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CADE’s General Superintendence issues opinion about the transaction between John Deere and Precision Planting

Acquisition

The transaction will be analyzed by CADE’s Tribunal, responsible for the final decision
published: Nov 17, 2016 10:56 AM last modified: Nov 17, 2016 11:00 AM

In a decision published in the Official Gazette on November 14,  the General Superintendence of the Administrative Council of Economic Defense – CADE submitted to its Tribunal the analysis of the transaction for the acquisition of the company Precision Planting LLC’s, from the Monsanto’s group, by Deere & Company (Administrative Proceeding No. 08700.000723/2016-07).

According to the General Superintendence’ opinion, the acquisition would be likely to cause anticompetitive effects in the planting system market - machines used in the planting of large seeds as beans, corn, soy beans and other grains. Such effects would occur considering that Precision Planting’s independence as a supplier of machines components maintains competition in the market by allowing companies to compete effectively with John Deere – which produces and distributes planting machines in this specific market. 

The report also stated that if the transaction is concluded, the parties would have the power and the incentives to adopt discriminatory practices, affecting other companies that acquire Precision Planting components. Also, the transaction would discourage the introduction of innovative products, which are not available for rural producers, in the Brazilian market. In addition, the acquisition would allow Deere’s access to sensitive information of several competitors, that use or intend to use Precision Planting components.

CADE’s Tribunal will be responsible for the final decision on the approval, disapproval or adoption of remedies to mitigate the competition concerns identified in the transaction. The Tribunal's decision can be applied unilaterally or by means of an agreement negotiated with the parties. The proceeding will be referred to a commissioner responsible for reporting the case and presenting it for the board’s judgment.

The operation was notified on February 1st and amended on July 22. From the date of the amendment, CADE has 240 days, which can be extended for  additional 90 days, to review and issue a decision on the transaction.

Understanding the case

The Brazilian planting system market has several national and foreign competitors. Deere, which produces and distributes these machines, is the main competitor, with a market share of 50%. The company also manufactures components that work only with its own planting machines.

Precision Planting produces and distributes components that are compatible with a variety of precision farming machines currently on the market, granting a high-speed precision planting. These components are distributed for planting producers, in order to be incorporated in new machines at the manufacturing facilities, and for rural producers, for the replacement or modernization of old planting machines.

According to the companies heard by the General Superintendence, Precision Planting has higher technology standards when compared to the others producers that operates in the national market. In Brazil, Precision Planting already distributes components for some planters manufacturers that compete with Deere.