The U.S. Federal Trade Commission will require Western Digital to sell off assets used to manufacture desktop hard drives to a competitor as a condition of its US$4.5 billion acquisition of rival Hitachi Global Storage Technologies, the agency announced.
The deal, as originally proposed, would have left Western Digital as one of two companies that control the worldwide market for desktop hard disk drives, the FTC said. The agency announced a proposed settlement allowing the deal to go forward on Monday.
The deal was anticompetitive, the FTC said in a press release. "Protecting competition in the high-tech marketplace is a high priority for the FTC," Richard Feinstein, director of the FTC's Bureau of Competition, said in a statement. "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."
Western Digital announced last Tuesday that it had reached an agreement to sell off assets to competitor Toshiba as a way to address regulatory concerns. The agreement will enable Toshiba to manufacture 3.5-inch hard drives for the desktop and consumer electronics markets and will allow Toshiba to expand its manufacturing of 3.5-inch drives for the near-line storage market, Western Digital said then.
Western Digital also announced that it has agreed to purchase Toshiba Storage Device (Thailand), a hard drive manufacturing division that suspended operations after massive flooding in the country in 2011.
The Toshiba transactions are conditional on Western Digital's closing of the Hitachi deal, the company said.
The FTC's proposed settlement order requires 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.
Western Digital announced a year ago that it planned to acquire Hitachi Global Storage Technologies -- now known as Viviti Technologies -- from Hitachi. The deal, as proposed, would have given Western Digital a larger share of the data center internal disk drive market. The company has largely focused in recent years on selling external hard drives for consumers.
At the time of the announcement, Western Digital held about 31 percent of the hard disk drive market, followed by Seagate Technology with 29 percent. Hitachi had about 18 percent of the market.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is [email protected]