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The most worrying thing behind Toshiba’s acquisition is antitrust
The ongoing negotiations between Toshiba and Western Digital (WD), valued at $18 billion, have reached a critical juncture. However, one major sticking point remains unresolved: the voting rights of Western Digital. Given the anticipated stringent scrutiny from China's anti-monopoly regulators, both parties are keenly aware that pushing through an agreement without addressing these concerns could lead to significant delays or even outright rejection. Considering China’s pivotal role as the global hub for storage technology, any disruption in business operations would be detrimental to both companies.
In similar transactions, the Chinese regulatory process has historically proven to be more rigorous compared to other regions. For instance, when Toshiba Medical Systems were sold to Canon in 2016, the initial approval period stretched to nine months, far exceeding the three-month timeline set by Japan’s Fair Trade Commission. Similarly, Panasonic encountered delays while acquiring Sanyo Electric, further highlighting the complexity involved in securing regulatory clearance from China.
According to legal experts well-versed in international trade laws, China’s regulatory framework demands exhaustive documentation aimed at safeguarding local industries. Typically, the review process lasts no less than six months, with high-profile cases often requiring additional scrutiny over an extended period. Semiconductors, in particular, are viewed as strategically vital sectors, prompting regulators to adopt an exceptionally cautious stance.
There are suggestions that China might impose conditions such as mandating the sharing of technical know-how with competing firms or even requiring partial divestiture of certain business units to foster competition. In past instances, such as Canon's acquisition attempt, the Chinese authorities have expressed dissatisfaction with practices where payments were made prior to submitting formal applications, resulting in financial penalties. This precedent suggests that future deals must strictly adhere to procedural norms.
Moreover, recent history offers another cautionary tale. In 2014, Maersk Group, the world’s leading container shipping entity, faced rejection from Chinese regulators regarding a proposed alliance with competitors. Consequently, they had to abandon their collaboration plans entirely. These examples underscore the importance of aligning with China’s regulatory expectations to avoid potential setbacks.
As Toshiba and WD navigate these challenges, they are likely to explore creative solutions that address both legal requirements and commercial interests. Ensuring compliance with China’s stringent regulations will undoubtedly play a crucial role in determining the success of their partnership moving forward.