European Commission opens in-depth investigation into Bayer-Monsanto deal

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European Commission opens in-depth investigation into Bayer-Monsanto deal

The European Commission (EC) has expressed concerns German multinational Bayer's proposed US$66 billion acquisition of U.S.-based Monsanto Company could reduce competition in areas such as pesticides, seeds and traits. 

Margrethe Vestager

In response to the proposed merger, which would create the world's largest integrated pesticide and seeds company, the EC has opened an in-depth investigation into the issue under EU Merger Regulation. 

The Commission said it would now have 90 working days, until Jan. 8. 2018, to make a decision, emphasizing the opening of an investigation like this did not prejudge the final result of the investigation. 

"Seeds and pesticide products are essential for farmers and ultimately consumers," Commissioner Margrethe Vestager, who is in charge of competition policy, said in a release.

"We need to ensure effective competition so that farmers can have access to innovative products, better quality and also purchase products at competitive prices. And at the same time maintain an environment where companies can innovate and invest in improved products," she said. 

The EC highlighted both companies were active in developing new products within their already leading portfolios in non-selective herbicides, seeds and traits, and digital agriculture.

Moreover, the commission emphasized the transaction would take lace in industries that are already globally concentrated, as illustrated by the recent mergers of Dow and Dupont and Syngenta and ChemChina, in which the Commission "intervened to protect competition for the benefit of farmers and consumers".

Glyphosate, glufosinate ammonium and biological pesticides

The Commission has noted the proposed acquisition could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice and less innovation.

For example, Bayer produces glufosinate ammonium, one of the few alternatives to the most sold non-selective herbicide in Europe, glyphosate, which is owned by Monsanto. 

"According to the Commission's preliminary investigation, Monsanto and Bayer are two of a limited number of competitors in this field capable of discovering new active ingredients and developing new formulations, including addressing the growing problem of weed resistance to existing products," the EC said.

The Commission plans to further assess both Monsanto's activities in biological pesticide products that would compete with Bayer's existing portfolio of chemical pesticide products, and the parties' overlapping activities in products that tackle varroa mites, a parasite affecting bee colonies in Europe.

Seeds and traits

The Commission's initial investigations also show both parties have high combined market shares in a number of these vegetable seeds markets, and that some of their products compete directly with each other. 

"Bayer and Monsanto are also active in the breeding and licensing of seeds for several field crops. Monsanto has the highest market share in oilseed rape seeds in Europe. Bayer, with the highest market share in oilseed rape seeds at global level, is one of the few players with the means to compete intensively in this market," the EC said.

"Furthermore, both parties are important licensors of cotton seeds to their competitors in Europe, and both are investing in research and innovation programs for wheat."

The Commission's preliminary investigation has also indicated Monsanto has a dominant position in several trait markets worldwide, which refers to a characteristics of a plant, such as height, herbicide tolerance and insect or disease resistance, that can be developed in laboratories and introduced in certain plant varieties. 

"The Commission will investigate in particular whether the transaction could lead to a reduction of competition in these markets, taking into account the existing links between the few worldwide competitors through cross-licensing and through research and development cooperations," the EC said.

"Finally, the merged entity would hold both the largest portfolio of pesticides products and the strongest global market positions in seeds and traits, making it the largest integrated company in the industry.

"The Commission will further investigate whether competitors' access to distributors and farmers could become more difficult if Bayer and Monsanto were to bundle or tie their sales of pesticide products and seeds, notably with the advent of digital agriculture."

Headline photo: www.shutterstock.com

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