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Vinasun and Grab app at loggerheads over losses

Fierce debate broke out during last week’s hearing between Vinasun and Grab as the Vietnamese taxi operator accused the Singaporean ride-hailing app firm of anti-competitive business practices that have resulted in lost earnings.

Vinasun alleges that Grab’s operations have caused them to lose around VND42 billion ($1.82 million) in 2016 and 2017
Vinasun alleges that Grab’s operations have caused them to lose around VND42 billion ($1.82 million) in 2016 and 2017

During the trial at the Ho Chi Minh City People’s Court, Vinasun accused Grab of participating in predatory pricing and violating the Ministry of Transport (MoT)’s Decision 24 on the implementation of the pilot project on contracted passenger transportation.

Vinasun alleged that Grab claims to be a tech firm but is indeed a taxi transport company, hiring a large number of drivers and causing economic damage to Vinasun. The company’s deputy director general Truong Dinh Quy said, “Transport co-operatives are a camouflage for Grab to operate as a taxi firm. This, coupled with its price support to attract a large number of driver-partners, has severely affected Vinasun’s operations.”

He claimed the alleged ‘illegal operations’ of Grab in the country have caused Vinasun to lose around VND42 billion ($1.82 million) in revenue in 2016 and 2017. Vinasun has subsequently requested lump sum compensation.

Lawyer Nguyen Van Duc for Vinasun also questioned how Grab receives operating expenses given that the ride-hailing app firm reported losses of VND1.7 trillion ($73.9 million) between 2014 and 2017 and charter capital of only VND20 billion ($869,565).

However, the representative of Grab Vietnam refused to answer, claiming it as a legitimate business secret. The ride-hailing firm also stated that its operations in Vietnam have always been compliant with rules and regulations, including Decision 24.

Speaking at the court, country head of Grab Vietnam, Jerry Lim, said that the MoT’s Decision 24 opens up opportunities for tech firms to match drivers with commuters, as Grab does. Therefore, it is not reasonable for Vinasun to request Grab to pay VND42 billion ($1.82 million) in compensation given that Grab does not violate local laws.

“Indeed, Vinasun also participated in the same pilot programme with its own e-hailing app. This means the two companies were competing on equal grounds,” he stressed.

Grab also pointed out that customers no longer prefer Vinasun’s services because it charges higher fares than ride-hailing app firms. Around 70 per cent of customers surveyed said Vinasun’s fares are more expensive than other brands. Meanwhile, over 30 per cent found Vinasun’s services inconvenient and its drivers unfriendly.

However, in response, the representative of Vinasun said that these are not the main reasons for Vinasun’s losses. Results indicate that 99 per cent of customers have left Vinasun for Grab, with 86 per cent of Vinasun customers switching to Grab due to lower fares.

Vinasun’s Quy said that Grab is subject to the tariff rate of a tech firm, and so the app can offer lower fares to customers than Vinasun. Grab also recorded losses of VND1.7 trillion ($73.9 million) to boost promotions and subsidies, which had a disastrous effect on the local taxi industry.

Refuting the allegation, the representative of Grab Vietnam said that the company has generated 170,000 jobs for locals and offered hourly incomes to Vietnamese driver-partners that are 55 per cent higher than the national average. Grab has reduced the travelling time of Vietnamese commuters as they only require around 2.5 minutes to locate a vehicle nearby.

Grab asked for an adjournment because Cuu Long Inspection Valuation Company, which had been in charge of calculating the damages suffered by Vinasun, was not represented in court. It also claimed that there are some issues related to the damage calculation method by Cuu Long.

Specifically, Cuu Long defined Vinasun’s losses based on its shrinking market capitalisation and expenses incurred due to idle cars. Still, Grab said that the decline of Vinasun’s market capitalisation, which is the total value of all outstanding shares owned by the company’s shareholders, cannot be an indicator of the damages incurred by a company.

Intriguingly, the calculation of the decline was based on the difference between Vinasun’s book value and market capitalisation on June 30, 2017 and not over the entire review period. The market capitalisation of a company stock fluctuates continuously on a daily basis, influenced by various macro- and micro-economic factors, including the quality of the stock market and investors’ expectations. Grab believes it is unfair to be at fault for volatile market conditions that all listed companies, including Vinasun, are experiencing over time.

Cuu Long’s report assumed that the e-hailing business is the sole cause of Vinasun taxis lying idle, according to Grab Vietnam. Grab said this is unreasonable, as the assessment did not take into account many other factors, such as old cars waiting for repair, maintenance or replacement, drivers taking personal leave, and the impact of Vinasun changing its business model to car franchising, where instead of hiring drivers as employees, they are franchising vehicles to them.