What future awaits Grab and Uber?

In case the deal between Grab and Uber fails due to violating the Competition Law, scenarios include Uber returning to Vietnam and Grab selling off Uber’s operations.

Grab and Uber may be forced to cancel
At present, the Vietnam Competition Authority (VCA) under the Ministry of Industry and Trade is conducting an official investigation to clarify signs of violation in the deal between Grab and Uber, after a preliminary investigation found that Grab’s market share after the deal will exceed 50 per cent, which goes against the monopoly clauses of the Competition Law. The official investigation will last for 180 days from May 18.

According to the Competition Law, if enterprises participating in an economic concentration have a combined market share of 30-50 per cent, their lawful representatives must notify the competition authority before implementing the concentration, otherwise they will have to pay a fine of 10 per cent of the revenue from the fiscal year previous to the date the deal was completed (if the deal is completed in 2017, the fine is equal 10 per cent of the revenue of the 2016 fiscal year).

To boot, in case the combined market share exceeds 50 per cent of the relevant market, the economic concentration will also be prohibited.

This brings up the question of what Grab will do if its market share exceeds 50 per cent.

Truong Thanh Duc, chairman of Banking Securities Investment Law Co., Ltd., told Vneconomy that if the deal between Grab and Uber violates the Competition Law, Grab will have to cancel the deal with Uber despite the deal is ended, much like the way AVG and MobiFone did.

Notably, MobiFone and AVG had to cancel the transfer of 344.66 million shares, returning to each other what they received according to the agreement. The total value of the deal was VND8.889 trillion ($392 million).

Selling Uber’s operation to third parties
Nguyen Minh Duc, representative of the Vietnam Chamber of Commerce and Industry (VCCI), told Vneconomy that if the deal does not comply with the regulations, Grab will have to pay a fine and separate its operations from those acquired from Uber to operate independently from each other.

However, Duc also stated that such a separation would be difficult. In reality, there has yet to be precedent for the separation of operations after a merger.

He added that after the merger, despite its monopoly, Grab neither does make competition impossible nor issues high fares to customers, the Vietnamese government should consider allowing Grab to continue operations as usual.

Uber has yet to comment on the issue, but seems to be bulling forward in other markets, following its post-M&A strategy.

Notably, according to AFP, on May 22 Uber announced that it would start piloting ride-hailing services in Japan this summer.

Uber said it aimed to provide local residents and tourists with “reliable and safe transportation” on the small island of Awaji, which is home to just over 150,000 people.

Despite finding it difficult to penetrate the Japanese market where risk-averse passengers stick to high-quality traditional taxi servicea, Uber is still eager to join this market.

“I am very excited that Uber’s technology will contribute to further enhancing the transit environment of Awaji Island,” Brooks Entwistle, Uber’s chief business officer, said in the statement, adding that this will be “the first initiative of its kind in Japan.”

Source: VIR