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European Commission launches in-depth investigation of Bayer acquisition of Monsanto

The European Commission has opened an in-depth phase 2 investigation into the proposed acquisition of Monsanto by Bayer.24 Aug 2017

The Commission is concerned that the merger could reduce competition in the markets for pesticides, seeds and traits, it said.

An in-depth investigation is opened when the Commission has concerns that a transaction could restrict competition in the internal market and the parties have not offered satisfactory commitments in phase 1 to resolve those concerns.

The acquisition of Monsanto by Bayer would create the world's largest integrated pesticides and seeds company. Both companies are active in developing new products in non-selective herbicides, seeds, traits, and digital agriculture, the Commission said.

These industries 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", it said.

The Commission cleared the Dow and Dupont merger in March, subject to conditions including the divesture of much of DuPont's pesticide business. ChemChina acquisition of Syngenta was approved in April based on ChemChina divesting significant parts of its European pesticide and plant growth regulator business.

The Commission will 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", it said. 

Digital agriculture is 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, the Commission said.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com said: "This merger will receive a great deal of scrutiny given the rapid consolidation in the global agrochemical market and the importance of the sector to consumers, farmers and the environment. It is very likely that similar concessions to those obtained in the Dow / Dupont and ChemChina / Syngenta mergers, including business divestments, will be required by the Commission to get the deal cleared and to resolve concerns about prices, quality, choice and innovation."

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 investigation may last up to 90 days.

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