FTC Requires Divestiture of Desktop Hard Disk Drives in Antitrust Proceeding | Practical Law

FTC Requires Divestiture of Desktop Hard Disk Drives in Antitrust Proceeding | Practical Law

The Federal Trade Commission and Western Digital Corporation agreed to settle the FTC's antitrust investigation of Western Digital's proposed acquisition of rival Hitachi Global Storage Technologies Ltd. The proposed consent decree requires Western Digital to sell certain assets used to manufacture and sell desktop hard drives.

FTC Requires Divestiture of Desktop Hard Disk Drives in Antitrust Proceeding

Practical Law Legal Update 7-518-5325 (Approx. 3 pages)

FTC Requires Divestiture of Desktop Hard Disk Drives in Antitrust Proceeding

by PLC Antitrust
Published on 20 Mar 2012 • USA (National/Federal)
The Federal Trade Commission and Western Digital Corporation agreed to settle the FTC's antitrust investigation of Western Digital's proposed acquisition of rival Hitachi Global Storage Technologies Ltd. The proposed consent decree requires Western Digital to sell certain assets used to manufacture and sell desktop hard drives.
On March 5, 2012, the FTC filed a complaint alleging that Western Digital Corporation's proposed acquisition of Hitachi Global Storage Technologies Ltd. would substantially lessen competition in the worldwide desktop computer hard disk drives market. According to the FTC, the acquisition would eliminate the head-to-head competition between Western Digital and Hitachi and greatly increase concentration in the relevant market. The market, already concentrated with only three competitors, would become considerably more concentrated, with a post-acquisition Western Digital controlling more than 50% of the market.
The FTC argues that the loss of this competition would likely result in both:
  • Western Digital's ability to unilaterally raise prices.
  • Increased coordination among the remaining competitors on pricing or output.
Western Digital and the FTC have proposed a consent decree to remedy the FTC's competitive concerns. Under the consent decree, Western Digital would be required to sell Hitachi's assets relating to the manufacture and sale of desktop hard disk drives to Toshiba Corporation within 15 days of the closing date of the acquisition. Western Digital would also be required to:
  • Provide Toshiba with access to Hitachi or Western Digital employees involved in the research, development and production of the desktop hard disk drives.
  • Cross-license the relevant intellectual property.
  • Supply Toshiba with about half of the critical components needed for the divested business.
  • Manufacture desktop hard disk drives at cost for Toshiba until Toshiba can manufacture them on its own.
The complaint and the consent decree will be available for public comment until April 4, 2012. When the consent decree becomes final, it will be available on the FTC's website. For additional information on the complaint and consent decree, see the FTC's press release and the Analysis of Agreement Containing Consent Order to Aid Public Comment.