SINGAPORE -- Anti-trust authorities in Singapore have slapped anti-competitive penalties on local company Grab, whose dominance in the city-state's ride-hailing market has solidified since its merger with the southeast Asian operations of U.S. rival Uber.  

Following the completion of the merger in March, the Singapore-based company holds 80-90% of the city's ride-hailing market, with transport operator ComfortDelGro holding 10-20% and remaining players controlling up to 5%, according to June data from the Competition and Consumer Commission of Singapore.

Grab's dominance in the ride-hailing industry following its merger with Uber's local business sounded alarm bells among local authorities, sparking a four-month investigation by the CCCS, which resulted on Sept. 24 in a combined 13 million Singapore dollar ($9.5 million) fine on the companies.

The watchdog deemed the merger anti-competitive, substantially reducing competition in the industry. It said the merger removed Grab's closest rival, leaving Singapore drivers, riders and consumers with few options and harming competition.

Lim Kell Jay, head of Grab Singapore, expressed disappointment at the watchdog's "very narrow market definition" of the transaction reducing competition.

"Commuters are free to choose between [taxis they hail in the street] and private-hire cars [such as Grab], and it is a fact that private hire cars drivers' incomes are directly impacted by intense competition with street-hail taxis," he added.

CCCS said it had "received numerous complaints from both riders and drivers" regarding the increase in fares and commissions following the merger and found that fares increased between 10-15% after the deal.

The watchdog has also voiced concerns that the merger could "make it difficult for potential competitors" to scale and expand in the market, as Grab imposed exclusivity obligations on taxi companies, car rental partners and some of its drivers. 

To curb the impact of the merger, CCCS issued directions to Grab and Uber to "open up the market and level the playing field for new players" which included ensuring drivers have the freedom to use any ride-hailing platform and are not bound by exclusivity clauses.

Indonesian rival Go-Jek welcomed the move by CCCS and agreed that new entrants into the market faced a very high barrier to entry. "It will have a significant effect on our strategy and timeline," the company added. Go-Jek is expected to enter the Singapore market this year, with analysts expecting it will be a close rival to Grab due to its size and success in its home market. 

The fine is not expected to make much of a dent in Grab's ambitious plans for Southeast Asia, according to some analysts. Valerie Law, a transport and logistics analyst at Smartkarma, said the fine was just a minor bump in the company's growth plans, as it wants to be a payment provider in the region as well.

"They are likely to diversify their revenue streams quickly to show bigger revenues in delivery, lifestyle services or payment services, so they are not seen solely as a ride-hailing app, she added. "In this case, when Go-Jek or other tech giants enter the market, they can tell CCCS they are not the biggest player in the expanded space."

Yang Nan, an assistant professor at the National University of Singapore, noted that while the merger's economic effect was "irreversible", CCCS' move would help prevent further alliances being formed by Grab and the traditional taxi industry and would allow competitors to enter or grow in the space.

Another analyst said that although Grab has the largest market share, it cannot control the behavior of consumers who are still free to switch. Nitin Pangarkar, associate professor from the department of strategy and policy at NUS Business School, said Singapore had plenty of transport alternatives, making Grab's market dominance in the narrowly-defined segment less salient. "If the taxi players continue to improve and so does [the city's mass transit rail system], they are effective substitutes for Grab," he added.

Nevertheless, other regulators in the region are remaining vigilant on the ride-hailing sector. The Vietnam Competition Authority is cautiously assessing the Grab-Uber deal, as Grab's market share in Vietnam after the acquisition surpassed 50%, which violates local regulations. In the Philippines, where the merger has been approved, the Philippine Competition Commission continues to monitor Grab's compliance with its regulations and any breaches could result in fines.