On 22 August 2017 the European Commission opened a Phase II investigation into the proposed acquisition of Monsanto Company by Bayer AG for US $66 billion. Bayer is a German-headquartered diversified pharmaceuticals, consumer health, agriculture and animal health company. Monsanto is a US-headquartered agriculture company, involved in the production of seeds, pesticides and herbicides. Both companies are active in digital agriculture[1] as well as research and development (R&D) of crop protection products. The proposed concentration would create the world’s largest integrated pesticides and seeds company, at a time of significant consolidation within the agrochemicals industry. 

The agrochemicals industry: all change

Bayer/Monsanto is the last of three transformative concentrations within the agrochemicals sector, preceded by Dow/DuPont and ChemChina/Syngenta, both conditionally cleared by the Commission at Phase II on 27 March 2017 and 5 April 2017, respectively. Each transaction was assessed on its own merits, but also subject to the ‘priority’ rule: the transaction that is notified first is assessed first. Bayer/Monsanto will therefore be assessed in light of the market structure created after the Dow/DuPont and ChemChina/Syngenta mergers. 

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The Commission’s in-depth Phase II investigations of Dow/DuPont and ChemChina/Syngenta both resulted in remedies to alleviate competition concerns; the same can be expected for Bayer/Monsanto. Bayer/Monsanto – like Dow/DuPont and ChemChina/Syngenta – is a global concentration being investigated by competition authorities worldwide; the Commission’s assessment will necessarily focus on European competition concerns, but assessments (and potential remedies) in other jurisdictions may cover different aspects of the acquisition. 

The Commission has found the agrochemicals sector to be characterised by: (i) expensive and timeconsuming R&D processes; (ii) the importance of innovation and pipeline products; (iii) high barriers to entry; (iv) highly segmented markets (based on the target crop, method of application, etc) leading to numerous, narrowly defined innovation spaces; and (v) a concentrated market structure, with a limited number of globally integrated players. These attributes have influenced the competition analysis of these recent industry consolidations, with Dow/DuPont principally being guided by the protection of product and innovation competition, while ChemChina/Syngenta focussed on the companies’ positions within the many affected markets. 

Dow/DuPont: innovation and market concentration

Dow/DuPont concerns the US $130 billion merger of equals between the Dow Chemical Company and E. I. du Pont de Nemours and Company, both US-based chemicals companies active in the crop protection sector. The transaction was announced on 11 December 2015 and notified to the Commission on 22 June 2016. The Commission opened a Phase II investigation on 11 August 2016 and conditionally cleared the merger on 27 March 2017. The deal was finally closed on 31 August 2017 after receipt of all required merger clearances around the world. 

Recognising the importance of innovation to the industry, the Commission was primarily concerned with product and innovation competition in relation to crop protection products. At the time, Dow and DuPont were two of only five global integrated players (i.e. active at all levels of the value chain, from discovery to R&D to distribution) in the agrochemicals industry. In assessing the crop protection product portfolios (including both existing and pipeline products), the Commission considered that competition from generic companies (involved in the development and sale of off-patent products, rather than innovation and discovery of new molecules) was limited for both herbicides and insecticides. Given the introduction of successful pipeline products, recently for insecticides and imminently for herbicides, the Commission recognised the strength of the parties’ combined crop protection portfolio. As a result of these factors, the Commission concluded that the proposed transaction significantly impeded competition in numerous markets. 

The Commission was also concerned that Dow and DuPont were two of only a few global R&D companies with the capability to innovate in certain narrowly defined innovation spaces. The Commission considered that Dow and DuPont were both important innovators and close innovation competitors, and that alternative R&D companies were unlikely to offset the reduction of innovation brought about by the proposed transaction, particularly given the concentrated market structure with high barriers to entry. 

The remedy required the divestment of DuPont’s R&D organisation and aspects of DuPont’s herbicides and insecticides business. FMC, a US-based generic player in the agrochemicals industry, has agreed to purchase the DuPont divestment business in an asset-swap deal, whereby DuPont will acquire FMC’s health and nutrition business. On 27 July 2017 the Commission conditionally cleared both parts of the asset-swap deal. The need for remedies in this spin-off transaction is a further indication of the nature of the agrochemicals industry, with a limited number of players competing in highly segmented markets identified by the Commission. 

ChemChina/Syngenta: guided by market structure

ChemChina/Syngenta concerns the US $43 billion acquisition of Syngenta AG, a Swiss-headquartered global integrated R&D agrochemicals company, by China National Chemical Corporation (ChemChina), a Chinese State-owned enterprise primarily active through its subsidiary, Adama, as a generic agrochemicals supplier. The deal was announced on 3 February 2016 and formally notified to the Commission on 23 September 2016; a Phase II investigation was opened on 28 October 2016 and conditional clearance was given on 5 April 2017. 

The Commission’s assessment was shaped by the differences in company profile and position of Syngenta and ChemChina: Syngenta is active throughout the value chain of crop protection products whereas ChemChina, through Adama, is a generic player. Therefore, unlike Dow/DuPont, loss of innovation concerns were not central to the assessment. 

The Commission focussed on off-patent crop protection products, where Syngenta and Adama compete in many product and geographical markets. Given the number and extreme heterogeneity of the affected markets, the Commission’s assessment involved a case-by-case analysis of the closeness of competition in each market. In some markets, there were marginal market share increases but the evidence on closeness of competition indicated significant competitive constraints between the parties’ products; conversely, some markets with high market shares exhibited limited competitive constraints. The Commission considered that over 100 overlaps were problematic due to a lack of alternatives post-merger and the close competition between Syngenta and Adama. Accordingly, the Commission accepted a comprehensive remedy proposal, which involved the divestiture of either Syngenta’s or Adama’s products in all these problematic markets, but did not require the inclusion of any production facilities. 

Bayer/Monsanto: next steps

Bayer and Monsanto announced their proposed concentration on 14 September 2016. After extended prenotification discussions, the merger notification was formally filed with the Commission on 30 June 2017. On 31 July 2017 the parties submitted commitments to address the Commission’s initial concerns; however, the Commission considered these commitments insufficient to alleviate its serious doubts, and did not market-test them. Instead, it opened Phase II proceedings. It provisionally has until 8 January 2018 to clear or prohibit the proposed concentration. In parallel, the Commission is cooperating closely with other competition authorities assessing this transaction, including those of the US, Australia, Brazil, Canada and South Africa.

The Commission’s initial market investigation revealed concerns in relation to pesticides, seeds and traits (characteristics of plants, such as herbicide tolerance or disease resistance, which can be developed in laboratories and introduced in certain plant varieties). In these areas, Bayer and Monsanto are two of a limited number of competitors and both companies have invested heavily in relevant R&D. Additionally, as the merged entity would be the largest integrated company in the agrochemicals industry, the

Commission has concerns regarding whether competitors’ access to distributors or farmers would become more difficult if Bayer/Monsanto were to bundle or tie their products or through the use of digital agriculture. 

The deal has also come under significant scrutiny and criticism from third parties, who have expressed concerns about food safety, consumers, the environment and the climate. Margrethe Vestager, the European Commissioner for Competition, has made clear that the Commission’s mandate is to assess the merger solely and impartially from a competition perspective.


The Bayer/Monsanto merger review comes at an interesting time, given the market structure and recent industry consolidation. The Commission’s analysis is likely to be informed by the companies’ profiles and positions within the industry: Bayer is one of the global integrated players in the agrochemicals sector, whereas Monsanto is considered to be a generic player. In this sense, the pair follows a similar structure to ChemChina/Syngenta. Nonetheless, Monsanto is active in R&D for pesticides, seeds and traits, areas in which the Commission has already expressed preliminary concerns. Considerations of product and innovation competition, as employed in the Dow/DuPont case, are also likely to be of significance in the Commission’s assessment, especially given both companies’ investment in digital agriculture.