Singapore’s competition watchdog on Thursday proposed fines on Uber and Grab and said they may have to unwind their merger because of “substantially lessened competition” in the market.

Uber sold its Southeast Asia business to ride-hailing rival Grab in March. The move saw the San Francisco-based company acquiring a 27.5 percent stake in Grab and Uber CEO Dara Khosrowshahi joining the firm’s board.

But the Competition and Consumer Commission of Singapore (CCCS) raised concerns about the merger, saying it has reduced competition and led to increased fares. The watchdog said that both parties did not notify the authorities of the merger despite anticipating that there could be some anti-competitive issues.

The CCCS said that the merger means that the barriers to entry for new entrants are high and that it could lead to less innovation and a lower quality of product. As a result, Uber and Grab may be fined and the transaction could be unwound.

“CCCS may require the parties to unwind the transaction unless the aforesaid public consultation confirms that any of the proposed remedies, or any further remedies, are sufficient to address the identified competition concerns, and are implementable in practice,” the watchdog said in a statement.

Some of these remedies include requiring Uber to sell Lion City Rentals, its car rental subsidiary in Singapore, to another competitor and forcing Grab to remove any exclusivity it has with other taxi firms. For example, some drivers for other taxi firms can only accept bookings from Grab and not from any competitors.

Uber and Grab have 15 working days to make their proposals for remedies to the CCCS.

Both companies were not immediately available for comment when contacted by CNBC.

Source: Tech CNBC
Uber and Grab face fines and their merger being unwound by Singapore watchdog