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July 24, 2018updated 20 Jul 2022 10:39am

EU Commission Opens Investigation into Gemalto Acquisition by Thales

Concerns over a future lack of competition in the hardware security market

By CBR Staff Writer

The European Commission has opened an ‘in-depth’ investigation into the takeover of Gemalto by French Aerospace and security contractor Thales Group.

Thales and Gemalto both operate in the same hardware security module for enterprise market in Europe.

Commissioner Margrethe Vestager commented in a released statement that: “Our society is increasingly dependent on data security solutions to secure all sorts of social, commercial or personal information.”

“We are opening this in-depth investigation to ensure that the proposed transaction between Thales and Gemalto would not lead to higher prices or less choice in hardware security modules for customers looking to safely encrypt their data”,” she added.

A Hardware security module (HSM) is a dedicated cryptographic processor which protects crypto keys during their use time and are designed specifically for this purpose. Traditionally they work in tandem with a physical key card.

They are used in most medium to large scale business operations and provide protection for cryptographic keys used in the processing of transactions or identities.

The EU commission has determined that Gemalto and Thales are in directed competition with each other for the HSM market.

The Commission stated in the announcement that they are: “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.”

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Gemalto is a digital security company based in the Netherlands as well as HSM, they also provide mobile software and products, machine to machine communication solutions and enterprise security

Patrice Caine Thales’s Chairman and CEO Patrice Caine, commented late last year when the takeover was accepted by Gemalto that: “The acquisition of Gemalto marks a key milestone in the implementation of Thales’s strategy.”

“Together with Gemalto’s management, we have big ambitions based on a shared vision of the digital transformation of our industries and customers.”

“Our project will be beneficial to innovation and employment, whilst respecting sovereign strategic technologies. We have a tremendous respect for Gemalto’s technological achievements, and our two Groups share the same culture and DNA.”

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.

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