Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves acquisition of SanDisk by Western Digital, (Feb 4, 2016)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has cleared under the European Union (EU) merger regulation the proposed acquisition of data storage manufacturer SanDisk Corporation by Western Digital Corporation, both of the United States, after concluding that the takeover would not adversely affect competition in Europe, the EC announced today.

Western Digital manufactures and supplies hard disk drives for consumer use in personal computers and consumer electronics, as well as for enterprise use in cloud computing and data centers. It also produces enterprise class solid state drives based on flash memory technology. SanDisk specializes in the production of flash memory storage solutions, including solid state drives for enterprise and consumer use, removable cards, USB flash drives, and embedded flash products for mobile devices and consumer electronics.

A hard disk drive is a digital storage solution that uses one or more rotating metal or glass disks with magnetic surfaces to store and allow access to data. A flash-based solid state drive is a storage solution that uses flash memory to store digital data.

Western Digital and SanDisk both provide computer storage solutions, such as hard disk drives or solid state drives based on flash memory, for the consumer electronics and enterprise markets. The Commission found that the overlap between the activities of the companies is effectively limited to the market for enterprise space for flash memory storage solutions, including enterprise solid-state drives.

Therefore, the EC assessed the effects of the transaction on competition in this area. Despite the merged entity's relatively high combined market share, the transaction does not raise competition concerns. In particular, strong and established players—such as Intel, Toshiba, Micron, and Samsung—are active on the market and will continue to exert competitive pressure on the merged entity.

The Commission also investigated the vertical link between SanDisk's activities in the production of flash memory and the downstream markets for enterprise flash memory storage solutions. The EC concluded that the merged entity would be unable to foreclose competitors from access to flash memory and that competing producers of flash memory would still have a sufficient customer base. This is because SanDisk's presence on the upstream market for flash memory manufacturing is limited and several competitors will remain active in the production of flash memory, solid state drives, and other flash memory storage solutions. Thus, the transaction would raise no competition concerns.

"I am pleased that we have been able to ensure that this multi-billion dollar deal in a fast-developing industry can go ahead without delay,” said Margrethe Vestager, Commissioner in charge of competition policy. “We have worked efficiently, in cooperation with our US counterparts, to scrutinize this takeover in the strategically important IT sector and concluded that there would be no adverse effects on either retail or commercial customers."

Companies: SanDisk Corporation; Western Digital Corporation

News: AcquisitionsMergers Antitrust