European Commission Investigates Bayer-Monsanto Merger
The European Commission (EC) has opened an in-depth investigation to assess the proposed acquisition of Monsanto by Bayer under the EU Merger Regulation, as the Commission has concerns that the merger may reduce competition in areas such as pesticides, seeds and traits.
The proposed acquisition of Monsanto (US) by Bayer (Germany) would create the world's largest integrated pesticides and seeds company. It would combine two competitors with leading portfolios in non-selective herbicides, seeds and traits, and digital agriculture. Both companies are active in developing new products in these areas. Moreover, the transaction would take place 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.
Commissioner Margrethe Vestager, in charge of competition policy, said: “Seeds and pesticide products are essential for farmers and ultimately consumers. 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.”
The Commission's preliminary concerns
The EC has preliminary concerns that the proposed acquisition could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice and less innovation. In particular, the initial market investigation identified preliminary concerns in the following three areas:
Pesticides
Monsanto's pesticide product glyphosate is the most sold non-selective herbicide in Europe. Bayer produces glufosinate ammonium, also a non-selective herbicide and one of the very few alternatives to glyphosate. 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.
Seeds
Bayer and Monsanto are both active in the breeding of vegetable seeds. The Commission's initial investigation shows that the 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.
Traits
A trait is a characteristic of a plant, such as height, herbicide tolerance and insect or disease resistance, and can be developed in laboratories and introduced in certain plant varieties.
The Commission's preliminary investigation indicates that Monsanto has a dominant position in several traits markets worldwide. Bayer is one of the few competitors to Monsanto in certain traits markets, and has notably developed alternative herbicide tolerance traits to Monsanto's. 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 cooperation.
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. Digital agriculture consists in the collection of data and information about farms with the aim of providing tailored advice or aggregated data to farmers. Both Bayer and Monsanto are currently investing in this emerging technology.
Last year, Bayer AG announced its intentions to purchase Monsanto Co. for USD66bn. The deal marks the third large merger within the agriculture inputs sector in recent memory, the other two being ChemChina-Syngenta and Dow-DuPont.
Since then, the two companies have been awaiting the antitrust approval of global powers. Although ChemChina-Syngenta and Dow-DuPont have both been approved. The outcome of the investigation is unclear as of yet, but there are three apparent options: the Commission could approve the deal, it could require some concessions, or it could deny the deal outright. They are expected to make a final decision by January 8.
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