Can Uber's“Purely Financial Investment”in Grab Pass the Merger Review?
The Taiwan Fair Trade Commission ("FTC") recently announced that it has extended the review period for the proposed combination between Grab and foodpanda to October 27, 2026. The reason for the extension is that, following its review, the FTC determined that, because the market structure following the combination of Grab and foodpanda would remain a "duopoly", as it was prior to the combination, it is necessary to further analyze whether Uber's 13% shareholding and 3.7% voting rights in Grab, through the "equity linkage" between Uber and Grab, would affect Uber Eats' and Grab's incentives and ability to compete following the combination, thereby giving rise to unilateral or coordinated effects similar to those arising from a horizontal combination, and consequently affect competition in the relevant market in Taiwan. The above considerations echo the point raised in our previous article that Uber's shareholding in Grab may give rise to competition concerns, thereby attracting the attention of competition authorities and consequently affecting the merger review process.
Another point worthy of attention is that Grab formally announced that Dara Khosrowshahi, CEO of Uber, resigned as a director of Grab on July 6, 2026. However, Uber's shareholding in Grab did not change following his resignation from Grab's board of directors. In these circumstances, whether the parties to the combination can argue that such shareholding constitutes a "purely financial investment" and does not involve any influence over business decisions, thereby addressing the FTC's concerns regarding the "equity linkage", remains questionable.
The U.S. FTC Provides an Exemption from Filing Requirements for Shareholdings Held Solely for Investment Purposes
Under the U.S. Hart-Scott-Rodino ("HSR") Act, if the acquisition of voting securities is made solely for the purpose of investment and, following the acquisition, the acquiring person holds no more than 10% of the outstanding voting securities of the issuer, the acquisition is exempt from the filing requirements under the Act, regardless of the dollar value of the voting securities acquired or held. In other words, if an investor has no intention of participating in the formulation, determination, or direction of the issuer's basic business decisions, and the investor's shareholding is below 10%, no filing is required. On the other hand, the U.S. FTC has further explained that if the investor nominates candidates for the issuer's board of directors, serves as a director or officer, proposes corporate actions requiring shareholder approval, solicits proxies, or is a competitor of the issuer, such conduct is inconsistent with an investment purpose and therefore the exemption would not be available.
Taiwan's Fair Trade Act Contains No Express Provision on Shareholdings Held Solely for Investment Purposes, but Relevant Precedent Exists
In contrast to the U.S., which has relevant rules concerning, among other things, the requirement that the voting securities held not exceed 10% and whether the investor's conduct is consistent with an investment purpose, Taiwan's Fair Trade Act contains no express provision concerning shareholdings held solely for investment purposes. This has given rise to related legal disputes. The most notable example is the case in 2019 in which WPG Holdings announced a tender offer to acquire up to 30% of the shares of WT Microelectronics.
Because the proposed acquisition of 30% of the shares did not reach one-third of the total voting shares of WT Microelectronics, there was no dispute that it did not fall within the type of combination specified in Article 10, Paragraph 1, Subparagraph 2 of the Fair Trade Act. However, the controversial issue was: should such shareholding be regarded as a "purely financial investment" that does not require a filing, or would it constitute "substantive control" and therefore require a filing?
The subsequent development of the case was that WPG Holdings amended its tender offer statement and made a number of representations and undertakings. The FTC noted that, according to the tender offer statement of WPG Holdings, the acquisition was made with a focus on financial investment. WPG Holdings further stated and undertook that, with respect to shareholders' meetings of WT Microelectronics duly convened in accordance with law, WPG Holdings would attend and participate in voting upon receiving notice thereof; after acquiring the shares of WT Microelectronics, WPG Holdings would exercise its shareholder rights independently and would not enter into any agreement with any third party concerning the joint exercise of voting rights, nor would it independently apply to the competent authority for the convening of a shareholders' meeting or jointly cooperate with any third party to convene a shareholders' meeting; after acquiring the shares of WT Microelectronics, at shareholders' meetings of WT Microelectronics duly convened in accordance with law, WPG Holdings would not solicit proxies from the public, and thus would not acquire voting rights beyond those attached to its own shareholding; WPG Holdings would maintain its shareholding in WT Microelectronics at no more than 30% and would not purchase additional shares of WT Microelectronics in the capital market; and WPG Holdings would not nominate candidates for or stand for election as directors of WT Microelectronics.
In light of these five representations and undertakings, the FTC determined that the shareholding acquired through the tender offer did not require a filing. The FTC also emphasized that, if WPG Holdings were to subsequently change any of the foregoing representations, undertakings, or the facts or conduct described therein, including, but not limited to, during the term of the relevant board of directors of WT Microelectronics, WPG Holdings would still be required, prior to the occurrence of such change in facts or conduct, to consult with the FTC again or submit a filing to the FTC.
Planning That Ensures Non-Involvement in Management and Does Not Diminish Incentives to Compete Will Be Key
The foregoing case demonstrates that the characterization of a shareholding as a "purely financial investment" can indeed affect merger review. However, it may be difficult for a business to persuade the FTC merely by asserting that its shareholding is held for investment purposes. Rather, it would need to develop specific firewall mechanisms sufficient to ensure that it does not become involved in management and that its incentives to compete are not diminished, and submit such mechanisms in the form of undertakings for the FTC's review.
With respect to the present combination between Grab and foodpanda, even though Uber's CEO resigned as a director of Grab on July 6, 2026, Uber's shareholding in Grab has remained unchanged. Hence, there remains a possibility that Uber could become involved in Grab's management or that the equity linkage could diminish the parties' incentives to compete. This is precisely why the FTC has attached importance to the "equity linkage". Accordingly, whether the parties to the present combination, namely Grab and foodpanda, can provide specific and sufficiently effective undertakings in this regard is expected to be a key factor affecting whether the combination will ultimately be cleared by the FTC.
