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CADE’s General Superintendence concludes opinion on transaction between Bayer and Monsanto

Acquisition

The merger was forwarded for the analysis of CADE’s Administrative Tribunal
by Assessoria de Comunicação Social published: Oct 04, 2017 10:56 AM last modified: Oct 04, 2017 10:56 AM

On 4 October, the General Superintendence of the Administrative Council for Economic Defense – CADE forwarded its opinion on the acquisition of Monsanto Company by Bayer Aktiengesellschaf for the Administrative Tribunal final analysis (Merger nº 08700.001097/2017-49).

According to the opinion of the General Superintendence, the transaction generates a significant horizontal concentration, especially in the markets of soybean seeds and transgenic cotton (biotechnology), important cultures to the country’s economy, since it merges two of the main competitors in the world, in an already significantly concentrated scenario and with high entry barriers.

Monsanto’s acquisition by Bayer could also increase the concentration level in both production and commercialization of soybean and cotton. The fact that most competitors operating in Brazil depends on these companies to obtain access to seeds’ biotechnology could also harm competition.  

The biotechnology is an essential input to compete in the seeds’ markets, since genetically modified cultures are responsible for most of the Brazilian production. 

According to the General Superintendence, the transaction also reinforces the vertical integration between the markets of biotechnology and production/commercialization of soybean seeds and cotton. The concerns are due to the companies’ capacity to determine the conditions to access biotechnology and the risk of adopting commercial practices that could hinder the competitors’ development.

Innovation

The opinion also points out competition concerns related to a market where integrated solutions are frequent. In this specific case, the transaction results in the merger of two out of the three main players able to simultaneously innovate in biotechnology, genetic improvement of seeds and agricultural pesticides.

After the merger, Bayer would become dominant in central links of the production chain of the main cultures, strengthening the companies’ position in the downstream distribution, which raises competition concerns.

The merger case was forwarded to CADE’s Administrative Tribunal, which is responsible for issuing a final decision – approval, disapproval or the adoption of remedies. The Tribunal’s decision can be applied unilaterally or by means of an agreement with the parties.

The merger was notified on 20 April 2017 and CADE is legally due to issue a final decision within 240 days, which can be extended for 90 more days.