In May 2024, U.S. company Uber and German company Delivery Hero announced that Uber would acquire Delivery Hero's foodpanda delivery business in Taiwan with USD 950 million (approximately TWD 30.4 billion). The news aroused market attentions and concerns. The competent authority of the Taiwan Fair Trade Act – Fair Trade Commission (“FTC”) confirmed that it has received the merger filing of the transaction and is now reviewing whether the filing materials are complete. FTC will handle this case prudently by focusing on the market concentration, the pricing power of the acquirer after the transaction, the coordinated effects of the transaction, and the market benefits, so as to prevent any competition restriction in Taiwan delivery market. Once the transaction obtains FTC’s decision on not prohibiting the merger, the two major delivery platforms in Taiwan will be fully integrated, with a market share expected to reach 80%.
The definitions and filing requirements of merger are set out in Chapter II “Restraints of Competition” under the Taiwan Fair Trade Act. Generally speaking, main focus of FTC's review in merger cases is whether the overall economic benefit of the merger outweighs the disadvantages of restricting the competition. To clarify the standard of review, FTC has promulgated relevant guidelines, which categorize the merger as horizontal and vertical etc., based on different competitive relationship among the enterprises. Different types of merger are subject to different review factors.
For horizontal merger, FTC’s review factors may include: the merging enterprises’ ability to increase the price of goods or services, as there is no more competition between them; or whether the counterparty still has the ability to bargain or counterbalance with the merging enterprises after the merger. For instance, in the case where Walsin Lihwa Corporation acquired a German steel company, FTC indicated that although the merging enterprises both produce and sell stainless steel pipes, the merger will not change Taiwan market structure, because the target company mainly operates in the EU. In addition, after the merger, the merging enterprises still have to face the competition pressure from domestic and foreign markets. Since there should be no significant restriction on competition, FTC did not prohibit the merger. However, in the case where Yieh United Steel Corporation and Yieh Phui Enterprise Co., Ltd. proposed to acquire Tang Eng Iron Works Co., Ltd., FTC stated that since the main product of both the merging enterprises is stainless steel panels, the merging enterprises were major competitors in the market. Before the merger, the product price of the target company is relatively low, and it is expected that the target company will not be able to play a price-control role after the merger. Moreover, with one less upstream competitor in the market, the bargaining power of downstream players will be reduced and they may not be able to counterbalance with the upstream players. Therefore, FTC considered that the merger had a significant disadvantages of restricting the competition and should be prohibited.
For vertical merger, FTC’s review factors may include: the possibility for the merging enterprises to abuse their market power in the relevant market; or the possibility for other competitors to choose trading counterparties after the merger. For example, in the case where Taiwan Mobile Co., Ltd. acquired shares of Tropics Entertainment Co., Ltd., FTC indicated that although “online video platforms” and “animation agency” are upstream and downstream businesses, the market share of the merging enterprises in these two markets were not high. In addition, there were many ways for online video platform operators to obtain programs and the animation agencies did not deal with only one online video platform operator. Considering competition in the market would not be affected significantly, FTC did not prohibit the merger.
In practice, there are many merger cases with both horizontal and vertical traits. In principle, FTC will combine the review factors of each type of merger and make an overall assessment. For instance, in the case where Pacific Electric Wire & Cable Co., Ltd., Ta Ya Electric Wire & Cable Co., Ltd., and China Wire & Cable Co., Ltd. acquired United Aluminum Technology Co., Ltd., the acquirers engaged in the manufacture and sale of electric wires and cables and have horizontal competition relationships. The target company was expected to produce and sell super heat-resistant aluminum zirconium alloy aluminum bars, which are one of the raw materials for electric wires and cables. Thus, their merger was both horizontal and vertical. Considering that each enterprise would still compete in its own market after the merger and other electric wires and cables operators may purchase raw materials either from the target company or via importation, it was difficult for the merging enterprises to block relevant market. Hence, FTC did not prohibit the merger.
Regardless of the type of merger that the enterprises intend to carry out, as long as the threshold of merger filing is reached, the merging enterprises are required to proceed merger filing in advance with FTC. Otherwise, administrative fines may be imposed. Besides market share, the merger filing threshold also includes whether the domestic and worldwide sales of the merging enterprises exceed the amount announced by FTC. The sales of the controlling and subsidiary businesses should be calculated together. For example, in the case of Hi-Life’s acquisition, the market share of the merging enterprises does not reach the merger filing threshold, but their domestic sales have exceeded the announced amount after combining the sales of the controlling and subsidiary businesses. However, the merging enterprises did not proceed with the merger filing in advance and was therefore administratively fined TWD 800,000 by FTC.
Before commencing any M&A transactions, enterprises should properly identify the relevant market(s) in which its products and services are involved, and carefully evaluate whether it is necessary to proceed merger filing with FTC in advance. If the enterprises are not sure whether the intended transaction requires merger filing under the laws, it is recommended that the enterprises seek assistance from legal professionals in advance. Otherwise, the intended transaction may not be able to complete and the enterprises may even be administratively fined by FTC for failure to comply with the law.
(The article is originally in Chinese which can be found here.)