Vietnamese taxi firm Vinasun’s Christmas present may have come a little late, but it has reason to celebrate nonetheless, as today, it has emerged victor in a lawsuit against ride-hailing giant Grab.
The People’s Court of Ho Chi Minh City found Grab guilty of operating as a taxi company and has therefore violated regulations in the country; Grab currently operates in Vietnam as a technology provider.
Grab has been ordered to pay a VND 4.8 billion (US$208,000) fine to Vinasun to compensate for the losses that the latter has suffered as a result of what it described as “unfair business practices” by Grab.
This sum, though, is a lot less than Vinasun’s original demands, which was VND 42.2 billion (US$1.8 million).
The verdict marks the end of an 18-month-long trial — dragged on by a series of hearing postponements and suspensions — between the Southeast Asian behemoth and one of Vietnam’s key taxi companies.
Vinasun had accused Grab of being disingenuous about the true nature of its operations in Vietnam; it claimed that Grab used its hefty war chest to poach large numbers of drivers and attract riders to its platform. Because of this, it said Grab upended the taxi market and dealt a significant blow to the Vinasun’s bottom line.
Grab said it intends the appeal the court’s ruling, and added that it is preparing to launch a defamation lawsuit against Vinasun and other companies who had colluded with the taxi firm if they do not retract the allegations.
“Today is an extremely unfortunate day for technology and foreign investment in Vietnam where clearly, innovation is no longer seen as a virtue,” said Jerry Lim, Country Head of Grab Vietnam, in an official statement.
“It contradicts the Vietnamese government’s pursuit of its Industry 4.0 and digital economy ambitions. Vinasun’s anti-competitive tactics have succeeded only in stifling innovation,” he added.
“E-hailing has come so far to become an indispensable part of people’s lives and the industry shouldn’t be forced to take a giant step backwards to now conduct itself and provide its services similar to that of traditional taxis,” said Lim.
The basis of Vinasun’s lawsuit
In an official statement published last month, Vinasun laid out its grievances with the ride-hailing giant and asserted why the company should claim damages.
Vinasun claimed that Grab’s status in the country as a provider of connection management services for “contract-based transportation” (in other words, a private ride-hailing platform) is a mere guise; in reality, the company is operating as a “complete taxi business”, it said.
Because of this, Vinasun claimed that Grab had breached its original agreement with the Vietnamese government, which had placed Grab under a private ride-hailing service innovation pilot project called Decision 24.
By running a full-fledged taxi business, Vinasun said, Grab has to be subjected to regulations under the taxi operating license, which go beyond the company’s current obligations as solely a software provider for private transportation. Because of this, Vinasun believes that Grab is exploiting loopholes in the legal system to avoid coming under taxi laws.
“Vinasun fully agreed with the representative of the Ho Chi Minh City People’s Procuratorate at the hearing on October 24, 2018, confirming the convincing evidence that clearly demonstrates that Grab operates as a complete taxi business with tariff, charge, promotion, discount, reward and fine … with clear evidence,” read Vinasun’s statement.
“Grab, as a taxi business, managed to escape 13 taxi business conditions, thereby hiring a huge number of drivers, has resulted in Grab violating Decision 24 … in addition, there are other issues such as customer data management, customer confidential information, penalties, insurance for drivers, etc,” it said.
Vinsaun added that Grab employed a “loss-making strategy”, offering monetary rewards to entice drivers to come onboard its platform. This would effectively enable Grab to get rid of any competition and dominate the market.
It also said that Grab failed to inform authorities of its promotional deals and discounts, and overextended the length of these promotions — a violation of the country’s trade law — with approval.
For Grab’s alleged violations, Vinasun is demanding the company compensate for losses as a result of reduced income to the sum of VND 42.2 billion (US$1.8 million). The company appointed Cuu Long, an Inspection Valuation company, to act as an independent assessor for the damages incurred.
“The lawsuit will not only bring about fair competition for businesses as well as promote and protect the legitimate rights and interests of the Vietnamese business community,” Vinasun declared, “but also contribute to the completion of related policies and laws related to the enterprise and the business environment so as to ensure the long-term sustainable development of the country and the real benefits for consumers.”
Grab has maintained that its operations and business activities do not fit the legal definition of a transport business; that it merely provides a software to help transport companies conduct business.
The company said that the Ministry of Transport has even reaffirmed its status as a software provider.
In a legal argument document prepared by Grab’s lawyers, it said “the Department of Transport of Khanh Hoa stated that ‘GrabTaxi Limited is a software provider, not a transport business, however, the functions and goals of the transport business are still performed by GrabTaxi.'”
It added that the ministry said that would be “no change in the draft [of the Pilot Project]” denoting Grab as a software provider, and that any transportation-related activities it conducts are ‘only meant to support the transportation units on the basis of business cooperation contracts.’”
This portion of Grab’s argument is pretty telling:
“In fact, Defendant (Grab) could not assign a driver to a particular trip in the way that taxi companies dispatch their cars. Defendant’s app works in the following manner: when a car is requested, the app will alert the drivers who are closest to the passenger.
At that moment, the driver has full autonomy to consider accepting the trip with the suggested fare calculated by the app and the first driver to accept the passenger’s request will provide the ride. Therefore, Defendant does not interfere in any way with this process and does not in any way manage or dispatch cars; rather. Defendant only facilitates rides between drivers and passengers through the use of technology.”
Grab also disputed that Vinasun’s claim that its loss of income was due to uncompetitive business tactics employed by Grab; rather, it said that Vinasun had every opportunity to innovate new solutions — based on Scheme 24 — and compete on the same level.
“All the reasons cited leading to so-called ‘damages’, and the so-called ‘effects’ on the business of Vinasun flow from technological progress and reform spearheaded by the Government, in turn led by the Prime Minister through the authorization of the Pilot Project rather than any violations, such as cars without ‘taxi signs’ on top,” said Grab, in an official statement.
In a press statement, Jerry Lim, Grab’s Country Head of Vietnam, said that “Vinasun has been and continues to be given an equal opportunity under Decision 24 to compete on fair grounds with 8 other players who have been granted an e-hailing pilot licence by the government to operate e-hailing services in 5 cities and provinces.”
Lim said that Vinasun itself has already developed an app as part of the pilot programme for its taxi and car-hailing service.
Grab also expressed doubts on Cuu Long’s credibility and ability to accurately measure the damages. It also remarked that even Vinasun’s management had acknowledged that the company’s reduced income could have been attributed to a slew of factors unrelated to Grab.
“At the General Meeting of Shareholders of 2017, the management of Plaintiff [Vinasun] acknowledged that ‘The company faced a lot of challenges, such as gasoline price changed 22 times, falling demand, increasing costs such as insurance cost and increase salary of nearly 13 per cent,” it said.
Other macro trends affecting the company’s stock prices and market capitalisation such as economic policy, politics or micro factors like market trends and investor behaviours should also be taken into account, Grab argued. It described Cuu Long’s claim that Grab’s entry into the Vietnamese market was the sole cause of Vinasun’s reduced market cap as “baseless”.
“[This] is is completely baseless and simply non-scientific from an economic
perspective; this is a reflection of Cuu Long’s fundamental lack of expertise regarding the stock market, particularly market capitalization …It is unacceptable to pick the difference between market value and book value at a particular point in time to calculate damages” said Grab.
Grab’s woes are not over. The Vietnamese regulator has recently ruled that the company breached anti-competitive laws when it acquired Uber’s assets in the region.