Commission Vice President in charge of competition policy Joaquín Almunia said: “Hard drives are the backbone of the digital economy. The sector has already experienced significant consolidation and the proposed acquisitions will further reduce competition. The Commission will carefully examine if effective competition is preserved and innovation encouraged."

There are currently five HDD manufacturers worldwide: Seagate, Western Digital, Hitachi ( Viviti Technologies) Toshiba and Samsung says the EC release.

The Seagate/Samsung merger would consolidate Seagate in lead position of the overall market for , particularly in the manufacture of 3.5" desktop HDDs where it would have only two competitors (Western Digital and Hitachi).

The Western Digital/Hitachi deal, examined in the light of the previous deal,  creates the world's market leader in the overall HDD market. For 3.5'' desktop HDDs, the only competitor would be Seagate/Samsung. For 2.5'' mobile HDDs, it would only face Seagate/Samsung and Toshiba.

The Commission has 90 working days, until 10 October, to reach final decisions on whether the transactions would significantly impede effective competition to an extent that would be detrimental to customers and consumers in the European Economic Area (EEA).

Seagate/ Samsung
The assessment of the Seagate/Samsung transaction is made without regard to Western Digital/Hitachi move,  was notified a day after the Seagate/Samsung move, on 20 April.

It shows that the merged entity would have a significant market share in the overall market for HDDs, particularly in 3.5" desktop HDDs where it would only face two competitors (Western Digital and Hitachi).

This could impact negatively on customers’ ability to obtain competitive prices for the product. Merger could also reduce manufacturers' incentives to innovate. Respondents to the market investigation raise concerns over  a risk of coordination between HDD manufacturers.

The proposed transaction would also lead to integration of Samsung, currently sourcing heads for HDDs from the only independent heads supplier, TDK of Japan, into a company vertically-integrated into head manufacturing.

This might lead to a significant reduction in demand for heads – a crucial component of HDDs, in turn result in uncompetitive prices for heads and weakening TDK's ability to keep innovating. It would also negatively affect Toshiba's competitiveness in the HDD market, as Toshiba depends on TDK heads.

Lastly, the Commission's market investigation reveals that Samsung is important supplier of HDDs to non-integrated external storage devices (ESD) manufacturers because of competitive prices and innovative product offers.

The initial investigation suggests a combined entity might have the ability and incentive to strengthen its own branded ESDs market presence byincreasing HDD prices or restricting supply for non-integrated ESD providers. This could negatively affect competition and innovation in the ESD market.

Western Digital/Hitachi
The assessment of the Western Digital/Hitachi transaction takes into account the Seagate/Samsung transaction, which was notified first.

The Western Digital/Hitachi transaction would create the world's market leader in the HDD market. The only remaining competitor for 3.5'' desktop HDDs would be the combined Seagate/Samsung entity.

For 2.5'' mobile HDDs, used in notebooks and other portable electronic devices, it would only face Toshiba and Seagate/Samsung. This could have a negative impact on customers' capability to obtain better prices and on suppliers' incentives to keep competing with innovative products. Concerns is also raised of an increased risk of coordination between HDD manufacturers.

The market investigation reveals concerns that the combined entity would source fewer heads from the merchant market. Combined with the Seagate/Samsung transaction, this may impact TDK's ability to invest in more innovative head development and Toshiba's ability to compete in the HDD market, given its dependence on TDK heads,  allowing the merged entity to raise prices.

The market investigation reveals concerns that the proposed transaction would reduce available HDD sources, detrimental to ESD manufacturers, simultaneously strengthening the combined entity's leading role in the ESD market and negatively affecting competition and innovation in the ESD market.

The companies and products
Seagate is active worldwide in the manufacture and sale of HDDs, Solid State Drives (SSDs), branded External Storage Devices (ESDs) and media players. Operations are vertically integrated upstream in the manufacturing of key components, such as read/write heads and media.

The Samsung HDD business being acquired is active in manufacture and sale of HDDs and branded ESDs. Samsung's HDD business is not vertically integrated upstream in component manufacture, but downstream in manufacture of computers and consumer electronics.

Although Samsung is also active in SSDs, this business will not be transferred to Seagate.

Western Digital and Viviti Technologies Ltd (formerly Hitachi Global Storage Technologies Holdings Ltd) are both active worldwide in manufacturing and sale of HDDs, SSDs and branded ESDs.

Their operations are vertically-integrated upstream in the manufacturing of key components, such as read/write heads and media.

An HDD is a device which uses one or more rotating magnetic disks to store and allow access to digital data and are employed in a variety of applications such as desktop and laptop computers and a range of consumer electronics applications such as digital video recorders or camcorders.

HDDs are customarily categorized by reference to their end use, in particular: (i) Enterprise or Server HDDs (used in servers and enterprise storage systems), (ii) Desktop HDDs (used for example in PCs and home electronics devices), (iii) Mobile HDDs (used in notebooks and portable devices) (iv) Consumer Electronics (CE).

SSDs are also data storage devices but use a different flash memory technology. They have improved technical characteristics such as faster access and higher reliability. But still come at much higher prices.

ESDs allow consumers to supplement storage space of their computers, home and small office networks or CE devices. Contrary to HDDs mainly sold to original equipment manufacturers (OEMs) and distributors as components, ESD finished products sell direct to the consumer.

There are currently five HDD manufacturers worldwide: Seagate, Western Digital, Hitachi, Toshiba and Samsung. They are also active on the downstream market for ESDs. In addition, there are several non-integrated ESD suppliers as LaCie, Freecom, Buffalo and Iomega, which depend on the HDD producers to supply them with HDDs.

The Commission's investigation points to the existence of separate markets for HDDs, SSDs and ESDs due to their different product characteristics, different prices and different suppliers presence.

In addition, the market investigation suggested that there may be separate sub-markets within HDDs based on end-use and form factor, given limited demand-side substitutability.