and (ii) persons who

wish to make an urban journey would not use the services provided by those drivers”(EUCJ 2017:para 39)

Particularly, the court concentrated on a fact that Uber acts “for profit”(EUCJ 2017:para 16) and “exercises

decisive influence over the conditions under which that service is provided by those drivers”(EUCJ 2017:para

39) The court also makes a statement that such a service is “more than an intermediation service consisting of

connecting”(EUCJ 2017:para 37) Otherwise, Uber’s activity must be considered as “an integral part of an

12052

13407 13488 14214

15990 17047 17160

9179

F IGURE 1 P ERS ON N EL QUAN T IT Y OF VIN AS UN

Source: Ha My, 2017

overall service whose main component is a transport service”(EUCJ 2017:para 40), and in final EUCJ therefore

ruled that:

An intermediation service such as that at issue in the main proceedings, the purpose of which is to connect,

by means of a smartphone application and for remuneration, non-professional drivers using their own vehicle

with persons who wish to make urban journeys, must be regarded as being inherently linked to a transport

service and, accordingly, must be classified as ‘a service in the field of transport’ within the meaning of EU

law Consequently, such a service must be excluded from the scope of the freedom to provide services in

general as well as the directive on services in the internal market and the directive on electronic

commerce.(EUCJ 2017:para 50)

Respect to this judgement, Spain as well as other EU member states shall “to regulate the conditions under which intermediation services such as that at issue in the main proceedings are to be provided in conformity

with the general rules of the FEU Treaty”(EUCJ 2017:para 47) In responses, France initially told the following

story relevant to such technical regulations In details, the conflict among UberPop and professional taxi

drivers had happened before the Uber Systems Spain case, which started since 2014, and 2016 the Regional

Court in Lille (France) brought criminal proceedings against Uber France for “the unlawful organization of a

system for putting customers in contact with non-professional drivers”(EUCJ 2018a:para 8,11,13) Under the

respective case of Uber Systems Spain, EUCJ in 2018 once again took a view that “Uber France fixes the rates,

collects the fare for each journey from the customer (before paying part of it to the non-professional driver of

the vehicle) and prepares the invoices”(EUCJ 2018a:para 10,17) and non-professional drivers under such a

case “transport passengers for remuneration”(EUCJ 2017:para 33; EUCJ 2018a:27)

To parallel with judgements on the former case, EUCJ founds that UberPop activity is essentially identical

to what offered by Uber Systems in Spain and came within “the field of transport”(EUCJ 2018a:para 22) It

did not constitute “an information society service” as UberPop arguments(EUCJ 2018a:para 22) In other

words, UberPop has no ground to maintain that its service generates “an information society service” as well

as to brings its defense against a composition of technical standards and regulations on such a service

Therefore, EU Member States “may prohibit and punish the illegal exercise of a transport activity such as

UberPop without having to notify the Commission”(EUCJ 2018b:1)

In general, these judgments become an important precedence Many countries, especially competition agencies where the services offered by Uber are making a muddle debate, find belief in the light of EUCJ

statement They recently after that are more convenient to stand Uber business activities on a position along

with transport services, or a taxi service in particular It is really crucial, however, may be not enough for what

essential to a process measuring the impacts of two-side business on the market

Always, OECD gravely warns that evaluating frames which currently apply for traditional markets, only one side markets, are out of order with the new business standard (OECD - Competition Committee 2009) To

continuously consume outdate approach, such proceedings will not be able to identify the intrinsic nature of

two-side platform and potentially create erroneous outcomes Back to what the paper discussed above, to find

out the field of trade is very important task but not all needed Each legal system should base on that initiate

and toward to the next track calculating what factual a shack coming from the business model itself It seems

that many competition systems still much enjoy a preliminary finding and forget what they need to act for the

next phase as OECD suggestion

Spain and France, for example, are two legal systems lose their directions for a correctness regulation The reasons they call for legal interpretation by EUCJ is for their competition law achievements But they just

confirm that service offered by Uber is a type of transport service, which is considered equally as traditional

taxi service As a result, they apply what is signed as “tradition” to the new In doing so, they can state that

such a service provided by Uber style is an “unfair practice” or even a criminal action if Uber does not meet

“technical standards” as traditions of taxi service, which is displayed in old one side business model It clearly

left OECD warnings behind In reality such a remained prosecution has not yet generated much subsidiary

concerns until the merger between Uber and Grab, another technological transport firm, conducted

3.3 A merger between Uber and Grab in South-East Asian

In the merger case, Grab plans to acquire Uber entirely in the market of South-East Asian, where Uber and Grab are two leading non-professional driver taxi service suppliers In history, Uber inaugurated its service in

Vietnam, Singapore, Philippine and Malaysia Grab taxi applications enters and share market with Uber soon

after that To different from Uber, Grab departed from Singapore and has focused on South-east Asian

Countries From some initial narrow market, Grab now launches its service not only countries above but also

Indonesia, Myanmar and Cambodia (Grab website 2018)

In March 2018, Grab made a successful deal with Uber, in which Grab “bought assets and driver contracts

of Uber across South East Asia” Under such a regional purchase agreement, Uber will obtain 27.5% of entire

shares owned by Grab for its exchanged assets and a pledge that Uber has to withdraw from Southeast Asian

market (CCCS 2018b:para 1; PCC 2018a:para 1) This transaction after its publicity announcement brought a

shock to all relevant parties, including customers, its partnership drivers and especially competition

commissions in these countries

On the fact that this merger is a cross border transaction, not only one but also many relevant countries stated they will monitor the acquisition Competition and Consumer Commission of Singapore (herein after

as “CCCS”), Malaysia Competition Commission (herein after as “MyCC”) and Vietnam Competition

Authority (herein after as “VCA”) informed their interventions in 27 March followed by Philippine

Competition Commission (herein after as “PCC”)’s jump into the proceedings in 2 April They all found clues

indicating that the post-transaction is likely to create harms on competition if Uber gets out of markets and is

barred no longer come back as a strongly independent player Although “there are many other enterprises

which offer e-hailing services”, these commissions’ directions are essential to ensure that “competition in the

e-hailing services is not disrupted by the merger between Uber and Grab” as MyCC representative

manifestation (MyCC 2018)

A few days early investigating, obviously, CCCS on the 30 of March in 2018 quickly responded to this no-notified merger case It stated that it had reasonable grounds for suspecting that the Competition Act “has

been infringed by the transaction due to substantial lessening of competition in relation to the chauffeured

personal point-to point transport passenger and booking services market in Singapore” According to CCCS,

Uber and Grab “are each other’s closest competitors and have a significant combined market share”, and this

close rivalry “can be seen from the surge in Uber’s fares following the recent outages of Grab’s app” (CCCS

2018d; CCCS 2018b:para 5) Under light of competition law, the marriage between them can exclude the

competitive pressure such that easily create more concentration on the market

Even without having to complete the investigation, CCCS decided to issue some proposed interim measures directions to the parties These “require the Parties to maintain their pre-transaction independent

pricing, pricing policies and product options in relation to the services, and not take any action which may

lead to the following in the services market” More extremely, CCCS request the merging parties “not to obtain

from the other party any confidential information” and lastly, “Grab shall ensure that Uber drivers joining

Grab’s ride-hailing platform of their own accord are not subject to any exclusivity clauses, lock-in periods

and/or termination fees”.(CCCS 2018a) As a result, the relevant parties submitted their presentation to CCCS

and “have agreed to extend the initial shut-down date of the Uber ride-hailing app in Singapore from 8 April

2018 to 15 April 2018” (CCCS 2018c), but just closed its app after May 7 by CCCS extension (CCCS 2018d:para

4)

PCC moreover provided many worthy notes from its collected data Specifically, Grab in Philippine after the acquisition would exceed 93% of registered vehicles, which substantially results in the situation “Grab

being able to profitably increase its prices given its market share as riders will not shift to other modes of

public transportation” According to this authority’s quick measure, the Uber refusal wihout chances

reentering into the market seems to be not beneficial and such that “barriers to entry are not insignificant”

The analysis also pointed out that “entry into the relevant market will not be timely, likely, and significant

such that a new entrant will not serve as a competitive constraint against Grab” In practice soon after releasing

such a deal, Grab’s price structure indicates that “prices are increasing, while quality of service is deteriorating,

to the detriment of the riding public” Altogether, PCC pointed a view that post-transaction “creates or

strengthens Grab's dominance in the relevant market” and concerns the coming days where the transaction

“has resulted and will likely continue to result in substantial lessening of competition in the relevant

market”(PCC 2018c; PCC 2018b; PCC 2018a:para 3) PCC thereby immediately ordered Uber and Grab to

comply many initial interim measures as CCCS (PCC 2018c; PCC 2018a)

All competition commissions finished their first phase of investigation and has moved to the second phase now However, there are difference among their approaches in order for a goal solving many obstacles that

follow with the new business structure of a technological service Once again, this status continuously makes

much noise in debate There are two opposite respects, for each, with particularly complicated concerns If

such competition agencies follow with EUCJ judgment and considered Uber as well as Grab service as a type

of transport service for technical regulations, they must take account into the definition of relevant market

which will be expanded too much In that case, Uber and Grab’s market share, which almost these legal

systems rely on for finally concluding their market power, will be smaller By contrast, they need to pay

attention on the newly particular business model

This confused perspective is clearly exhibited in such current competition agencies analysis They mentioned the service as “transport passenger and booking services” but they did not count the drivers or

occupation of traditional taxi firms during measuring the Uber and Grab market power Extremely, they at

least one time stated the situation where Grab will be “near monopoly” after acquisition that only result from

the fact professional driver taxi services are not calculated Particularly, it is likely that such competitions

agencies base their evaluation on the old frames applied for one side market They do not care about the feature

of two-side business where Uber and Grab make their performance as mentioned

It seems that only CCCS tends to open its mind when it latterly decided that “Uber is not obliged to extend the app” beyond the date of May 7 (CCCS 2018d:para 4) It means that Uber can legally stop their performance

the merger plan can be conducted It is because Singapore competition law as many other legal systems

introduces the modern approach in merger control Instead of closing the transaction, CCCS release it first and

can provide some remedies later when it finds some anticompetitive harm form such as case In doing so,

CCCS in its permission to Uber and Grab deal also notifies that it “may impose such appropriate directions

(or accept such appropriate commitments from the Parties) to remedy, mitigate or eliminate any adverse

effects of such an infringement” (CCCS 2018d:para 5)

Interestingly, CCCS also recognized the enhanced design of Uber service It identified that “barriers to entry are likely to be high due to strong network effects (i.e the larger the number of drivers that are available

on a ride-hailing platform, the larger the number of riders will be attracted to use that platform, and vice

versa)” after Uber disappears (CCCS 2018b:para 5) In particular CCCS provided more explanation for its

validation:

Many drivers are constrained by exclusivity arrangements such that they can only drive for one ride-hailing platform This makes it difficult for a new ride-hailing platform to attract drivers Further, a new entrant would

likely have to invest a significant amount of upfront capital in order to attract drivers and riders to move over

from the incumbent ride-hailing platform, so as to build up a critical mass of users The new entrant would

likely have to continue sustained investment in order to compete with the incumbent ride-hailing platform

(CCCS 2018b:para 5)