FTC Conditionally Approves Acquisition in Disk Drives Market

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC will allow Western Digital Corporation’s proposed acquisition of Viviti Technologies Ltd., formerly known as Hitachi Global Storage Technologies, to proceed, subject to divesture of selected Hitachi Global Storage Technologies assets related to the manufacture and sale of desktop hard disk drives to Toshiba Corporation.

A proposed consent decree would resolve FTC charges that the proposed acquisition would likely have harmed competition in the market for desktop hard disk drives used in personal computers.

According to the agency, the deal as originally proposed would have left only two companies, Western Digital and Seagate Technology LLC, in control of the entire worldwide market for desktop hard disk drives—key inputs into computers and other electronic devices that are used to store and allow fast access to data.

“Protecting competition in the high-tech marketplace is a high priority for the FTC,” said FTC Bureau of Competition Director Richard Feinstein. “This order will ensure that vigorous competition continues in the worldwide market for desktop hard disk drives and that consumers are not faced with higher prices or reduced innovation as a result of this deal.”

Timing of Filings

In a March 5 statement accompanying the complaint and proposed consent order, the FTC explained the relationship of its analysis of the proposed Western Digital/Hitachi acquisition to an acquisition by Seagate Technology LLC of Samsung Electronics Co. Ltd.'s hard disk drive assets. The FTC reviewed the Western Digital/Hitachi transaction at the same time as it reviewed Seagate Technology/Samsung transaction. The two transactions were announced within weeks of each other.

“Commission staff reviewed both matters at the same time in order to understand the effects on competition resulting from each transaction on its own, as well as the cumulative effect on the relevant markets if both transactions were allowed to be consummated,” according to the FTC. The agency earlier closed its investigation
of the Seagate Technology/Samsung transaction without taking action.

European Commission

In reviewing the two transactions, the European Commission (EC), on the other hand, followed a priority rule and gave priority to the transaction that was notified first. As a result, Seagate’s planned acquisition of Samsung’s hard-disk operations, which was notified to the EC prior to the planned Western Digital/Hitachi combination, was assessed assuming that Western Digital and Hitachi were still separate competitors. The implications of the second deal were not considered.

In November 2011, the EC announced that clearance of the Western Digital/Hitachi combination was conditioned upon the divestment of essential production assets for 3.5-inch hard disk drives, including a production plant, and accompanying measures. The Seagate Technology/Samsung transaction was approved by the EC without conditions.

The case is Matter of Western Digital Corporation, FTC File No. 111 0122, Docket No. C-4350, CCH Trade Regulation Reporter ¶16,738. The proposed consent agreement appears here at 77 Federal Register 14523, March 12, 2012.