September 3, 2019

On 6 August 2019, the Parliament of Singapore passed the Point-to-Point Passenger Transport Industry Bill, which mandates that all ride-hail and street-hail service providers with a fleet size of more than 800 vehicles will have to be licensed from June 2020. In essence, the government is making moves to exercise oversight and regulation over such operators. Lim Chong Yah Professor Julian Wright and Dr Timothy Wong (NUS Department of Economics) believe that the bill levels the playing field for ride-hailing operators by ensuring robust competition between them.

The ride-hailing industry exhibits monopolistic tendencies; operators with larger networks possess an edge over those with smaller ones. This is because riders prefer a ride-hailing operator with more drivers on the road so as to minimise waiting time. Similarly, drivers prefer an operator whose app is used by many riders since it minimises drivers’ idle time and time spent getting to the next commuter. As such, ride-hailing operators seek to increase their network relative to other operators through exclusivity clauses; some operators like Grab disallow their drivers from operating on other networks. This can make it challenging for smaller and new operators to attract drivers and compete.

To counter this, the new ride-hailing licenses prohibit such exclusive contracts, allowing drivers to operate on multiple networks at once. On top of explicit exclusivity clauses, Prof Wright and Dr Wong caution that regulators must also take note of implicit exclusive arrangements hidden from plain sight, such as an operator using partnerships with car rental or insurance companies to limit drivers from other operators. Prof Wright and Dr Wong argue that if implemented effectively, the bill can help level the playing field and promote greater efficiency due to increased competition. The benefit to riders is that prices will remain fair and service quality may improve.

Read the full article here.