Go Jek, Uber, Grab and other ride-hailing services is a KPPU issue

The demonstration by taxi and the public transport rivers yesterday received much criticism from the Netcitizenship, who naturally gravitate to things Webby, disruptive and saves them money.

The transport drivers are apparently disgruntled over dwindling income caused by their ride-hailing services and the ostensible reason for objecting to the latter’s presence are claims that they do not pay tax, do not have proper permits and may be foreign companies invading Indonesian turf.

These are wrong reasons to demonstrate, even though a demonstration is justified. It is justified because the ride-hailing services are engaging in unfair trade practices. It is unfair to the taxi and other public transport drivers because they cannot compete against heavily subsidised prices of Go Jek and the other ride hailers. The ride hailers aren’t making money at this stage but trying to win market share through heavily discounted prices. They can sustain their discounts because they have investors who are willing to pump money into them in the gamble that they would turn out to be the Next Big Thing.

How long will these subsidies last? As long as investors are willing to inject capital into the ride hailers. It may be six months ayear or beyond but what’s interesting are the repercussions they cause in the meantime.

Never mind the fly-by-night and dubious taxi companies who provide shoddy and unreliable service. They deserve to perish. But a company such as Blue Bird that has won the trust of many Indonesians because they had relative clean and serviceable cars and reliable drivers when the market was full of bad ones are affected too.

So a scenario could develop where the taxi companies, even Blue Bird, all start to fold or deteriorate because of reduced revenues. This situation, however, is no guarantee that the ride hailers would succeed or become a viable replacement. What if most of them fold because the investors got bored or dismayed by the continual financial losses? Where would we be then? Bereft of quality traditional public  transport as well as affordable ride hailers?

This issue also raises a question of how much and how long it is fair to provide discounts to win market share. Most products hold promotions and provide discounts to do just that but they are usually short-lived ones as the real economic pressures assert themselves. But with ride hailers the only economic hidden hand is that of the investor, often with access to huge funds.

So is this unfair business practices, that should be looked at by the KPPU? Or is this the new world of disruption that will herald new business models for public transport?