The buyout deal between Grab and Uber in the Philippines has left two regulators debating on the viability of the interim measures that the country’s competition watchdog wants implemented while its review is in progress.
Land Transportation Franchising and Regulatory Board (LTFRB) Board Member Aileen B. Lizada said the agency is quite puzzled as to how the parties involved in the transaction would implement the measures set by the Philippine Competition Commission (PCC).
The antitrust body issued late Friday the interim measures that will be put in place to ensure that the integrity of the motu propio review is preserved.
In a nutshell, the commission ordered the parties to temporarily stop the consummation of their March 25 deal.
The most striking of the seven points that the competition commission issued was the continuation of Uber’s independent operations in the Philippines.
“On the part of directing Uber to maintain its apps independently, the paramount concern of LTFRB is the riding public because, as disclosed by Uber during the hearing at PCC, they don’t have funds, grants and employees here in the Philippines anymore,” Lizada said.
During Thursday’s public hearing at the PCC’s headquarters, Uber Chief Business Officer for Asia Pacific Brooks Entwistle said funding for the Philippines has already been pulled out by its mother company in the United States.
“So, who will be funding now the business operations of Uber? Who will take the blame if an Uber driver gets involved in road crashes, and the complaints?” Lizada said.
To recall, Uber and Grab entered into a buyout deal, wherein Grab will get the assets of Uber in Southeast Asia, while Uber gets a 27.5-percent stake in Grab. The Philippine units of Uber and Grab are included in the deal.
But for PCC Chairman Arsenio M. Balisacan, Uber is more than capable of operating its ride-hailing app in the country, despite its claims that it has already exited the Southeast Asian market.
“Uber is highlighting its exit,
but what it does not emphasize enough is its integration with Grab. Thus, Uber is not truly exiting the Philippine market but, rather, effectively merging their operations with Grab here. The deal makes Uber a part-owner of Grab,” he said.
The parties also have to maintain their business operations and other conditions prevailing prior to March 25, which include, among others, ride-hailing and delivery platforms; pricing and payment policies, including incentives and promotions to riders; product options; customer and rider database; and on-boarding of new partner drivers, as well as fees, charges and incentives to partner drivers.
Likewise, the parties are to refrain from providing access to confidential information, such as pricing, formula, incentives, operations, marketing and sales policies, promotions, partner drivers and customers, to each other.
They are, likewise, ordered to stop from imposing exclusivity clauses, lock-in periods and/or termination fees, and from performing any act that may lead to reduced viability and salability of the parties’ businesses.
Uber’s franchise lapses
Another legal tussle that could further entwine the case is Uber’s franchise. Lizada said the accreditation of Uber as a transportation network company (TNC) has lapsed. Hence, operating Uber in the Philippines might be illegal.
“Uber’s accreditation has already expired and the LTFRB has yet to act on it. A legal implication that should be addressed,” she said.
However, PCC Commissioner Stella A. Quimbo noted that this should not be an issue, given that both companies still have provisional authorities.
“Per the LTFRB, both Grab and Uber have provisional authorizations, despite the expiry of their accreditation,” she told the BusinessMirror.
To this, Lizada said her group may process the continuity of Uber’s transportation network vehicle services (TNVS), but the accreditation of Uber’s TNC franchise will still depend on whether Uber decides to renew it.
“What the LTFRB can do, though, is to ensure continuity of the service
by processing the Uber TNVS who would like to continue to do ride sharing, because our paramount consideration is the riding public,” she said.
Already, Uber drivers have started migrating to the Grab platform, as
they would like a continuity of their businesses in the ride-hailing space.
Not a blame game
Lizada, a lawyer, likewise, gave emphasis on the possible case of “involuntary servitude,” should Uber be forced to do business in the Philippines despite its “corporate decision” to put its business elsewhere.
“If PCC directs Uber to continue its operations, another issue here will be: Does it not constitute involuntary servitude on the part of Uber when it has already decided to pull out its operations in the Philippines,” she said.
But for Quimbo, what is imperative is for the PCC to conduct a review of the deal, which potentially gives Grab a “virtual monopoly” in the local ride-hailing market.
“The LTFRB has a different mandate. They could have a different take on the matter. The PCC is not blaming anyone for Uber’s exit.
Entities should be able to make business decisions on their own, keeping in mind that if such decisions can harm competition in the market, then PCC is duty bound to step in,” she said.
Grab and Uber were both mum last Sunday, despite repeated queries
from the press.
The PCC is mandated to protect competition in the market and prohibit anticompetitive conducts, including mergers and acquisitions of businesses and companies that may substantially prevent, restrict or lessen competition.
A merger or acquisition review using competition lens will determine whether the merger of two players in the ride-sharing market will substantially lessen competition. The PCC may prohibit any merger should anticompetitive concerns arise during the transaction review.