Regulator imposes further conditions on Western Digital/Viviti deal - International Law Office

On March 2 2012 the Ministry of Commerce published another conditional clearance of concentration in the hard disk industry. The decision comes three months after it imposed similar conditions on Seagate's acquisition of Samsung's hard drive business. This time, the parties to the concentration parties are Western Digital and Viviti Technologies, with the ministry having defined the relevant market as the worldwide market for hard disk drives.

In appraising the effects of the concentration in question, the ministry took into account:

• the competitive situation of the relevant market;
• the purchase model;
• the rate of capacity utilisation;
• product innovation;
• bargaining power from the acquirer's side;
• market entry; and
• the effects on consumers and the relevant product market.

On this analysis, the ministry concluded that the concentration would probably have the effect of eliminating and restricting competition in the market for hard disk drives in China.

As a result of several rounds of negotiation with the concentration parties, the ministry followed the EU and US authorities in accepting the imposed divestiture. In addition, it required the parties to:

• maintain Viviti as an independent competitor and independently operating business;
• ensure that Viviti continues to market hard disk drives independently, using its original team, under the same brands as before;
• create a firewall between the parties to prevent unauthorised exchanges of information;
• conduct research and development activities as before;
• appoint a trustee to supervise the implementation of all obligations under the conditional clearance.

Companies will note with concern that the entire process - from the initial submission of filing documents to the ministry's final decision - took around 11 months, even longer than the seven-month wait in the Seagate/Samsung transaction.

For further information on this topic please contact Zhan Hao at Grandall Legal Group by telephone (+86 10 65 890 699), fax (+86 10 6517 6800) or email (zhanhao@grandall.com.cn).