FEBRUARY 21 — There has been a spate of headlines over the past few weeks suggesting the possibility of a merger between Singapore-based ride hailing giant Grab and its Indonesian competitor Gojek.
In many markets, Grab and Gojek are competitors and in Singapore the two firms are effectively a duopoly in the ride hailing space.
So any merger would create a dominant player in ride sharing and a very powerful player in last mile delivery services. Such a powerful merged entity could have a negative impact on customers and those who make a living riding and driving for the companies.
No merger has officially been announced and any such deal would face regulatory scrutiny but the persistent rumours and the precedent of the Grab-Uber merger in South-east Asia means this mating of giants remains on the table.
Meanwhile, there has also been talk of a Grab-Tokopedia merger. Tokopedia is Indonesia’s largest e-commerce site offering consumers millions of products and again generating billions of dollars of revenue.
Once again though, a merged entity would create an immensely powerful company in Indonesia integrating both commerce, ride hailing and delivery.
If a Gojek-Tokopedia merger came to pass, many Indonesians could essentially live their lives — food, delivery, transport, shopping and finance — within a super app.
While both these mergers remain only at the potential stage, the very idea of giant powerful corporations merging to create even more giant and powerful corporations is inherently troubling.
We live in a world where Covid-19 threatens our health, where many of our freedoms have been diminished, where our employment prospects have dimmed — yet through all this, corporate wealth and power appear to be skyrocketing.
Markets are hitting all-time highs and corporate bottomlines particularly in the tech space seems to be as healthy as ever.
Basically the disparity in power between ordinary people and powerful wealthy corporations only seems to be growing.
Once firms reach the size and scale of Grab and Gojek, it seems they cannot be disrupted easily via competition.
Amazon in the US has seen no major online competitor despite the US being a very sophisticated market.
In South-east Asia it’s hard to see any new player breaking the hold of the Grab-Gojek big boys. So once these monsters form, it seems likely they’ll be with us forever.
Again I understand that we can’t live in a world without large companies. It’s the principle of economies of scale; big companies can often offer more and better services at a lower price point to their customers than smaller rivals.
But at a certain point, economies of scale reach a limit from a customer point of view. When firms become big enough and powerful enough, they don’t need to keep improving their services to retain users.
We become their captives regardless of service quality.
Recently I’ve noticed it’s harder for me to get Grab taxis; response times have reduced and service has declined but Grab is still the largest and most ubiquitous option out there so I keep using the service.
We are talking about services extremely important to our day to day lives; transport, food delivery, shopping, financial services as more users use in-app financial products.
To have such services controlled by near monopoly players can create obvious problems for consumers.
To me, the root of the problem appears to be finance. Enormous online businesses like Grab and Gojek have been able to grow and scale thanks to enormous infusions of venture capital.
However, despite their scale these businesses are not fundamentally profitable.
One reason for the lack of profits is competition. Grab and Gojek are in such fierce competition neither can charge high prices.
Therefore it’s in the interest of the funds and banks backing the platforms to see them merge — as this would free them from their current price war.
The problem here though is, in that event, as customers we are basically having monopolies imposed on us to ensure investor profits.
This appears to be another symptom of a financial world that seems to be out of control, a world where valuations of businesses are no longer pegged to profits but to sentiment or perceptions of future value.
How did an unprofitable business come to be worth so much?
At the end of the day, as customers and citizens we should have access to well-priced competitive services and regulators should move to protect the interest of consumers not giant corporations.
Perhaps the answer lies in breaking up these giant corporations, not making them ever larger.
Super apps will only reduce options and choice so perhaps we should work to introduce more good apps and fewer super apps.
*This is the personal opinion of the columnist.
