Western Digital has been cleared by the European Commission to acquire Hitachi's hard drive business in a cash and stock transaction valued at about $4.3 billion. The deal, announced roughly eight months ago, should leave Western Digital with about 50% of the market but it will not be finalized until some requirements are met. Namely, the company has to sell off some of its hard-disk drive production assets to a smaller competitor.

The idea – at least in the European Commission's eyes – is to ensure that competition in the industry is "fully restored before the merger is implemented."

Currently there are four active hard-disk drive suppliers worldwide: Western Digital, Hitachi, the merged Seagate-Samsung and Toshiba. The proposed acquisition of Hitachi GST, recently renamed Viviti Technologies, would have reduced that number to three and leave much smaller Toshiba, which holds around 10% of the market, in an unfavorable position.

Western Digital can't complete the purchase until it finds a suitable buyer, approved by the Commission. Considering the regulator's intentions to promote competition the only likely candidate allowed buying WD's assets would be Toshiba, or perhaps TDK, if the Japanese maker of disk drive heads and sliders wants to enter the market. The problem is, even if they are interested in a deal, both of them know Western Digital will be in a hurry to sell so that it can complete the Viviti purchase and can bid a really low price.

The news follow an arbitration award yesterday ordering Western Digital to pay Seagate a hefty $525 million in damages for allegedly coaxing "confidential information and trade secrets" from a former Seagate employee. Western Digital has denied those allegations and it plans to contest the ruling. But they'll have a lot on their plate in the meantime forking out millions of dollars to get their flooded Thailand plants back up and running.