Singapore's Competition and Consumer Commission has slapped the city-state's most notable start-up, Grab, with a fine for its takeover of Uber's Southeast Asia operation.
But, at just S$13 million ($9.5 million), the penalty can hardly dent Grab's latest valuation of $11 billion and represent less than 1% of the $1 billion the company raised in its last fundraising in August. The regulator ruled out blocking the transaction, instead taking measures to "reduce the impact of the transaction", including unwinding exclusivity agreements.
For Southeast Asia's biggest unicorn and its investors, the modest penalty is great news, clearing the way for the company to achieve its ambitions of vastly expanding its core ride-sharing business while also harnessing its growing trove of data in other fields, including financial services and payments, food delivery and parcel services.
It's therefore little surprise that Grab welcomed the commission's decision, as well as a similar verdict from its Philippine counterpart, which earlier levied no financial penalty.
"Grab is heartened to receive the support of governments across Southeast Asia to enable us to serve Southeast Asians better," said Lim Kell Jay, head of Grab Singapore. "The recent decisions by Philippine Competition Commission and CCCS in not pursuing the route of unwinding the transaction demonstrate a deeper appreciation of Grab’s potential to serve the region."
However, of more concern to investors is that Grab's growing ecosystem leaves little room to breathe for any competitor hoping to establish a foothold in the growing number of markets where Grab wants to be a player.
The most obvious area is ride-sharing. To be sure, the competition watchdog has ordered Grab to unwind exclusivity deals with drivers. But it also acknowledges that Grab holds some 80% of the market and cites feedback from potential entrants who said "it would be difficult for them to attain a sufficient network of drivers and riders to provide a satisfactory product and experience ... to compete effectively against Grab".
That's bad news for the likes of Indonesia's Go-Jek, which is aiming to grow at a time when Grab is seeking a bigger slice of the Indonesian market. And it's difficult to imagine any significant international player opting to go head to head with Grab, given the cross-shareholdings involved: Uber took a 27.5% share in Grab in their March deal, while China's Didi Chuxing is also a shareholder – and Japan's SoftBank is a significant stakeholder in all three.
Still, Go-Jek is putting a positive spin on the news and pledging to go ahead with its expansion into Singapore.
"We are glad that the Commission has come to the same conclusion that we have – that new entrants into the market are facing a very high barrier to entry," a Go-Jek spokesman said. "We’re encouraged to see the measures being taken to level the playing field – it will have a significant effect on our strategy and timeline. We are now confident that Singapore will have a robust, efficient and competitive market, and that our arrival will have a significantly positive impact on the lives of people in Singapore.”
In other fields, Grab doesn't yet dominate and the likes of Alibaba's Ant Financial are undoubtedly steeling for a battle in payments. But smaller players in Southeast Asia will stand little chance of catching up on a company like Grab, which has worked its way into the mobile phones of millions of potential customers.
Could the Lion City's regulator have shown a little more bite? The point may be moot. Singapore's government is near-obsessed with being at the cutting edge of economic development. Putting the blocks on a merger that will turn its homegrown startup into a dominant regional player that is on the map of global investors likely trumps the prospect of building a broader startup ecosystem.
After all, if China can't support multiple ride-hailing players, how can Singapore? Will any country (apart from an increasingly backward Hong Kong) dare put the brakes on ride-sharing, which is immensely popular both with hipster passengers and flexibility-seeking drivers?
One nation that is yet to pass its verdict on the merger is Malaysia, which announced its investigation in July. In an intriguing sub-plot, Grab was founded in Malaysia by a Malaysian, Anthony Tan, before being lured south to base itself in Singapore, with support from venture capital fund Vertex.
Perhaps the decades-old emnity between the two neighbours will add spice to the verdict of the Malaysia Competition Commission, when it eventually arrives.