Hitachi and LG are to stop individually making CD, DVD (digital versatile disc) and other optical storage systems, and have been granted the EC's (European Commission's) consent to do so as a joint venture.

The EC has approved the deal between Hitachi of Japan and LG Electronics of South Korea, arguing that the combo will face stiff competition from rivals and therefore isn't likely to pose a competitive threat.

The two firms are pooling their strengths in the development of optical data-storage disc drives such as CD drives and DVD drives for computers. Both parents will transfer their activities to the joint venture and subsequently exit the market at stake, the EC said in a statement.

The responsibilities of the EC, the executive body of the European Union, include acting as competition regulator. It is also currently looking at bringing Microsoft to court.

Production of optical disc drives will be outsourced either to the parent companies or to independent manufacturers, the companies told the EC.

"The creation of the joint venture will neither significantly reduce the competition in the market nor significantly reduce the choice for consumers," the EC said.