CADE approves with restrictions Bayer’s acquisition of Monsanto
The Administrative Council for Economic Defense – CADE approved on 07 February the merger between Monsanto Company and Bayer Aktiengesellschaft (Merger No. 08700.001097/2017-49,). The approval was conditioned to the signature of a Merger Control Agreement (ACC in its acronym in Portuguese) proposed by the parties within CADE’s Administrative Tribunal. In this merger, Bayer acquired Monsanto’s unitary control.
Bayer has three business areas: Pharmaceuticals Divisional, Consumer Health and Crop Science, and operates in 75 countries. Monsanto Company has activities in 67 countries and operates in Brazil through its subsidiaries.
CADE’s General Superintendence assessment identified competition problems linked to horizontal overlaps and reinforcement of vertical integrations in the markets of soybean seeds and transgenic cotton. Moreover, the evidentiary stage also pointed out that issues related to conglomerate effects could arise from the operation in related markets.
Considering the concerns identified by CADE, the companies proposed remedies to address the competition concerns. The main remedy consists in the divestment of all the current Bayer’s assets that are related to the soybean seeds and cotton businesses, as well as the unit of non-selective herbicides based on ammonium glufosinate. This divestment will occur through the selling of the soybeans and herbicides units to BASF (for an approximate value of € 5.9 billion).
In his vote, the Reporting Commissioner of the case, Paulo Burnier da Silveira, highlighted that the “structural remedies proposed by the parties are significant and address satisfactorily the main concerns identified by CADE”.
Burnier argued that the structural remedy solves all horizontal overlaps created by the merger in Brazil. As it eliminates the competition problems resulting from horizontal concentration, the remedy also addresses competition concerns related to the reinforcement of vertical integrations in the affected markets.
In addition to the structural remedies, Bayer and Monsanto also proposed behavioral commitments that involve the transparency of the commercial policies, the prohibition to impose exclusivity on the sales channels, tie-in sales and bundling, as well as a wide and non-discriminatory licensing practice of its products. A Trustee will support the monitoring of the commitments agreed in the ACC.
The Tribunal, in its majority, followed the Reporting Commissioner’s vote and approved the acquisition with the conditions above. Two dissenting Commissioners voted to block the transaction.
The merger analysis counted on intense international cooperation between CADE and competition authorities from other countries. Among them are the authorities from European Union, India, Russia, South Africa and United States. In total, 29 jurisdictions were notified of the transaction, and in half of them the conclusion of the analysis is still pending – in particular the Department of Justice of the United States and the European Commission.
During the initial phase of the merger, when consulting the competitors, clients and associations, the CADE’s General Superintendence received complaints that the parties could have been adopting unilateral conducts with anticompetitive effects in the markets of soybean seeds and of cotton.
The General Superintendence, understanding that these complaints were not directly related to the transaction, decided to initiate an preliminary investigation procedure, the Administrative Inquiry nº 08700.000270/2018-72, aiming to investigate possible conducts of abuse of dominance by these companies. The preliminary investigations are underway.