Following Grab’s taking control of Uber’s operation and assets in eight South East Asia countries recently, there is a public opinion that says Grab is monopolising the ride hailing market in Malaysia.
Consumers, in particular, do worry if, then if, then if and then, if this fourth thing is also true, then perhaps we should do something about its monopoly.
And politicians definitely have a large say in what they do and how they do it.
As an example of this, I quote from the Minister in the Prime Minister’s Department, Datuk Seri Nancy Shukri: “I had a meeting with Grab yesterday and they have given assurance that the transfer of shares will not affect the fare. In such event, we will consider taking legal action under the Competition Act 2010 which prevents monopolistic position and pacts by large enterprises in manipulating the price of goods and services,” she said.
It’s not so much that this is a wrong response, I think it’s that the grounds the minister takes into consideration while making the response are wrong.
Monopolies are just fine.
It is not fine only if Grab is non-contestable or a protected monopoly that we need to worry about and act over.
If there are 22 taxi apps operators in the country, then Grab is not simply a monopoly.
Grab may very well have market dominance but that again is not the same as a monopoly.
If so, is transporting people from point A to B quicker and efficiently than anyone else something we are actually worried about being dominated?
If it is possible for those taxi apps operators to contest against Grab, then we simply do not have a problem with the continued market dominance.
And contestable market dominance does not need to be regulated because we can leave that competition and contesting to do the regulation for us.
If having dominated the market, then Grab raises prices just because it can, at which point our question is whether the dominance is contestable.
My argument is, when you do try to say, raise prices, can someone come in and try to undercut you?
If yes, you’ve got contestable dominance or even a contestable monopoly.
And precisely because the dominance is contestable, Grab is unlikely to try to gouge consumers.
For if Grab does, the competition will arise.
What if Grab is doing a good job which is unmatched by other competitors, what if it tries to exploit its dominance position by deliberately undercutting the competition until they go bust?
Again, my view is that Grab is contestable. Even if it could bankrupt all 22 taxi app operators out of the market (unlikely to succeed), that doesn’t mean that it’s going to be able to profit from having done so.
Grab knows that by doing so, it will just bring the competition back again.
Note that cutting its prices while taking losses to gain market share only to raise them later just doesn’t work if it cannot raise prices again later.
MEDECCI LINEIL
