On November 11, 2019, the FCO approved the acquisition of Acacia Communications, Inc. (“Acacia”) by Cisco Systems, Inc. (“Cisco”). The FCO had asked the merging parties to withdraw their notification to have more time to define the relevant markets but cleared the transaction in phase 1 after the parties had resubmitted their notification one month later.
Cisco sells, among other things, IT hardware (e.g., routers and switches) and services for digital infrastructure platforms and corporate networks, while Acacia manufactures optical interconnects for use in network products that facilitate high-speed transmission of data, including semiconductor products like coherent digital signal processors (“DSPs”) and silicon photonic circuits (“PCIs”), as well as so-called transceivers. Based on Acacia’s product portfolio, the FCO defined separate—worldwide—product markets for DSPs, PCIs, and three different categories of transceivers, as well as downstream markets for optical networks and switches/routers.
The FCO did not have horizontal concerns for a lack of an overlap between the merging parties. The FCO eventually did not raise vertical concerns either. Even though the FCO found that Acacia had a strong position in the DSP and transceiver markets and Cisco was strong in the downstream market for routers, the FCO deemed the risk of foreclosure to be low. In relation to DSPs and transceivers, the FCO considered anti-competitive effects unlikely to occur, given the substantial number of competitors in both markets. With respect to transceivers and optical networks, the FCO found that the merging parties had no foreclosure incentives, because their respective market shares were low and numerous competitors present. Finally, in relation to transceivers and switches/routers, the FCO determined that while the merging parties might have an incentive to foreclose competitors in light of Acacia’s technological edge in transceivers, their competitors and new entrants in transceivers would exert sufficient competitive pressure to prevent anti-competitive effects from occurring.