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SoftBank’s Son wants Grab and Gojek to merge, but that raises questions over competition

Written by Khamila Mulia Published on 

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The two Southeast Asian super apps are reportedly engaged in regular calls to discuss a possible combination of their businesses.

SoftBank’s Masayoshi Son is putting on more pressure pushing for a merger of the two Southeast Asian super apps, Grab and Gojek, as reported by Bloomberg. The two tech giants are currently engaged in regular calls to discuss a possible agreement, according to the report.

Bloomberg also mentioned that a key sticking point is whether the two companies combine all operations or if Grab just acquires Gojek’s Indonesian operations. Grab CEO Anthony Tan is said to prefer the latter as it would give him more control to run the Indonesia business as a subsidiary of Grab. Gojek’s shareholders, however, are reportedly pushing for a regional deal.

Tan’s interest in acquiring Gojek Indonesia makes sense as the two companies seem to have slightly different strategies which could complement each other. While Grab seems to focus on transportation, Gojek was more actively diversifying its products and services in the past two years. Gojek has, for example, entertainment services such as GoPlay and GoGames, which are currently lacking on the Grab platform. Gojek also updated its financial services by launching gold investment product GoInvestasi earlier this year. On the other hand, Grab has unique transportation services like car rental and e-scooter that can enhance Gojek’s offerings.

Nevertheless, the merger could raise questions about market concentration. Ideally, one industry should have more than a single player in order to produce healthy competition, and to make sure companies provide the best service and pricing for consumers.

KPPU commissioner Guntur Saragih did not answer directly whether a merger between Grab and Gojek would violate anti-monopoly rules in Indonesia. He only said that based on law number 5 of 1999, the KPPU has the authority to evaluate merger notifications made by business actors that meet the threshold amount, namely a combined asset value of at least IDR 2.5 trillion (USD 169 million) or a combined sales value of at least IDR 5 trillion (USD 338,6 million). The regulation applies to all industries, including the tech sector.

The combined assets of Grab and Gojek certainly exceed this threshold amount. Grab is currently valued at around USD 14 billion, while Gojek is worth USD 10 billion. “Business actors who meet the threshold and have carried out a merger or acquisition have a maximum time of 30 days to notify KPPU,” Saragih told KrASIA. “We may allow or cancel the merger or acquisition based on that evaluation.”

Potential violation of consumer rights

Meanwhile, the head of the Indonesian Consumer Foundation YLKI, Tulus Abadi, said that a Grab-Gojek merger would potentially be violating consumer rights and create unfair business competition. “With one giant company in the online transportation sector, they could determine pricing arbitrarily and make it more difficult for new players to enter the industry,” Abadi told KrASIA.

Over the past two years, Grab has had several problems with competition watchdogs in markets where it operates. In Singapore, Grab and Uber were fined with a combined of USD 9.5 million over their merger deal in 2018. The competition watchdog also ordered Uber to sell vehicles from its local leasing business to any rival that makes a reasonable offer. Last year, Malaysia’s competition regulator proposed a fine of USD 20 million for breaking the law by imposing restrictive clauses on its drivers. More recently, Indonesia’s KPPU accused Grab offering preferential treatment to drivers in its rental program, but the case has been overturned by the South Jakarta district court.

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