Western Digital in Brussels merger rules row

Europe’s top competition watchdog has dismissed complaints from Western Digital, the world’s biggest hard disk drive manufacturer, about Brussels’ implementation of merger notification rules and signalled a firm line on the US group’s bid to buy Hitachi’s hard drive business.

Joaquín Almunia, EU competition commissioner, promised to look closely at the $4.3bn Western Digital deal and defended giving a regulatory advantage to Seagate, another US hard drive maker seeking clearance for a takeover in Asia.

Mr Almunia opened in-depth probes into the two deals amid antitrust fears over the number of global hard drive makers falling from five to three. However, only Western Digital has since been served with a complaint, partly because it lodged its merger notification a day after Seagate’s $1.4bn bid for the hard drive business of Korea’s Samsung.

The decision to give Seagate priority meant its deal was judged as if there were five actors in the market, with Western Digital and Hitachi of Japan still competing.

Western Digital, which was put at a disadvantage even though it announced its acquisition of Hitachi’s hard drive business a month before Seagate’s takeover, is challenging the decision in the EU’s general court. It is citing the fact it was the first to approach the Commission regarding the merger but was pushed to second place in the queue because Seagate was allegedly allowed to lodge a formal notification more quickly.

Mr Almunia gave short shrift to complaints about the first-come, first-served rules. “The mergers were notified to us within a very short time and when this happens we must give priority to the transaction that was notified first,” he said in New York on Thursday. “The sector is already quite concentrated. If both mergers were approved there would be only three, or perhaps two, players per product market. Hard disk drives are one of the backbones of the digital economy and their demand is forecast to grow significantly in the next few years. So we need to look into these deals really well.”

Western Digital’s take­over of Hitachi would strengthen its 50 per cent market share, while the Seagate-Samsung tie-up would account for 40 per cent of the market. Toshiba is the other major hard drive maker.

US regulators are judging the cases together, rather than in sequence, even though Western Digital was the first to file in that jurisdiction.

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