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Western Digital / Hitachi

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Western Digital Corporation (WD) proposed acquisition of Hitachi Global Storage Technologies (renamed Viviti Technologies). The deal was announced on 7 March 2011 and was worth an estimated $4.3 billion.

Both companies manufacture and sell hard disk drives and external hard disk drives and both are vertically integrated.


Competition analysis (source: merger register)

The proposed acquisition will increase concentration in what are already highly concentrated markets. In particular, the ACCC considered that competition concerns may arise in markets for 3.5" desktop and 3.5" consumer electronic HDDs. This is because post-mergers of both WD/HGST and Seagate/Samsung, the number of manufacturers in these HDD markets would reduce from four global suppliers to only two global suppliers.

The ACCC also considered competition concerns may arise in the market for 3.5" business critical HDDs, where Toshiba currently has only a minimal presence. The ACCC considered that HGST is a close competitor to WD, with the vertically-integrated HGST being an industry leader in terms of innovation and product quality. The ACCC therefore considered the removal of the competitive constraint imposed by HGST would likely heighten competition concerns in these markets.

On 23 November 2011, the European Commission cleared the WD/HGST transaction subject to conditions requiring the divestment of essential production assets for 3.5" HDDs, including a production plant located in China, intellectual property and accompanying measures. The transaction cannot be completed until a suitable purchaser has been approved by the European Commission.

The ACCC considered that, subject to the divestiture remedy commitments provided by WD, the competition concerns arising from an acquisition of HGST by WD appear likely to be alleviated in the relevant global markets. On this basis, the ACCC has decided not to oppose the proposed acquisition. Should the divestiture remedy commitments provided by WD to the European Commission not be met, the ACCC will review its decision.

The ACCC reviewed this matter concurrently with the review of Seagate/Samsung


China (MOFCOM)

MOFCOM defined the relevant market as the global HDD market

On 2 March China's Anti-Monopoly Bureau of the Ministry of commerce conditionally approved Western Digital's acquisition of Hitachi's hard disk drive business.

Conditions included WD maintaining Hitachi GST as an independent competitor in the global HDD market. According to the DavisPolk review of the decision (available in Chinese) WD must:

As part of this condition, under close supervision of a monitoring trustee and MOFCOM, Western Digital must:

  • ensure that Hitachi GST products are independently manufactured, priced, and marketed;
  • refrain from exercising its shareholder rights in Hitachi GST in an "anticompetitive" manner;
  • maintain independence between the two entities' research and development groups; and
  • establish firewalls to prevent the transmission of competitively sensitive information between the two entities.

Monthly reporting of compliance is required and the condition remains in place indefinitely (unless WD successfully applies for a waiver after two years).

Although no additional structural conditions were imposed, MOFCOM's approval was conditional on WD complying with the FTC and EC mandated divestiture.

For a more detailed analysis see Henry LT Chen and Frank Schoneveld, 'China Conditionally Clears Western Digital's Acquisition of Hitachi's Hard Disk Drive Business ' (2012) National Law Review. In that article the authors note:

This case contains the most comprehensive clearance conditions ever imposed by MOFCOM. The Ministry requires Viviti not only to be de facto independent, which is the same as for the Seagate/Samsung, but also to be legally independent. Further, the requirement concerning exercise of shareholding rights and performance of shareholder obligations to be subject to MOFCOM's prior approval will likely cause many interesting legal issues, such as corporate governance, under the corporation laws of China and the country of origin of WD and Viviti.

From another perspective, it is noted that MOFCOM, in this decision, expressly acknowledged the effectiveness of clearance conditions imposed by the European Commission by including the same conditions as part of its decision, which must nevertheless still be executed under China's anti-monopoly legal regime. It can be seen then, that at least two competition/monopoly authorities in two of the world's major economies are apparently working more closely toward imposing clearance conditions on the same transactions in their respective jurisdictions. Although it is not certain how much credit the Chinese authorities are willing to grant their European counterpart, the decision demonstrates the benefits of planning for globally concerted merger notifications before formally filing with any major merger control authorities.


European Union

Notified on 20 April 2011 - one day after Seagate notified of its proposed acquisition of Samsung - as a result it was assessed on the assumption that the Seagate acquisition had taken place. Western Digital appealed to the General Court against the Commission's application of this priority rule.

An in depth investigation commenced in May 2011.

Approved, subject to condition that WD divest Hitachi assets relating to desktop HDD's to Toshiba.



Approved, 24 November 2011, with remedies

View JFTC press release.


United States

Challenged, but approved by Consent Agreement which required Western Digital to divest HGST's desktop HDD assets to Toshiba Corporation.

Some reasons provided FTC Statement relating to the WD merger (http://www.ftc.gov/os/caselist/1110122/120305westerndigitalstmt.pdf) as follows:

After a thorough investigation the Federal Trade Commission has challenged Western Digital Corporation's ("Western Digital") proposed acquisition of Viviti Technologies Ltd., formerly known as Hitachi Global Storage Technologies ("HGST"). This challenge comes several months after the Federal Trade Commission closed its investigation of Seagate Technology LLC's ("Seagate") acquisition of Samsung Electronics Co. Ltd.'s hard disk drive assets ("Samsung"). The two proposed transactions were announced within weeks of each other, and both had potential implications for competition in the same product markets. 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.

The evidence gathered in the Commission's investigation revealed that the relevant product markets in which to assess the competitive impact of the proposed transactions are based on specific end-uses for hard disk drives ("HDDs") -- such as desktop, notebook, and enterprise – because product features, pricing, and competition differ by end-use applications. For many of these end-uses, we did not have reason to believe that the proposed transactions would result in effects that would have justified a challenge. In the 3.5 inch desktop HDD ("desktop HDD") market, however, we had reason to believe the consummation of both of these acquisitions would result in likely anticompetitive effects. The Commission came to this conclusion based on the evidence from interviews with market participants, testimony of the parties' executives, and documents produced by the parties and other industry participants.

The Commission determined after its investigation that there were significant differences between the competitive implications of the two proposed mergers. Since in each case the acquiring firm was a strong competitor, attention turned to the characteristics of the two firms that were to be acquired in these proposed transactions – HGST and Samsung. Based on this analysis, it was clear that an independent HGST was much more likely to be an effective competitive constraint in the desktop HDD market than would an independent Samsung.

In particular, HGST has been a strong, high quality and innovative competitor in the desktop HDD market. Moreover, HGST has been identified by a number of industry participants as a key driver of aggressive price competition in the desktop HDD market in 2010, and was well-positioned to grow its desktop HDD business in the near future. In contrast, Samsung had struggled to be competitive in the desktop HDD market. In a market for desktop HDDs containing only Western Digital, HGST, and the combined Seagate/Samsung entity, HGST would retain the ability and incentive to act as an effective constraint on desktop HDD pricing. By contrast, Samsung would be less likely to serve as a meaningful constraint on pricing in a desktop HDD market consisting of Western Digital/Hitachi, Seagate, and Samsung. Based on these considerations, the Commission made the decision to challenge the Western Digital/HGST transaction while clearing the Seagate/Samsung transaction, and to preserve the competitiveness of the desktop HDD market by requiring Western Digital to divest HGST's desktop HDD assets to Toshiba Corporation under the terms of a proposed Consent Agreement.



FTC press release notes:

In addition to the scrutiny they have received from the Commission, many other antitrust enforcement agencies investigated these mergers. Commission staff cooperated with agencies in Australia, Canada, China, the European Union, Japan, Korea, Mexico, New Zealand, Singapore, and Turkey, and worked closely with the agencies' investigative teams on the timing of review, substantive analyses, and potential remedies, during the pendency of these investigations. This close cooperation with foreign antitrust enforcers helped ensure an outcome that benefited consumers in the United States


Articles and news about this case

Anjie Law Firm, 'Another Conditional Clearance on Hard Disk Industry Concentration' (China Law Vision, 30 March 2012)

DavisPolk, Client Memorandum, 'Chinese Antitrust Authorities Approve Western Digital/ Hitachi GST Deal with Significant Conditions' (9 March 2012)

Chris Casacchia, 'Japanese Regulators OK Western Digital's Hitachi Global Storage Buy' (Wednesday 28 December 2011, Orange County Business Journal)