Incident 272: Grab Tweaked Matchmaking Algorithm, Providing Preferential Treatment to Drivers Registered with Affiliated Car Rental Service

Description: Grab Indonesia was fined by the Indonesian Competition Commission (KPPU) for unfairly favoring drivers who rented cars via the Grab-affiliated company Teknologi Pengangkutan Indonesia (TPI), including offering more rides via their matchmaking algorithm.
Alleged: Grab developed and deployed an AI system, which harmed non-TPI-registered Grab drivers , Grab drivers in Indonesia and Grab drivers.

Suggested citation format

Lam, Khoa. (2019-10-08) Incident Number 272. in Lam, K. (ed.) Artificial Intelligence Incident Database. Responsible AI Collaborative.

Incident Stats

Incident ID
272
Report Count
3
Incident Date
2019-10-08
Editors
Khoa Lam

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Incident Reports

Grab Indonesia is in a legal battle with the country’s business competition supervisory commission (KPPU).

The Indonesian branch of ride-hailing platform Grab is accused of favoring drivers who rent cars via the Grab-affiliated company Teknologi Pengangkutan Indonesia (TPI).

KPPU alleges that Grab offered drivers under TPI’s car rental schemes preferential treatment, which included tweaking its algorithm to allocate them more rides than other drivers. This raises important questions about the inner workings of Grab’s matchmaking algorithm.

TPI is a car rental company that works with Grab Indonesia to offer several long-term car lease schemes, with the opportunity for Grab drivers to gain ownership of the car after several years. The programs include the Gold Captain, Gold Star, Green Line, and Flexi Plus schemes. TPI’s company website is currently inaccessible.

According to a local media outlet Detik Finance, KPPU built its case after it received complaints from independent Grab drivers who are members of the Indonesian specialized transport organization in North Sumatra. They reported being disadvantaged by the unfair distribution of orders between TPI and non-TPI driver-partners.

Grab and TPI underwent a third preliminary hearing with KPPU in Jakarta on Tuesday and the details discussed during this hearing have not yet been made public.

However, KrASIA has obtained material from an individual who attended an orientation program at TPI’s office in 2017, at a time when Grab was actively promoting its rental schemes. Grab had announced its intention to pour USD 700 million into its rental program.

During the orientation session, KrASIA’s source received several documents such as sign up forms and was told that drivers in the Gold Captain rental scheme will get “three times higher ride allocation” than non-TPI drivers, among other benefits.

In return, those who take up the TPI rental scheme have to adhere to various strict rules including a 4.5 customer rating minimum, only five order rejections in a day, and being available to take orders for a minimum of 50 to 60 hours per week.

A photo provided to KrASIA by the orientation program participant shows the “3x priority order” offer on a banner inside TPI’s office building.

 A USD 1.7 million fine

“If (Grab) is proven guilty, the commission council can impose a maximum fine of IDR 25 billion (USD 1,7 million),” KPPU’s commissioner Guntur Saragih told KrASIA, but also declined to share further details about the case as it is still ongoing.

In addition to priority ride allocation, KPPU takes issue in the way Grab Indonesia and TPI are affiliated, with concurrent positions at the director and commissioner level at the two companies, according to local media reports.

In total, Grab and TPI are alleged to have violated three articles in the law concerning the prohibition of monopolistic practices and unfair business competition, namely article 14 relating to vertical integration, Article 15 related to exclusive deals, and Article 19 related to discriminatory treatment.

Grab Indonesia’s lawyer Hotman Paris Hutapea denied all KPPU allegations. Hutapea insisted this case was not worth pursuing by KPPU because Grab and TPI’s actions did not harm the public interest. In an interview with CNBC Indonesia, he assured that Grab provides equal opportunities to all driver-partners.

Is priority ride allocation fair?

Ride-hailing businesses are, at their core, about matching passengers looking for a ride and drivers looking for an income opportunity in the most efficient way.

Proximity is surely the most important factor in matching drivers and passengers. However, when there are many potential drivers and passengers in one place, other factors become relevant.

How exactly the matchmaking algorithm works is usually not divulged by ride-hailing companies, although Grab does offer some insights via its engineering blog. In a post where it breaks down supply and demand principles in ride-hailing, Grab claims that allocation is the number one goal in ride-hailing. It does not mention that matchmaking differentiates between different driver groups in the system, such as whether they are TPI car renters or not.

The way Grab clearly offered “3x priority ride allocation” in its promotional material, presumably to make the car rental program associated with its platform more attractive to drivers, offers a rare glimpse into how it thinks of and manages its matchmaking algorithm to suit business needs. It raises questions about what can be considered fair in an opaque matchmaking system into which only the platform itself has full insight. In Indonesia, it’s now up to KPPU to decide the case.

Grab Indonesia denied violating any regulations in its partnership with TPI in its response to KrASIA’s inquiries.

“The partnership is established with the simple goal of benefitting all our driver-partners. We know that some of our driver-partners would like to leverage the Grab platform to earn a living, but do not have the means to own a private car. Hence, we have partnered with PT TPI to facilitate driver-partners’ access to cost-effective car rental services so that they can continue to earn a living like many others,” said a Grab Indonesia spokesperson.

“There is no preferential treatment given to driver-partners who are registered with TPI,” he added.

Grab didn’t comment specifically about “3x priority ride allocation” promotion, but said that Grab’s booking system is fair and purely based on performance and merit.

“Grab aims to maintain a positive and respectful user environment for everyone. To promote and encourage quality service amongst our driver-partners, we have driver benefits programs, which include prioritized booking, to reward all eligible driver-partners who have consistently been rated highly by passengers.”

Grab Indonesia said that although the company did not see any violation, it respects and will follow through all the trial processes of this case.

Update: October 13th, added the last six paragraphs to reflect Grab Indonesia’s responses to KrASIA’s request for comments.

Grab accused of offering preferential treatment to drivers in its rental program by Indonesian competition watchdog

Grab Indonesia is in a legal battle with the country’s business competition supervisory commission (KPPU).

The Indonesian branch of ride-hailing platform Grab is accused of favoring drivers who rent cars via Grab-affiliated company Teknologi Pengangkutan Indonesia (TPI).

KPPU alleges that Grab offered drivers under TPI’s car rental schemes preferential treatment, which included tweaking its algorithm to allocate them more rides than other drivers. This raises important questions about the inner workings of Grab’s matchmaking algorithm.

TPI is a car rental company that works with Grab Indonesia to offer several long-term car lease schemes, with the opportunity for Grab drivers to gain ownership of the car after several years. The programs include the Gold Captain, Gold Star, Green Line, and Flexi Plus schemes. TPI’s company website is currently inaccessible.

According to local media outlet Detik Finance, KPPU built its case after it received complaints from independent Grab drivers who are members of the Indonesian specialized transport organization in North Sumatra. They reported being disadvantaged by the unfair distribution of orders between TPI and non-TPI driver partners.

Grab and TPI underwent a third preliminary hearing with KPPU in Jakarta on Tuesday, and the details discussed during this hearing have not yet been made public.

However, KrAsia has obtained material from an individual who attended an orientation program at TPI’s office in 2017 when Grab was actively promoting its rental schemes. Grab had announced its intention to pour US$700 million into its rental program.

During the orientation session, KrAsia’s source received several documents, such as signup forms, and was told that drivers in the Gold Captain rental scheme will get “3x higher ride allocation” than non-TPI drivers, among other benefits.

Support independent journalism. In return, those who take up the TPI rental scheme have to adhere to various strict rules including receiving a minimum 4.5 customer rating, getting only five order rejections a day, and being available to take orders for at least 50 to 60 hours per week.

A photo provided to KrAsia by the orientation program participant shows the “3x priority order” offer on a banner inside TPI’s office building.

A US$1.7 million fine “If [Grab] is proven guilty, the commission council can impose a maximum fine of 25 billion rupiah [US$1.7 million],” KPPU commissioner Guntur Saragih told KrAsia, but declined to share further details about the case as it is still ongoing.

In addition to priority ride allocation, KPPU takes issue in the way Grab Indonesia and TPI are affiliated, with concurrent positions at the director and commissioner level at the two companies, according to local media reports.

In total, Grab and TPI are alleged to have violated three articles in the law concerning the prohibition of monopolistic practices and unfair business competition, namely Article 14 (relating to vertical integration), Article 15 (relating to exclusive deals), and Article 19 (relating to discriminatory treatment).

Grab Indonesia’s lawyer, Hotman Paris Hutapea, denied all KPPU allegations. Hutapea insisted this case was not worth pursuing by KPPU because Grab and TPI’s actions did not harm the public interest. In an interview with CNBC Indonesia, he assured that Grab provides equal opportunities to all driver partners.

Is priority ride allocation fair? Ride-hailing businesses are, at their core, about efficiently matching passengers that are looking for a ride and drivers that are looking for an income opportunity.

Proximity is surely the most important factor in matching drivers and passengers. However, when there are many potential drivers and passengers in one place, other factors become relevant.

How exactly the matchmaking algorithm works is usually not divulged by ride-hailing companies, although Grab does offer some insights via its engineering blog. In a post where it breaks down supply and demand principles in ride-hailing, Grab claims that allocation is the no. 1 goal in ride-hailing. It does not mention that matchmaking differentiates between varying driver groups in the system, such as whether they are TPI car renters or not.

The way Grab clearly offered “3x priority ride allocation” in its promotional material – presumably to make the car rental program associated with its platform more attractive to drivers – offers a rare glimpse into how it thinks of and manages its matchmaking algorithm to suit business needs.

It raises questions about what can be considered fair in an opaque matchmaking system into which only the platform itself has full insight. In Indonesia, it’s now up to KPPU to decide the case.

Grab Indonesia denied violating any regulations in its partnership with TPI in its response to KrAsia’s inquiries.

“The partnership is established with the simple goal of benefitting all our driver partners. We know that some of our driver partners would like to leverage the Grab platform to earn a living, but do not have the means to own a private car. Hence, we have partnered with PT TPI to facilitate driver partners’ access to cost-effective car rental services so that they can continue to earn a living like many others,” said a Grab Indonesia spokesperson.

“There is no preferential treatment given to driver partners who are registered with TPI,” he added.

Grab didn’t comment specifically about the “3x priority ride allocation” promotion, but said that Grab’s booking system is fair and purely based on performance and merit.

“Grab aims to maintain a positive and respectful user environment for everyone. To promote and encourage quality service amongst our driver partners, we have driver benefits programs, which include prioritized booking, to reward all eligible driver partners who have consistently been rated highly by passengers.”

Grab Indonesia said that although the company did not see any violation, it respects and will follow through all the trial processes of this case.

Indonesia competition watchdog accuses Grab of offering some drivers special treatment

The Indonesian operation of ride-hailing decacorn Grab has been fined Rp 30 billion ($2 million) by the country’s Business Competition Supervisory Commission (KPPU), after being deemed guilty of discrimination by giving preferential treatment to a certain group of drivers.

According to the KPPU, Grab Indonesia has given drivers of Teknologi Pengangkutan Indonesia (TPI), a Grab-affiliated company car rental firm, certain privileges at the expense of regular, non-TPI driver-partners.

The ruling also saw TPI being fined Rp 19 billion ($1.3 million), as stated in an official release by the commission.

In one of the case hearings of the trial, which began in October last year, the commission said that Grab’s partnership with TPI aimed to control the tech-based transportation rental market and in effect result in the decreased orders for non-TPI drivers and also reduce the number of such drivers.

The KPPU says its investigation has found “discrimination carried out by GRAB and TPI against  individuals, by giving TPI partners privileges such as giving priority orders, suspension periods, and other facilities.”

“The practice has resulted in monopolistic practices and unfair business competition against non-TPI partners and individual partners,” the statement said.

Responding to the verdict, Grab said in an official statement that its partnership with PT TPI is established with the simple goal of benefiting all its driver-partners through the ease of access to vehicles and that it has not violated any regulation, engaged in any anti-competitive business practices, or injured any third parties.

The company also maintains that the booking system is fair and purely based on performance and merit and that there is no preferential treatment given to driver-partners who are registered with TPI.

“With this matter of principle in mind, we will appeal against KPPU’s decision in due course according to prevailing regulation,” a Grab spokesperson said.

Indonesia is not the only market where Grab has been facing legal troubles related to matters of competition.

In Malaysia, the country’s competition commission proposed a fine of over 86 million ringgit ($20.5 million) on Grab for violating the competition law by imposing restrictive clauses on its drivers. The regulator has accused Grab of its dominant position in the market by preventing its drivers from promoting and supplying advertising services for competitors.

Grab, however, has challenged the proposed fine in court.

Grab fined $2m by Indonesia's competition watchdog over driver discrimination