Bayer/Monsanto - Commission clears path to create global seed and pesticide behemoth

In its in-depth review, the Commission examined more than 2,000 different product markets and reviewed 2.7 million documents.

In view of the parties' strong market positions and the closeness of competition, the Commission concluded that the transaction as notified would have reduced competition on price and innovation on a number of different markets in seeds, pesticides and digital agriculture. 

In order to obtain merger clearance, Bayer agreed to divest:

• its entire vegetable seeds business;
• its entire broad acre seeds and traits business (including its R&D organisation, subject to limited carve outs);
• a number of its non-selective herbicide assets, in particular its global glufosinate business assets and three lines of research;
• a number of its nematicidal seed treatment assets and products (sold under the Poncho, VOTiVO, COPeO and ILeVO brands); and
• its global digital agriculture assets and products (which can provide advice to farmers by drawing on big data analyses, satellite pictures, weather information and data collected from farmers themselves), subject to the purchaser granting a temporary licence to Bayer.

The purpose of this divestiture package is: 

• to remove all of Bayer's and Monsanto's existing overlaps in seed and pesticide markets;
• to maintain competition on innovation regarding specific R&D activities to develop new pipeline and challenger products; and 
• to ensure sufficient competition in digital agriculture. 

It is evident that the Commission wanted to ensure that there was not a further reduction in the total number of global players active in the supply of seeds and pesticides, given the scale of recent market consolidation in an already concentrated industry. 

The Commission required Bayer to sell the divestiture package to a suitable purchaser.  Bayer proposed BASF as the suitable purchaser which triggered a separate merger notification to the Commission.  On 30 April 2018, the Commission cleared BASF's acquisition of the divestiture package, subject to conditions.  In particular, in view of concerns that the transaction would have reduced innovation competition in the European Economic Area for the development of certain non-selective herbicides as well as potential competition for the production of nematicidal seed treatments, BASF committed to divest:

• one of the overlapping lines of research for the development of non-selective herbicides; and
• a BASF pipeline nematicidal seed treatment product, Trunemco.

The Commission continues to assess whether BASF has the ability and incentives to run and develop the divestiture business so that it can replicate Bayer as an active competitor in the market.  The conditional clearance of BASF's acquisition of the divestiture business does not prejudge the outcome of that separate competitive assessment. 

The Bayer/Monsanto deal is one the few transactions to date that has raised significant concerns regarding the loss of innovation competition, namely in areas where Bayer and Monsanto competed head-to-head in innovation and Bayer was the main challenger of dominant Monsanto. 

According to public sources, during the American Bar Association Antitrust Law 2018 Spring Meeting, Mr. Carles Esteva Mosso, Deputy Director - General Mergers at the Commission's Competition Directorate, commented that in other areas where the two companies were not close competitors, lines of innovation did not match and where there were other competitors, the Commission did not identify concerns.  

It has also been reported that Mr. Carles Esteva Mosso explained that, as a result of the Commission's preference for structural remedies and, in particular, the divestment of standalone and viable businesses:

• the Dow/DuPont merger remedy package included the sale of the entirety of DuPont's R&D facility in Philadelphia; and 
• the Bayer/Monsanto remedy package included Bayer's entire seeds and traits innovation facility.