EC opens in-depth investigation into proposed acquisition of Gemalto by Thales
Staff Writer |
The European Commission (EC) has opened an in-depth investigation to assess the proposed acquisition of Gemalto by Thales under the EU Merger Regulation. The Commission is concerned that the merger could lead to higher prices and reduce choice and innovation for customers of hardware security modules.
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The proposed transaction would combine the two largest suppliers of hardware security modules used for enterprise key management solutions, both in the European Economic Area (EEA) and at global level.
A hardware security modules (HSM) is a dedicated hardware appliance running on encryption software to generate, protect, and manage encryption keys used to protect data in a secure tamper-resistant module. The combined entity would become by far the largest player in the market for HSMs in Europe and worldwide.
Thales and Gemalto currently closely compete against each other in the market for hardware security modules at the European and global level.
At this stage, the Commission is concerned that the proposed transaction would eliminate the competitive constraint that Thales and Gemalto exercise on each other and on the other few players that would remain in the market and would risk creating a dominant player at the European and global level.
The Commission is also concerned that by reducing the number of players in the market and by lowering the merged entity's incentives to compete effectively, the transaction could lead to higher prices and reduce innovation.
The Commission will now carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns are confirmed.
The Commission will in particular further assess: (i) the extent to which the parties are close competitors, (ii) the potential response of the merged entity's competitors, and (iii) the ability of software-based solutions to reach the same security level as hardware security modules, and therefore compete with the latter.
The transaction was notified to the Commission on 18 June 2018. The Commission now has 90 working days, until 29 November 2018, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation. ■