Regulators are not fully aware of how Grab’s algorithm works. Without guardrails, these are prone to abuse, experts say.
Transportation giant Grab offers a convenient alternative to navigating the country’s busy cities – but at a premium.
MANILA, Philippines – Rica Torres, 37, used to take a Grab car almost every day to take her six-year-old son to and from school. The app-based service was more convenient than riding a jeepney, a tricycle, and crossing an overpass. But the family’s travel routine wasn’t sustainable. While their home is only seven kilometers away from school, booking a GrabCar ride meant leaving very early to avoid rush hour. They also spent at least P600 a day on the app alone. That’s roughly the minimum daily wage in Metro Manila.
For years, Grab’s seemingly steep fares driven by surge pricing have become a common commuter woe. Because no other firm has been able to threaten Grab’s dominance in the four-wheel transport network vehicle service market, customers are often left without other options. As of April 2024, there areBehind Grab’s multi-billion dollar business is its data and algorithm-based approach to matching drivers and customers.
To test and learn more about how this algorithm works, PCIJ collected Grab’s pricing information by attempting to book rides for 10 routes across Metro Manila nearly every hour from 6 a.m. to midnight for one week. PCIJ also obtained data from Grab’s Farefeed application programming interface every 15 minutes every day for the same routes during the same period.
There is still no information about how the LTFRB will resolve the questions about surge pricing. PCIJ’s interview and records requests with the agency have not been granted as of posting time. LTFRB only acknowledged our letter. “Two Christmases passed by already and there’s still no decision… We want to know when the surge should be implemented. Our focus then was that Grab supposedly applied surge charges because of supply and demand.
Grab said it “strictly follows the fare matrix” set by the LTFRB, which includes provisions for surge pricing. The company also claimed that fares were shown upfront on the app “to provide transparency and allow for informed choices.” Across all the rides we tried to book that week in February, data showed that surge charges were always included in the fares. Following Grab’s explanation, this suggested that booking requests always exceeded available cars nearly throughout the entire day – even early in the morning and late in the evening, even on weekdays and weekends. But it’s difficult to find out if demand did outpace supply because only Grab has access to this data.
For example, a six-kilometer ride from Makati to Taguig on February 17, 2024 at 5 pm cost P381. Without a surge, the ride should cost about P215. The estimated surge rate was P166 or 1.98 times the distance and duration fees. The surge fees on this day ranged from 29% to 44% of the whole fare. Nearly two in three rides had a “None” surge notice in the API data, while the remaining rides were mostly “high surge” with a few “low surge”. This was inconsistent with what we found on the app where the surge fees were always added. Based on our data, there was always an extra amount charged on top of the P45 base fare, P15 per kilometer, and P2 per minute costs set by the LTFRB.
Grab added that its algorithm took into account a variety of factors, including traffic congestion, geographic location, the supply of drivers, and demand for rides. According to Grab Philippines, surge pricing is “an industry-accepted, sophisticated and scientifically developed algorithm-based feature driven by real-time supply and demand dynamics.”
Statistical analyses conducted by PCIJ did not yield conclusive results. The routes exhibited both positive and negative correlation between surge rates and wait times, which suggested that surge pricing did not always work to improve service quality, measured roughly as a reduction in wait time. The firm said surge pricing was designed to address supply-demand imbalances but was not a static solution. The duration and impact of surge pricing depended on factors such as driver availability, demand surges in specific locations, and traffic congestion, it said.
PCIJ has sent several requests and made follow-ups to the LTFRB since November 2023. The letters were acknowledged but not addressed. We wanted to ask the transport regulator about the status of its surge pricing inquiry and other related regulatory concerns. Dominic Ligot, co-founder of social impact technology company CirroLytix, said that while the Data Privacy Act and the Cybercrime Law cover abuses using technology or abuses on data, they do not cover algorithmic bias or algorithmic abuse. New laws are needed to cover algorithmic liabilities, he said.
Indonesian ride-hailing startup Go-Jek, the only potential competition to Grab, tried several times to enter the Philippine market, but faced numerous roadblocks. Asked how it monitors Grab’s compliance with its merger deal commitments, the PCC said it tracked Grab’s compliance through third-party monitors using reports generated by Grab. Grab submitted quarterly reports to the PCC.
According to Grab, all fines have been paid in full and on time, but the PCC clarified that Grab had yet to settle a P16 million fine, which is the subject of a petition for review before the Court of Appeals.
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