Taxi or technology?

Ride-hailing firm Grab in hot water in Vietnam

In late December, a Vietnam court ordered the Singapore-based firm to pay a local cab company just over $200,000 for losses incurred due to competition. The decision hinged on whether Grab should be considered a taxi company, or, as it generally is, a technology company. The court ruled in favour of the local firm. Now, Grab's country head has hit back, calling the ruling "extremely unfortunate"

Robin Spiess
January 4, 2019
Ride-hailing firm Grab in hot water in Vietnam
A Vietnamese Grab motorbike-taxi rider waiting for customers in Hanoi Manan Vatsyayana / AFP

After a lengthy 18-month trial, a court in Ho Chi Minh finally handed down its verdict on 28 December in favour of local company Vinasun, due to Grab “having seriously violated the law on transport business”, a court clerk told AFP.

Vinasun blamed Grab for profit losses amounting to $1.8m since Grab’s entrance into the Vietnamese market in 2013.
The verdict stated that Grab had violated Vietnamese regulations by operating as a taxi company, rather than solely as a technology firm, according to local newspaper Tuoi Tre.

The judge decided that there appears to be a link between Vinasun’s losses and Grab’s entrance into the market, but that there is a lack of evidence to hold Grab accountable for all of Vinasun’s losses.

Grab will be appealing the decision, which it claims to be “extremely unfortunate”, according to a recent press release.
“This [ruling] will set a bad precedent for other traditional companies and inadvertently encourages them to take the easy way out and maintain the status quo by suing their competitors instead of constantly innovating through technology to remain relevant and competitive,” said Jerry Lim, country head of Grab in Vietnam, in the release.

“A lawsuit of such anti-competitive nature has a deterrent effect on foreign direct investments and poses very challenging business conditions for high-tech companies and foreign investors,” Lim added.

Hoang Ngoc Giao, director of the Institute for Policy, Law and Development Studies in Hanoi, told Reuters that the court’s decision went against the interest of Vietnamese consumers.

“The decision will set a precedent that hinders the development of a digital economy in Vietnam, and will discourage the development of several companies,” Giao told Reuters.

Technology or transportation company?

During the trial, Vinasun made claims that Grab has failed to pay national taxes and has broken the Ministry of Transport’s Decision No.24/QD-BGTVT, or “Decision 24”, which enumerates the guidelines by which ride-hailing companies can operate in Vietnam. Neither of these claims appear to have been substantiated.

According to the verdict, Grab lost the case primarily due to the court’s belief that the ride-hailing firm should be registered not only as a technology company, but as a taxi company.

“Grab claims to be a company which provides technology and does not conduct a taxi business nor manage the drivers. But in fact, Grab does manage the drivers and charges transport fees,” the verdict read, according to Vietnam Express.

“When customers order a ride, they transfer their money to Grab or pay via the driver a sum from which Grab takes a percentage. Grab also determines the bonus and punishment for drivers,” the verdict added, by way of proving that Grab acts as a taxi company would.

If Grab were to be registered as a taxi business, it would be required to provide employees with labour contracts, traffic safety training and social security. Because Grab does not follow these regulations and does not pay the taxes that a transport business should, the court said, it has been acting illegally.

The Ministry of Transportation in Vietnam has never before required a ride-hailing company to register as a taxi firm, but the Ho Chi Minh court proposed that Vietnamese authorities redefine Grab as a transport business at the same time that it claimed Grab has been acting illegally for not being registered as such.

Same same, but different: Comparing cases

It is not uncommon for taxi companies and drivers to seek legal recourse for loss of business incurred after the entry of ride-hailing apps into the market; ride-hailing giant Uber is currently facing several similar cases around the globe.

In Melbourne, Australia, taxi drivers are currently suing Uber for stealing their clients while operating without the required licence. In London, England, drivers of the city’s iconic black cabs joined together in August to file suit against Uber for operating unlawfully and stealing upwards of $630 million of cab drivers’ profits since 2012. In New York, a cab company is currently suing the giant firm for violating the yellow cab drivers’ “exclusive right” to pick up passengers on the street.

Uber also lost a similar challenge in 2016, when a French court ordered Uber to pay $1.4 million to a rival taxi group after ruling that Uber drivers were illegally collecting fares while waiting on the street.

In each of these cases, the cab drivers’ lawsuits have been dependent on first proving that Uber was and is performing an illegal act under each nation’s current laws. Without this proof of wrongdoing, the drivers would not be entitled to compensation.

Grab faces decision from Vietnam’s competition watchdog

It has been a year of ups and downs for ride-hailing firm Grab, which kicked off 2018 with a landmark merger that saw international ride-hailing giant Uber turn over its Southeast Asian business to the regional company.

But the merger, which saw Grab’s biggest competitor leave the market, has fallen under scrutiny. Several countries, including Vietnam, are now analysing the agreement for its potential violation of various laws, with Singapore’s competition watchdog becoming the first to rule against Grab in September when it fined Grab and Uber a whopping $13 million for anti-competition practices.

The Vietnam Competition and Consumer Protection Authority (VCA) closed its investigation into Grab in mid-November, and announced a month later that it had reason to believe the Grab-Uber merger “shows signs” of being in breach of the country’s competition law, which forbids consolidation that leads to the combined entity having more than 50% market share.

The final verdict should be handed down by 15 January.
In response, Lim asserted that Grab was among several competitors – including taxi companies and other ride-hailing firms – currently active in Vietnam’s market, and that “the key point of contention may lie in the difference in the authorities’ and our definitions of relevant market and what constitutes a competitive playing field.”

As Grab awaits the VCA’s verdict as to whether or not its merger with Uber has violated the country’s laws, the recent court decision in favour of Vinsaun does not bode well for the future of the ride-hailing firm in Vietnam.

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