A commuter books a vehicle via ride-hailing app Grab in Manila. —INQUIRER FILE PHOTO
MANILA, Philippines — Grab Philippines will refund its cut to its riders whenever it overcharges, as part of the new conditions imposed by the competition watchdog in an effort to hit the ride-hailing giant where it hurts most.
It would take some time, however, before customers get any compensation under what is called the “disgorgement mechanism,” the Philippine Competition Commission (PCC) said in a press briefing on Monday.
Essentially a state-mandated refund, the disgorgement will have a lag time of about two months after the PCC issues its order, assuming Grab will not file a motion for reconsideration.
Grab riders will see the overcharges refunded in their GrabPay accounts.
Investopedia defines disgorgement as an act of repayment for an ill-gotten gain, but this jargon can barely capture how many riders feel whenever faced by the daily dilemma of choosing either Grab’s unreasonably high prices or the poorly managed and outdated modes of public transportation.
“That’s the concept of the disgorgement. It is something that is not due you but you obtained, and it is really because you are exercising market power,” PCC Commissioner Johannes Bernabe said.
The PCC ruled on the refund of overcharges more than a year after Grab bought out Uber in Southeast Asia. Uber, however, is a minority shareholder in Grab.
Excessive fare
“So if you were not dominant, if you were not a monopoly, you should not have been able to impose this kind of excessive fare,” Bernabe added.
The disgorgement forms part of a revised set of government conditions that the PCC had to renegotiate with Grab starting August, after the company’s operations remained problematic despite PCC’s earlier efforts to curb its anticompetitive behavior.
August also marked the first year of Grab’s voluntary commitments to the PCC, in which the company’s operations were monitored for four consecutive quarters.
Only the results of the monitoring for the first nine months were released so far, and the PCC said it fined Grab a total of P23.45 million for essentially overcharging its riders during this time.
But a little more than P5 million of this amount would be refunded to Grab riders, since the conditions imposed on the company were revised late into the monitoring period.
Refund in January
Assuming Grab will not file a motion for reconsideration, customers can use their refunds sometime in January next year, since the order was only issued this November.
But the money will only be paid back as fast as Grab is willing to cooperate.
So far, Grab Philippines has filed motions to reconsider the fines in the first six months of supervision, although the antitrust body has upheld the fines.
Asked for comment, the company said it would now pay accordingly for the penalties imposed by the PCC so far. This means payment of P11.3 million in fine for Aug. 10, 2018, to Nov. 10, 2018, and P7.1 million for Nov. 11, 2018, to Feb. 10, 2019; and P5.05 million in refund for Feb. 11 to May 10.
Results of the fourth quarter monitoring—covering May 11 to August—have yet to be released.
Disconnect
The fines declined over the months that the PCC monitored Grab, suggesting a disconnect between its compliance with the antitrust body and the improvement many riders hardly felt.
A violation could lead to a fine of up to P2 million per breach, a separate fine from the refund that Grab should give back to its customers, the PCC said.
The revised commitments for pricing will extend for one more year starting this month.
Other conditions, such as those allowing Grab drivers to use other ride-hailing apps, will be extended for four years.
All this is in an effort to enable a viable player to enter the market and compete with Grab.
99% market share
There are other players in the market, but PCC Chair Arsenio Balisacan has noted that Grab Philippines still controls “almost 99 percent” of the market.
According to Bernabe, the PCC needs to give new companies more time to grow, since the entry of a big player does not necessarily mean a big enough competitor.
Gojek, for example, has gained only 15 percent of the market in Singapore within a year, despite pouring a lot of resources into the market, Bernabe said.
The company is trying to enter the Philippines but has been set back by government regulations.
“We have observed that the competition in the marketplace has not really improved. And we don’t know if this will improve within a one-year period because the competition will depend on new entrants coming in or existing players growing bigger,” Bernabe said.