EU investigates hardware takeovers

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The European Union’s Competition Commission is looking into prospective deals from two of the world’s leading hard disk companies to ensure all is fair in mergers and storage.

The regulator is examining Seagate’s planned take-over of Samsung’s HDD division, alongside Western Digital’s acquisition of Hitachi’s storage arm, to ensure the overall market won’t suffer as a result.

Joaquín Almunia, the Commission’s vice president in charge of competition policy, said: “Hard drives are the backbone of the digital economy. The sector has already experienced significant consolidation and the proposed acquisitions will further reduce competition.”

“The Commission will carefully examine if effective competition is preserved and innovation encouraged.”

The sticking point for the Commission is how much it would cut down competition between vendors. A merger of Seagate and Samsung would increase the former’s leading position, leaving only Western Digital and Hitachi to compete. If those two merged as well, they would then take over the market and only face competition from the Seagate/Samsung venture and Toshiba.

“This could impact negatively on customers’ ability to obtain competitive prices for the product [and] the merger could also reduce the manufacturers' incentives to innovate in the market,” said an EU statement.

The investigation will not be conducted overnight though, with the Commission having 90 working days to make a final decision – making the deadline 10 October.

As a result, Western Digital has now re-jigged its date for the completion of its acquisition, putting its estimates back to the fourth calendar quarter of this year.

“The company is co-operating fully with the EC in the Phase II review [and] the company indicated that it is proceeding, on plan, with its integration-planning activities associated with the proposed acquisition,” read a statement from Western Digital, showing it still believed the Hitachi deal would go ahead.

IT PRO contacted Seagate for its perspective on the investigation but it had not returned our request at the time of publication.

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