Vinasun-Grab litigation taken to appeals court

The first instance judgement on the Vinasun-Grab lawsuit was not satisfactory to either side, prompting the Ho Chi MInh City court to take the case into appeals Photo: Le Toan

In June 2017, traditional taxi operator Vinasun filed a lawsuit against Grab, claiming that the latter’s operations, contributing to nearly VND42 billion ($1.8 million) of the VND76 billion ($3.25 million) losses it had suffered in 2016 and the first half of 2017. On December 28, the Ho Chi Minh City Court awarded Vinasun VND4.8 billion ($208,700) in damages – to the dissatisfaction of both sides, who then submitted their appeal letters to the court.

Accordingly, Grab disagreed to pay any measure of compensation, while Vinasun revised its compensation claim to VND36.3 billion ($1.57 million). The Ho Chi Minh City Court will have to open an appeal case to deal with the dispute.

The war never ends?

The appeals procedure is expected to take place in mid-March 2019, 60 days after both the defendant and the plaintiff submitted the appeal letters.

A representative of Grab told VIR that the company’s operations in Vietnam comply with regulations, thus it will never accept to pay the compensation demanded by Vinasun.

Most recently, the Ho Chi Minh City Superior People’s Procuracy published its opinion on the lawsuit, arguing that there was no causal link between Vinasun’s damages and Grab’s [allegedly illegal] business activities.

According to the procuracy, Vinasun’s lost earnings had a variety of reasons, such as regulatory landscape, market conditions, competition dynamics, and passengers’ evolving demands. Furthermore, the damage assessment report by Cuu Long Valuation Inspection Company, hired to appraise Vinasun’s losses, was not based on a sound legal and practical basis. Thus, Vinasun’s request for compensation has signs of baseless.

The procuracy stated that Grab was granted an e-hailing pilot licence under the Ministry of Transport’s (MoT) Decision No.24/QD-BGTVT on the pilot schemes for ride-haling services. The operations of the ride-hailing firm did not violate Vietnamese regulations. Therefore, the procuracy declared that the first instance judgement that Grab violated Decision 24 and Decree No.86/2014/ND-CP on business and conditions for transportation business by automobiles is groundless.

As there is no real evidence to back up Vinasun’s allegations, the procuracy proposed that the Ho Chi Minh City Superior People’s Court overturn the ruling of the Ho Chi Minh City People’s Court made in December ordering Grab to pay VND4.8 billion ($208,700) in compensation for Vinasun.

Economic expert Ngo Tri Long noted that Grab is authorised under Decision 24 to pilot contracted passenger transportation and that it has yet to be determined whether Grab’s business model is one of transport or service provision, while the legal framework is under revision. Thus, there is not enough ground to claim that Grab’s business violates regulations.

While Grab’s case is supported by the Ho Chi Minh City Superior People’s Procuracy as well as experts, there is a rumour that there is lobbying involved in favour of Grab, prolonging the lawsuit.

Upgrade or go backward?

The prolonged court case between Vinasun and Grab reflects the new competition between traditional taxi operators and ride-hailing firms in Vietnam. Indeed, Vietnam has become a battleground for local ride-hailing firms like Fastgo, Aber, Vato, and Southeast Asian unicorns Grab and Go-Viet (under Go-Jek). Some newcomers recently jumping on the bandwagon include Vietnamese tech startup Be Group and Singapore-based ride-hailing app TADA.

In this fierce war, both ride-hailing firms and traditional taxi operators have to change their business strategies to acquire a larger market share.

In the case of Grab, after successfully luring in a large customer volume with its ride-hailing services, in May 2018, the company announced its plan to develop a synchronised (closed) transport service including customer transport, food delivery, logistics, non-cash payments, and financial services for people in Southeast Asia – all in one handy phone application.

Grab’s plan drew in investment from several large groups. Notably, in mid-June 2018, Toyota Motor Corporation (Toyota) invested $1 billion with the agreement that Grab and Toyota will co-operate to develop the ride-hailing segment to promote the application of mobile solutions across Southeast Asia, bringing Grab closer to its vision of becoming a one-stop mobile platform in the region.

Then in early August 2018, after Grab announced to develop a super-app to serve people’s daily needs, OppenheimerFunds, Ping An Capital, Mirae Asset-Naver Asia Growth Fund, Macquarie Capital, and other investors participated in Grab’s new capital mobilisation round with an investment of up to $2 billion, reinforcing Grab’s goal of becoming a leading technology company in Southeast Asia.

In addition, Grab established a strategic partnership with Microsoft to use cloud computing to innovate and promote its digital services in Southeast Asia. The parties will utilise Microsoft’s machine learning and Artificial Intelligence (AI) capabilities to realise these targets. Besides, the two companies will study innovative technology projects to fine-tune experience for customers, driver partners, and business partners.

In September 2018, Grab and Moca – a leading digital payments service in Vietnam – officially announced a strategic partnership to promote cashless payments on the Grab platform and across Vietnam.

Moca and Grab will leverage each other’s technological expertise and partner networks to roll out payment services to millions of Vietnamese consumers and small- and medium-sized enterprises (SMEs).

Meanwhile, FastGo selected the strategy to invest overseas with Myanmar as its first destination. Notably, in last December, FastGo was launched in Myanmar, becoming the first Vietnamese firm in the ride-hailing sector to expand to foreign markets.

Tran Bang Viet, now a consultant and used to be CEO of Vietnam’s biggest traditional taxi operator, told VIR that FastGo has two targets. The first is to look for opportunities in a potential market like Myanmar where tourist volumes are increasing. It wants to be a pioneer in supplying ride-hailing services in this market, instead of being a latecomer like in Vietnam.

“Second, this move also helps build FastGo’s image, which will in turn lure in more passengers in the local market,” Viet said.

Traditional taxi operators are also loath to miss out on the technological revolution in passenger transport. In December 2018, many of them decided to team up to launch the Vietnam Taxi Alliance which will operate across the country through the ride-hailing application “EMDDI,” a vehicle management software developed by scientists of the Hanoi National University.

Previously, Thanh Cong, Sao Hanoi, and Ba Sao formed the G7 Taxi Union in Hanoi to compete with Grab. Together, G7 has about 3,000 cars, accounting for around 20 per cent of taxis in Hanoi.

“While the taxi alliance is only unfolding its wings, it is considered a powerful weapon in the competition with foreign ride-hailing service suppliers, including Grab,” Viet said. “In order to create uniformity among taxi companies, in the future, these companies could look to implement merger and acquisition (M&A) activities to reduce the number of taxi brands. For example, in Hanoi there need only be three or four taxi brands.”

“In general, the market has great development potential because customers are quick to get used to ordering vehicles via ride-hailing apps. However, they often install two ride-hailing apps on their mobile phones, one of which is Grab, thus, the remaining players will have to continue promotions and advertisement campaigns and enter co-operations to gain the second position following Grab,” Viet said.