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Commentary

Grabbing Uber

05:06 AM May 14, 2018

Technology makes life easy, and even easier with digital technology. When an alternative to manually hailing a taxi ride became available to Filipinos, they hailed the advent of its providers, Grab and Uber. But not yet long in the game, Uber threw in the towel by selling its business to Grab. The public cried foul because the merger would result in a monopoly, and higher fares. In law, monopoly resulting from a merger and
acquisition (M&A) is an antitrust violation.

The antitrust law — the Philippine Competition Act — is hardly known to Filipinos. Its object is to enhance the free market economy paradigm in the country by ensuring open access to it. It also seeks to reinforce the liberalization of key sectors in the economy by safeguarding competition conditions.

The law basically has a two-fold purpose: to achieve market efficiency and consumer welfare, or protection, through better choice of quality goods or services, and hopefully better prices, too.

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Cartels and monopolies are anticompetitive because they control market behavior to the detriment of the market and the consumers. Cartelists and monopolists control the supply side and manipulate the demand side of a relevant market. As a result, consumers bear higher prices and get poor-quality goods or services. The anticompetitive conduct results in a breach of trust that the consuming public reposes in a free market economy.

In 2015, the Philippines enacted the Philippine Competition Act (PCA) with the following objectives: a) promote free and fair competition in trade, industry, and all commercial economic activities; b) prevent economic concentration that creates conditions for anticompetitive conduct; and c) penalize all forms of anticompetitive agreements, abuse of dominant position, and anticompetitive M&As.

The PCA is the Philippine version of the US Sherman Antitrust Act of 1890, and the competition provisions of the Treaty for the Functioning of the European Union. It also paved the way for the integration of the Philippine economy into the Asean regional economy, which took effect in January 2016. Strong and open competition is a linchpin of the Asean economic integration.

The PCA proscribes three classes of antitrust act or conduct: a) anticompetitive agreements; b) abuse of dominant position; and c) M&As that substantially prevent, restrict, or lessen competition in the relevant market, or in the market for goods and services determined by the Philippine Competition Commission. An agreement refers to any type or form of contract, arrangement, understanding, collective recommendation, or concerted action, whether formal or informal, explicit or
tacit, written or oral. It may either be horizontal or vertical.

The M&A between Grab and Uber would definitely restrict or lessen competition in the market for car- or taxi-for-hire service because the surviving service provider (Grab) would be literally grabbing the market share of the defunct service provider (Uber).

Aside from being subjected to criminal investigation to be conducted by the Office for Competition of the Department of Justice, upon endorsement by the Philippine Competition Commission, violators of the antitrust law face administrative sanctions, such as disapproval of the merger or even a forced sellout, or a fine ranging from P50 million to P250 million.

The antitrust law makes it unattractive for competitors to merge their homogenous businesses.

The Grab-Uber M&A came on the heels of the liberalization by the Land Transportation Franchising and Regulatory Board (LTFRB) of the grant of franchises to transportation network vehicle services (TNVS). Prior to the liberalization, a TNVS provider was given a franchise either as Grab or Uber affiliate. The LTFRB, perhaps anticipating the merger—and therefore complicit—made it universal for both.

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Frank E. Lobrigo practiced law for 20 years. He is a law lecturer and JSD student at San Beda College Graduate School of Law in Manila.

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TAGS: grab, Inquirer Commnetary, Philippine Competition Law, TNCs, transportation network companies, Uber
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