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Seagate, WD should put a gun to Brussels' head

How can the EC meddle in acquisitions beyond its borders?

Application security programs and practises

Opinion What if the European Commission's competition authority finds against Seagate and Western Digital in its acquisition investigations? Could it ban their products from Europe?

The EC thinks it possible that both acquisitions run the risk of reducing competition in the hard disk drive market, and that this is "likely to harm consumers through higher prices, reduced choice or less innovation". Here's what the EC says about mergers it checks:

All proposed mergers notified to the Commission are examined to see if they would significantly impede effective competition in the EU. If they do not, they are approved unconditionally. If they do, and no commitments aimed at removing the impediment are proposed by the merging firms, they must be prohibited to protect businesses and consumers from higher prices or a more limited choice of goods or services.

Here, specifically, is what the EU thinks currently about one aspect of the Western Digital, Hitachi GST acquisition:

… the market investigation revealed concerns that the proposed transaction would reduce the available sources of HDDs to the detriment of ESD (external storage device) manufacturers so as to strengthen the combined entity's leading role in the ESD market. This could negatively affect competition and innovation in the ESD market.

Prohibited? If two US firms want to conduct acquisitions of companies outside the European Union, how can the EC prohibit them? Suppose the EU finds that the two acquisitions would reduce competition in the HDD industry to the detriment of EU inhabitants and bans them - so what?

If it stops Seagate and WD selling their products into the EU how will that sustain or increase competition in the HDD industry for EU citizens? The citizens, and businesses in the EU, would only be able to buy hard disk drives from Samsung and Toshiba, whose product ranges are restricted and manufacturing capacities limited.

The EU's citizens would then find that they suffered from an appallingly uncompetitive permitted HDD supply situation, putting EU businesses using HDDs in dreadfully uncompetitive doldrums.

It strikes me that both Seagate and WD could go to the EU's head competition bureaucrat, Commission VP Joaquín Almunia, and hold a gun to his head by saying: "Prohibit our acquisitions if you want, but it's your EU citizens and businesses that will suffer."

They won't though, more's the pity. ®

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