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Uber was dealt a potentially devastating legal blow on Thursday as it tried to escape its failing operations in Southeast Asia to focus its resources on more profitable markets.

Regulators in Singapore issued a provisional decision that would order the ride-hailing company to reverse its merger with former competitor Grab — to which Uber sold the majority of its Southeast Asia operations in March — because it violates competition law. Grab is based in Singapore and is the dominant ride-hailing startup in the region.

The effort to compete with Grab and other local startups was costly for Uber: the San Francisco-based company shelled out about $700 million in an effort to establish an outpost in the area. After struggling to make a foothold in the Southeast Asian market, Uber decided to sell its operations and assets in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam to Grab in exchange for a 27.5% stake in the company (which would be worth several billion dollars, according to Uber).

The Competition and Consumer Commission of Singapore said that merger “led to a substantial lessening of competition” in app-based car services because Uber and Grab were one another’s fiercest competitors in Singapore. The commission’s provisional decision also noted that the merged companies have already increased prices since the decision to combine assets.

In addition to unwinding the merger, the companies could also be subject to financial penalties, although the commission did not specify the amount of any potential fines.

Singapore’s commission also wants the public to weigh in on the matter. It is asking for feedback on the effects of the merger on everyday citizens, which will influence its final decision. The feedback must be submitted by July 19.

Depending on what the public says — and based on the commission’s preliminary investigations — the two ride-hailing companies might have to unwind the still-nascent billion dollar merger. The companies have 15 days to respond to the commission, after which a final decision will be made.

Grab says it disagrees with the commission’s investigations, saying it uses a very narrow definition of competition. The company says while they are one of the most visible players in transport, they aren’t the only player in the market.

“This provisional decision and proposed remedies are overreaching and go against Singapore’s pro-innovation and pro-business regulations in a free market economy,” Grab told TPG in an email. “We note that the provisional decision is not final nor effective yet, and we will submit our written representations to the CCCS before the deadline. We will take all appropriate steps to appeal against this decision.”

Grab also says it preemptively told the commission about the merger and engaged with the panel before officially signing the deal with Uber.

TPG reached out to Uber for more information but did not hear back by time of publication.


Featured image by ROSLAN RAHMAN/AFP/Getty Images.

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