The Federal Trade Commission will require Western Digital Corporation to sell assets used to manufacture and sell desktop hard disk drives to Toshiba Corporation as part of a proposed settlement that resolves charges that Western Digital’s proposed acquisition of rival Hitachi Global Storage Technologies Ltd. would likely have harmed competition in the market for desktop hard disk drives used in personal computers.
The proposed FTC order settles charges that 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.
“Protecting competition in the high-tech marketplace is a high priority for the FTC,” said 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.”
Under an agreement dated March 7, 2011, Western Digital intends to acquire Hitachi Global Storage Technologies (now known as Viviti Technologies Ltd.) from Hitachi, Ltd. for approximately $4.5 billion. Both companies manufacture and sell desktop hard disk drives, key inputs into computers and other electronic devices that are used to store and allow fast access to data.
According to the FTC’s complaint, Western Digital’s proposed acquisition of Hitachi Global Storage Technologies would likely be anticompetitive and would violate Section 5 of the FTC Act and Section 7 of the Clayton Act by reducing competition in the worldwide market for desktop hard disk drives. The FTC contends that the deal would reduce the number of competitors in that market from three to two and would likely allow Western Digital to exercise market power, resulting in higher prices for consumers.
The proposed settlement order remedies these competition concerns by requiring Western Digital to divest selected Hitachi Global Storage Technologies assets related to the manufacture and sale of desktop hard disk drives to Toshiba within 15 days of the acquisition. The time for the divestiture can be extended by 15 days, if necessary, to allow the companies to receive regulatory approval in other jurisdictions.
According to the FTC, Toshiba has the ability to replace Hitachi Global Storage Technologies as an effective competitor in the worldwide market for desktop hard disk drives. While Toshiba currently does not compete against Western Digital or Hitachi Global Storage Technologies in this market, it does make and sell hard disk drives for use in mobile and other end-use applications. Because Toshiba has extensive experience manufacturing these other types of hard disk drives, and has an existing worldwide infrastructure for the research, development, and sale of desktop hard disk drives, Toshiba is well-positioned to replace the competition that will be eliminated as a result of the proposed transaction.
Under the proposed settlement order, Toshiba will receive all of the productive assets needed to replicate Hitachi Global Storage Technologies’ position in the desktop hard disk drive market. In addition, the settlement order requires Western Digital to provide Toshiba with access to its employees involved in research and development and the production of desktop hard disk drives, and also requires Western Digital to license all intellectual property needed to make and supply desktop hard disk drives to Toshiba. The settlement order also requires Western Digital to be available to supply Toshiba with certain components Toshiba will need to run the desktop hard disk drive business it acquires, and to contract manufacture hard disk drives for Toshiba until Toshiba is able to manufacture them on its own. The FTC also has appointed a monitor to oversee the sale of the assets to Toshiba and to keep the Commission informed about the status of the required divestiture.
The proposed transaction was reviewed by antitrust enforcement agencies around the world, as well as by the Commission. Commission staff cooperated with antitrust agencies in Australia, Canada, China, the European Union, Japan, Korea, Mexico, New Zealand, Singapore, and Turkey, often working closely with the staff of these agencies on the analysis of the proposed transaction and potential remedies to reach outcomes that benefit consumers in the United States.
The Commission vote approving the complaint and proposed consent order was 4-0. The proposed order with will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until April 4, 2012, after which the Commission will decide whether to make it final.
The Commission also issued a separate statement explaining the relationship of its analysis of the proposed acquisition by Western Digital of Hitachi Global Storage Technologies to the earlier acquisition by Seagate Technology LLC of Samsung Electronics Co. Ltd.’s hard disk drive assets, a transaction that the Commission cleared without taking action in December 2011. The Commission vote to issue the statement was 4-0.
NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.
(FTC File No. 111-0122)
(Western Digital.final)