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Antitrust fine against two ride-sharing giants called 'less impactful than a slap on the wrist'

Key Points
  • Singapore's decision to fine ride-hailing giants Grab and Uber will not have any meaningful impact on either company and underscores shortcomings of existing global regulations to protect customers, according to Corrine Png, CEO of Crucial Perspective.
  • The two companies were fined in total about 13 million Singapore dollars after Grab bought Uber's Southeast Asia business earlier this year.
  • Alex Capri, a visiting senior fellow from the NUS Business School, said the fine was just a warning shot and formed the beginnings of potential regulatory measures to deal with fast-growing tech companies.
Signage for Uber Technologies and Grab are displayed outside a building in Singapore, on April 26, 2018. 
Paul Miller | Bloomberg | Getty Images

Singapore's decision to fine ride-hailing giants Grab and Uber will not have any substantial impact on either company, and the situation underscores the global shortcomings of existing regulations to protect customers, a transportation expert told CNBC.

Following Uber's sale earlier this year of its Southeast Asia business to the Singapore-based Grab, the city-state's anti-trust watchdog on Monday slapped Grab and Uber with fines totaling about 13 million Singapore dollars ($9.5 million). The Competition and Consumer Commission of Singapore also directed the companies to open up the local market to new players and reduce the impact of a less-competitive field on drivers and consumers.

Although the multimillion-dollar price tag may seem steep, industry observers deemed the response as relatively positive news for Grab, which now dominates the market.

"These imposed fines are even less impactful than a slap on the wrist for Uber and Grab," Corrine Png, CEO of transport research consultancy Crucial Perspective, told CNBC. She pointed to the massive market value of both companies and also to the fact that Grab raised billions of dollars in fresh funds following Uber's withdrawal from the regional market.

In fact, she added: "The Billion Dollar question is whether Grab and Uber went ahead with the merger of their Southeast Asian operations knowing that any fine or penalties permitted by existing regulations would be dwarfed by the jump in Grab's market valuation resulting from this merger?"

Uber is currently valued at $72 billion and Grab at $11 billion, according to the latest available data on CB Insights. The Singapore-based tech firm, which is backed by Japan's SoftBank Group, raised about $2 billion in funding from Toyota and a host of financial firms in recent months.

Png added that Grab's estimated valuation had jumped from $6.5 billion before the Uber deal, and that the American tech company had walked away with 27.5 percent of the Singapore-based firm.

"The reality on the ground is that the current existing regulations are not equipped to effectively protect consumers against this new breed of fast-growing ride-hailing tech giants with extensive reach and deep pockets," Png said.

The Singaporean regulator began investigating the merger on grounds that it might have broken the country's competition act and said that it received "numerous complaints" from both passengers and drivers using Grab's services.

VIDEO2:3902:39
Grab co-founder addresses concerns since the Uber merger

The anti-trust watchdog said its findings showed effective fares in Singapore rose between 10 and 15 percent since the merger, and that Grab's extensive network makes it harder for potential competitors to scale and expand in the market. CCCS told Grab to remove its exclusivity arrangements with any taxi fleet in the country and maintain its pre-merger pricing algorithm.

Alex Capri, a visiting senior fellow at the NUS Business School, described the fine as just a warning shot that may form the beginning of potential measures from regulators to deal with fast-growing tech companies.

"There will need to be more scrutiny in the future for this to have any significant impact on the industry. But it's a first step," he told CNBC.

The anti-trust watchdog told CNBC that Grab and Uber had seven days, following Monday's decision, to appoint a "monitoring trustee" to oversee compliance with the authority's directions.

For its part, Grab said that it will abide by the measures set out by the watchdog and that it will continue to talk with Singaporean authorities to create a level playing field.

Indonesian rival Go-Jek said it welcomed the measures from the Singapore watchdog.

This week's decision may precede more moves from regulators to cut down on tech firms' market dominance, experts said.

"We are just at the beginning of a tech-backlash. This is because tech has moved ahead of the regulators way too fast," Capri said by email. "We're seeing new (regulations) on data privacy and localization, fake news, and now the big Platforms are going to come under increased attack (regarding) anti-trust issues."

The merger between Grab and Uber is also under regulatory review in Vietnam. Reports said that anti-trust regulators in the country could block the deal if the firms' combined local market share exceeds 50 percent. Go-Jek officially launched in Vietnam earlier this month, with plans to go into Thailand, Singapore and the Philippines in the near future.

Malaysian regulators are also reportedly reviewing the state of competition in the domestic ride-hailing market. In the Philippines, while the deal has been approved, the local competition watchdog said it was monitoring Grab's compliance with conditions intended to improve the quality of service, according to Reuters.

The Singapore decision this week could set a precedent for other regulators in Southeast Asia, according to Shantanu Majumdar, a regional director at J.D. Power.

"With less options in the market and, as a result, less incentives for competitive pricing, it is crucial that customers do not suffer as a result of such mergers," he told CNBC by email. But, Majumdar added, Uber's merger with Grab "seems to be complete and irreversible" and it is "very unlikely that the decision by CCCS will force a demerger."

Capri also pointed out that regulators in Indonesia and Malaysia tend to enact policies that favor domestic companies across all sectors. Ultimately, he said, whether or not consumers lose out from such a merger depends on their satisfaction with the services.

For now, he said, "consumers seem to be happy with their service and ... don't feel deprived for choice," he said.