THE COUNTRY’S competition watchdog had fined Grab Philippines some P23.45 million for breaching its initial pricing commitments, as the authority approved a fresh undertaking as condition for its clearance of the ride-hailing firm’s acquisition of Uber’s Philippine business last year.
In a press briefing on Monday, Philippine Competition Commission (PCC) officials said the fine includes a P5.05-million refund to Grab riders who used the service between February and May.
These refunds will be returned to customers through the GrabPay Wallet in the app 60 days after PCC issued the order on Nov. 14.
Under the extended undertaking that took effect on Nov. 1 and which will remain in force for a year, Grab will return to affected customers amounts in breach of a 22.5% ceiling for average increase in a month from fares prior to the acquisition of Uber.
“… [T]he Philippine Competition Commission has approved a new set of commitments undertaken by Grab to address the lingering competition concerns in the ride-hailing market,” PCC Chairman Arsenio M. Balisacan said in his opening statement at the briefing.
“This effectively extends the PCC’s hold on Grab to conditions that prevent it from behaving like a monopolist to the detriment of the riding public.”
The extended undertaking involves “more streamlined commitments and metrics on pricing, service quality and non-exclusivity which Grab is compelled to abide by,” Mr. Balisacan explained.
He noted that a year after initial commitments were approved, “there continues to be a lack of competitive constraints on Grab and competition concerns… subsist”, consisting of the company’s prevailing market dominance, its ability to unilaterally increase prices profitably, existence of significant barriers to entry and inadequacy of its service quality.
“This is why there was a need to re-negotiate these commitments and install new commitments — to effectively address the persistent impact of a virtual monopoly on a sector imbued with public interest,” he added.
“Now entering the second year of PCC’s monitoring, we have maintained the same framework but introduced new mechanisms to ensure Grab’s compliance with its commitments.”
The new tools include a “disgorgement mechanism” under which Grab will have to return price excesses to riders if it breaches the monthly average fare cap set by the PCC. The refund scheme started in the third quarter of its initial undertaking.
Grab Philippines said in a statement Monday that it respects PCC’s mandate to protect Philippine consumers, and has worked with the authority to form and finalize its voluntary commitments.
“The antitrust body has identified certain deviations from Grab’s voluntary commitments, and based on the recent order from the PCC, Grab will be paying a total computed amount of P5,050,000 to the passengers who took Grab rides from February until May 2019,” the company said.
“Grab Philippines maintains its compliance with the LTFRB’s fare matrix and will work closely with the PCC in implementing the agreed mechanics for the payment, which will be communicated to the public at least five days before paying,” it added, referring to the Land Transportation Franchising and Regulatory Board.
Grab has until Dec. 14 to pay its first and second quarter fines amounting to P11.3 million and P7.1 million respectively.
Within this initial period, Grab had also paid P9 million in fines for breaching its commitments after it presented inaccurate pricing data and incomplete sampling frames, and for violating its commitment to remove the “see destination” feature for drivers.
In the same press briefing on Monday, PCC Commissioner Johannes Benjamin R. Bernabe said that the 22.5% allowable average increase in a month is based on inflation rate, traffic density and effects of surges.
Refunds will be on top of fines of up to P2 million per breach.
“The undertaking and the commitment decision of the commission is intended to prohibit [Grab] from exceeding the cap… if they breach that cap, that’s when the penalties and the disgorgement mechanism kick in… It’s really a stick designed to disincentivize pricing beyond the threshold,” Mr. Bernabe explained.
After PCC reviews and confirms monthly fare breaches at the end of each quarter, the commission will notify Grab to refund the excess to customers’ GrabPay Wallets in 30 days.
In addition to this price agreement, the extended voluntary commitments includes all prior commitments to non-exclusivity and service quality.
Under the undertaking, Grab may ask to be released from its commitments if a competitor takes on at least 20% market share, or two or more players with a combined 30% market share. — Jenina P. Ibañez