Commissioner Margrethe Vestager, in charge of competition policy, said: "We have approved Bayer's plans to take over Monsanto because the parties' remedies, worth well over €6 billion, meet our competition concerns in full. Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger.
In particular, we have made sure that the number of global players actively competing in these markets stays the same. That is important because we need competition to ensure farmers have a choice of different seed varieties and pesticides at affordable prices. And we need competition to push companies to innovate in digital agriculture and to continue to develop new products that meet the high regulatory standards in Europe, to the benefit of all Europeans and the environment."
Today's decision follows an in-depth review of Bayer's proposed acquisition of Monsanto. Monsanto is the world's largest supplier of seeds, which generates most of its sales in the US and Latin America. Monsanto also sells glyphosate, which is the most used pesticide worldwide to control weeds. Bayer is the second largest supplier of pesticides worldwide, with a stronger focus in Europe. It is also an important globally active seeds supplier for a number of crops. The transaction creates the largest global integrated seed and pesticide player.
As part of its in-depth investigation, the Commission has assessed more than 2,000 different product markets and reviewed 2.7 million internal documents. It concluded that the transaction as notified would have significantly reduced competition on price and innovation in Europe and globally on a number of different markets. The Commission also had concerns that it would have strengthened Monsanto's dominant position on certain markets, where Bayer is an important challenger of Monsanto.
The commitments submitted by Bayer address these competition concerns in full:
- They remove all of the parties' existing overlaps in seed and pesticide markets, where concerns were raised, by divesting the relevant Bayer businesses and assets.
- They cover Bayer's global R&D organisation for seeds and traits as well as Bayer's research activities to develop a challenger product to Monsanto's glyphosate. They also cover certain Monsanto assets, which in future would have competed with a Bayer seed treatment against nematode worms.
- Finally, Bayer has committed to grant a licence to its entire global digital agriculture product portfolio and pipeline products to ensure continued competition on this emerging market.
On this basis, the Commission concluded that the divestment package enables a suitable buyer to sustainably replace Bayer's competitive effect in these markets and continue to innovate, for the benefit of European farmers and consumers.
Bayer has proposed BASF as purchaser for the remedy package. The Commission's assessment is ongoing whether a) the divestiture to BASF meets all purchaser requirements, and b) whether it creates any problematic overlaps or raises other competition concerns (see further below).
Bayer and Monsanto can only implement the transaction when the Commission has completed its review of the proposed buyer.
The Bayer/Monsanto transaction is the third in a row in the seeds and pesticides sector. In line with its case practice, the Commission assesses transactions taking place in the same industry according to the so-called "priority rule" - first come, first served. The assessment of the merger between Bayer and Monsanto has been based on the market situation following the Dow/DuPont merger and the ChemChina/Syngenta merger, taking the remedies in both cases into account.
When it comes to seeds and pesticides there are of course other vital concerns that go beyond competition policy, including consumer protection, food safety and ensuring the highest standards for the environment and the climate. The strict national and European regulatory standards on these matters will remain just as strict after this merger as before it and continue to apply (see further below).
The Commission's competition concerns
The Commission's in-depth investigation identified the following competition concerns:
a) Seeds and traits
Seeds are arguably the most important input for farmers, who need a choice of seed varieties that bring high yields in the soil and climate that the crop is cultivated in. Monsanto is the largest supplier of seeds in the world. Bayer is a comparatively smaller player, active in selected crops, but it has extensive research & development (R&D) activities. In Europe, Bayer and Monsanto compete in the supply of vegetable seeds, oilseed rape seeds and cotton seeds, and Bayer has generally been an active and important challenger to Monsanto.
The parties also compete in genetically-modified (GM) and non-GM traits. Traits are modifications to the genome of a seed that make the seed tolerant to certain herbicides or resistant to pests. Traits can be found in nature (native traits) or created with the help of biotechnological tools. They qualify as GM or non-GM traits depending on the biotechnology used to bring the trait into the seed. The trend in the industry goes towards the sale of seeds, which contain several 'stacked' trait combinations.
Vegetable seeds
Monsanto is globally the largest supplier of vegetable seeds with its Seminis and De Ruiter brands, and Bayer is currently the fourth largest player in the sector, with its Nunhem's brand. The Commission concluded that the transaction as notified would have eliminated important head-to-head competition in several markets for particular vegetable seeds, where few alternatives were available to farmers.
Broadacre seeds
Broadacre seeds cover all seed crops that are cultivated on large plots of lands, such as corn, soy, wheat, oilseed rape, cotton seeds.
The activities of Bayer and Monsanto overlap in Europe in two crops namely oilseed rape and cotton seeds. The Commission had concerns that:
o Oilseed rape seeds: the transaction as notified would have eliminated competition in Europe between the largest supplier in Europe Monsanto and the largest supplier globally, Bayer, which is currently expanding into Europe.
o Cotton seeds: the transaction as notified would have eliminated competition in the licensing of cotton seeds in Europe.
Broadacre traits
Monsanto is the dominant player in the global trait business with its "Round Up Ready" trait stack families. Bayer with its "Liberty Link" trait stack families is an important and active competitor.
While many GM traits are not allowed for cultivation in Europe, the Commission has investigated the effects of the merger on the global market for the licensing of traits and trait stacks where Bayer and other European players such as BASF, Limagrain, KWS or Syngenta are active as licensors or licensees and directly affected by the merger.
The Commission found that the transaction as notified would have:
o eliminated competition between "Liberty Link" trait stack families (Bayer) and "Round Up Ready" trait stack families (Monsanto);
o eliminated innovation competition on GM and non-GM traits conferring herbicide tolerance or insect resistance; and
o strengthened Monsanto's dominance in traits conferring herbicide tolerance or insect resistance.
b) Pesticides
Pesticides are products used in agriculture to control pests that can harm crops. Herbicides are pesticides that control weeds.
The Commission found that the transaction as notified would have:
o eliminated competition in non-selective herbicides for agricultural and non-agricultural uses between Bayer's glufosinate (under its ‘Liberty' and ‘Basta' brands) and Monsanto's glyphosate (under its ‘Round-up' brand); and
o eliminated innovation competition in herbicides and herbicide systems (i.e. herbicide combined with a trait conferring herbicide tolerance to a crop).
The Commission also found that the transaction as notified would have eliminated potential competition in seed treatment to protect against nematode worms between Bayer's and Monsanto's future products (called Nemastrike).
c) Digital agriculture
Digital agriculture uses public data such as satellite pictures and weather data as well as private data collected from farmers' fields. It applies agronomic knowledge and algorithms to that data to recommend to farmers how to best manage their fields. For example, how many seeds to use, and on how much and when to use pesticide and fertiliser. This makes digital agriculture important, not only to farmers but also to the environment.
The transaction as notified would have resulted in the loss of potential competition in Europe between Bayer's recently launched Xarvio offering and Monsanto's FieldView platform, the leading platform worldwide, which is about to be launched in Europe.
d) Initial competition concerns not confirmed by the in-depth investigation
Finally, the Commission also looked into the effect of the proposed transaction on innovation in biological pesticides and bee health, and investigated whether the merged entity would have had the ability to exclude competitors from the market through bundling of seeds and pesticides products at distributor level or at grower level. However, the in-depth investigation did not confirm any of these concerns
The commitments
Bayer offered a set of commitments that fully address the Commission's competition concerns.
a) Vegetable seeds
Bayer has committed to divest its entire vegetable seed business, including its R&D organisation, to a suitable buyer currently not active in vegetable seeds. This would allow the buyer to replicate the competitive constraint previously exercised by Bayer on Monsanto and ensure that the number of global vegetable seeds R&D players remained the same.
b) Broadacre seeds and traits
Bayer has committed to divest to BASF almost the entirety of its global broadacre seeds and trait business, including its R&D organisation. The divestiture would include Bayer's seed activities, not only in oilseed rape and cotton where Bayer's activities overlap with Monsanto in Europe, but also in soybean and wheat, which are important globally and will ensure the viability and competitiveness of the divested business. It would also include Bayer's entire trait business, including its R&D on GM and non-GM traits.
The divestiture of the seeds and trait business to BASF, which is currently not selling seeds, would remove all the horizontal overlaps between the parties It would also ensure that the current number of global integrated traits players remained the same at four players (with DowDuPont and Syngenta) and ensure that the current number of global broadacre seeds players remained at six (with DowDuPont, Syngenta, KWS and Limagrain).
c) Pesticides
Bayer has committed to divest to BASF its glufosinate assets and three important lines of research for non-selective herbicides. This research forms part of the race to find challenger products for glyphosate. The divested assets would enable BASF, which is currently not selling non-selective herbicides, to replicate the competitive constraint previously exercised by Bayer on Monsanto both in herbicides and in herbicide systems.
To address the Commission's concerns in seed treatments to protect against nematode worms, the parties have also committed to divest to BASF Monsanto's nematode seed treatment assets (Nemastrike). This would enable BASF to replicate the competitive constraint, which Monsanto would have exerted on Bayer absent the merger.
d) Digital agriculture
Bayer has committed to licence a copy of its worldwide current offering and pipeline on digital agriculture to BASF, maintaining competition by allowing BASF to replicate Bayer's position in digital agriculture in the European Economic Area (EEA). This will ensure that the race to become a leading supplier in Europe in this emerging field remains open.
Divestiture to BASF
Bayer proposed in the commitments BASF as the purchaser of the main part of the remedy package comprising broadacre seeds and traits, pesticides and digital agriculture activities.
At first sight, BASF appears to be a suitable buyer because the fact that BASF does not currently sell seeds or non-selective herbicides means there are limited horizontal overlaps in these areas. Furthermore, BASF owns a complementary global pesticide business and it has the necessary financial strength to compete. A market test of competitors and customers was largely positive about the suitability of BASF as a purchaser.
However, Bayer and BASF need to provide further evidence to the Commission on BASF's ability and incentives to run and develop the divested business in order to replicate Bayer as an active competitor of the merged entity, and on possible overlaps in particular in trait and herbicide research.
The outcome of this investigation cannot be prejudged at this stage. Bayer can only implement the acquisition of Monsanto once the Commission has formally assessed and approved the finalised divestiture of the package of assets to BASF.
For vegetable seeds, the commitments did not name a buyer. In the meantime, Bayer has also proposed BASF as a buyer for this part of the remedy. This part of the remedy also requires a purchaser approval.
The divestiture to BASF of the two packages triggered in the meantime a separate and parallel merger notification, the outcome of which can also not be prejudged.
International Cooperation
The Commission has cooperated very closely with a number of competition authorities on this case, including among others the US Department of Justice as well as among others the Australian, Brazilian, Canadian, Chinese, Indian and South African competition authorities.
Concerns in addition to competition concerns
During its investigation, the Commission has been petitioned through emails, postcards, letters and tweets expressing concerns about the proposed acquisition. The Commission's mandate under the European merger control rules is to assess the merger solely from a competition perspective. This assessment must be impartial and is subject to the scrutiny of the European Courts.
Other concerns raised by the petitioners relate to European and national rules to protect food safety, consumers, the environment and the climate. While these concerns are of great importance, they cannot form the basis of a merger assessment. Please also see Commissioner Vestager's response to the petitions published in August 2017.
Companies and products
Bayer, headquartered in Germany, is a diversified pharmaceuticals, consumer health, agriculture (Bayer Crop Science) and animal health company. This transaction mainly concerns the Bayer Crop Science division. Bayer Crop Science operates three business segments: (i) Crop Protection (i.e. pesticides); (ii) Seeds and Traits; and (iii) Environmental Science. Bayer is also active in developing and providing digital agriculture services.
Monsanto, headquartered in the US, is an agriculture company which produces seeds for broad acre crops, fruits and vegetables as well as plant biotechnology traits. It also supplies pesticide products, including the glyphosate herbicide under the “Roundup” brand, and other herbicides for agricultural and non-agricultural use. Additionally, Monsanto is involved in research on biological agriculture and provides farmers with digital agriculture services under the 'Field View' brand through its 'Climate Corporation' business.
Merger control rules and procedure
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently three on-going phase II merger investigations: the proposed merger between Praxair and Linde,the proposed acquisition of Cristal by Tronox, and the proposed acquisition of Ilva by ArcelorMittal.
More information will be available on the competition website, in the Commission's public case register under the case number M.8084.
The Commission has today decided to give conditional approval to Bayer's plans to buy Monsanto under EU merger rules. We were able to do so because of the significant remedies the companies offered, which met our competition concerns in full.Both companies are major players in the seeds and pesticides industries. In this sector, Bayer generates the vast majority of its sales from pesticides and less than a fifth from seeds. Monsanto on the other hand generates most of its turnover from seeds. About a third comes from the sale of pesticides – mostly glyphosate, which is the most used pesticide worldwide to kill weeds.
In terms of geographic footprint, Bayer makes about 30% of its sales in Europe, whilst Monsanto makes less than 10% of its sales in Europe.
So, the two companies have different strengths, also when it comes to their size in Europe. But combined, the transaction creates the world's largest player active in both seeds and pesticides.
Our in-depth investigation raised concerns that the transaction as notified would have significantly reduced competition in a number of markets in Europe and globally. It would also have significantly reduced innovation, which is very important to develop seeds with a higher yield or pesticides that are less toxic, less damaging to the environment.
In response, the parties have submitted a remedy package worth well over 6 billion euros. It removes all problematic overlaps between the parties' activities. And it ensures that the number of global players actively competing and innovating in seeds and pesticides remains the same, before and after the merger.
That's important because we need competition to make sure farmers have a choice of different products at affordable prices. And we need competition to push companies to continue develop new products that meet the high regulatory standards in Europe, to the benefit of all Europeans, consumers and farmers alike, and the environment.
It is our job as a competition authority to make sure mergers don't deny Europeans the benefits of competition – neither today nor tomorrow. And this is what our decision today does.
The Commission's competition concerns and the parties' remedies
To give you a bit more detail about our competition concerns and how they have been addressed:
As regards seeds, Bayer and Monsanto compete in Europe in the markets for vegetable seeds, such as tomato or cucumber seeds. They also compete in oilseed rape and cotton seeds. The transaction would have removed important competition on seeds between the parties and left farmers with fewer alternatives.
Furthermore, Bayer is challenging Monsanto on the global markets for the development and licensing of traits that genetically modify seeds, so they become tolerant to certain pesticides or resist insects.
In response to both concerns, Bayer has committed to divest almost all of its global seeds and trait business, including its research & development organisation. Divesting such a standalone business helps ensure that it would be viable and competitive in the hands of a purchaser. The divestment also includes Bayer activities that do not compete with Monsanto in Europe but are important globally, namely soybeans and wheat.
As regards pesticides, Bayer's glufosinate competes with Monsanto's glyphosate. Bayer is also very active in the research race to develop a challenger to glyphosate. We were concerned that some of this important innovation effort would be lost after the merger. The parties have therefore agreed to divest Bayer's glufosinate business as well as those research activities. They will also divest certain Monsanto assets in seed treatments to ensure this market stays competitive.
Finally, both companies are active in the emerging market of digital agriculture. Digital agriculture recommends to farmers how many seeds to use, how much pesticide to spray and how much fertiliser to spread. It bases these recommendations on field data, weather data, agronomic knowledge and algorithms. Thus, this technology can, for example, help to minimise the use of pesticides. This makes digital agriculture important, not only to farmers but also to the environment.
Bayer has recently launched in Europe its product family called Xarvio and Monsanto was about to launch in Europe its competing FieldView platform.
In response to our concerns, Bayer has committed to licence to the remedy-taker its global digital agriculture products and pipeline products. This would ensure that the race to become a leading supplier in Europe in this field remains open.
Divestiture to BASF
After an in-depth review, our assessment confirmed that this extensive remedy package removes all the competition concerns raised by this merger.
Our decision requires Bayer to sell this package to a suitable purchaser. Bayer has chosen BASF. BASF is not currently active in seeds markets. It also does not sell a herbicide in Europe that competes with glyphosate.
At first sight, it seems that BASF has the potential to be suitable to replace Bayer's competition. It has the global scale and financial strength to compete.
But we will now carefully review whether BASF indeed meets all the purchaser requirements and whether the terms of the sale are in line with Bayer's commitments. This includes looking at whether new or existing links between BASF and the parties would negatively affect BASF's ability or incentives to compete. This is a complex task, also given the size of the remedy package.
Separately, we are assessing whether the sale to BASF itself raises any competition concerns. Our current deadline to take a decision is 16 April.
Bayer will only be allowed to implement the takeover of Monsanto after the Commission has assessed and approved the sale of the remedy package to BASF.
International cooperation
Finally, since Bayer and Monsanto are globally active, the transaction is being reviewed by a number of different competition authorities worldwide.
The merger's effect on competition in other jurisdictions can be different, depending on the crops that are grown there, market structures and the regulatory framework.
For example, much of Monsanto's strength stems from its portfolio of genetically modified traits that it adds to seeds to modify them. Most of these modified seeds are not permitted in the EU. That's why Monsanto's position in seeds is less strong here than in jurisdictions, where GMOs are widely used.
As always, we have been working closely with our colleagues across the world. Some investigations, including by the US Department of Justice, are still ongoing. The Brazilian, Chinese and South African competition authorities have cleared the transaction with conditions that addressed their competition concerns – and also work with our conditions.
An industry in transformation
There has been a lot of public interest in this case and we have received over a million petitions, emails and tweets raising concerns about allowing this merger to go on. Many were worried about the negative effects on consumers and farmers through decreased competition.
I understand why.
Today's transaction is the third in a series of mergers that are reshaping the sector. Last year, Dow merged with DuPont and ChemChina bought Syngenta. And together, Bayer and Monsanto would be even bigger.
That is a lot of change in a short time. But EU merger control has made sure that none of these mergers has resulted in less competition on price or innovation in Europe.
In each case, the parties had to make significant commitments that protect effective competition. These ensured that no research and development capabilities were lost, in an industry where innovation is particularly important. And the commitments ensured there continues to be strong competition in each area:
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There will still be four global players in seeds and traits, as before. Bayer can only merge with Monsanto, if we find that BASF can replace Bayer as the fourth player by essentially taking over Bayer's current seeds and trait activities. And the merging parties will also continue to face strong competition from Dow/DuPont and Syngenta as well as from pure seeds players such as Limagrain and KWS.
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And in pesticides, there will still be five global players. Bayer/Monsanto will continue to meet competition from BASF, Syngenta and Dow/DuPont. In addition, when we approved the Dow/DuPont merger in July last year, we ensured that FMC could take over DuPont's place as the fifth competitor in this area.
In each case we looked at whether there are any anti-competitive effects that go beyond the areas in which the merging companies compete head to head. In other words, whether companies would create combined solutions based on their own seeds and their own pesticides, making it harder for others to compete. Our conclusion was no. In Europe, even players as big as Bayer/Monsanto and Dow/DuPont would struggle to create combined solutions that could significantly hamper the ability of other players, such as BASF or Syngenta, to compete for customers.
Concerns in addition to competition
At the same time, many citizens have reached out to express concerns that go beyond competition policy. For example, concerns on the risks that GMOs and glyphosate may pose for the human health and the environment. These are concerns that go to the question of what kind of society we want to live in and what kind of regulation should apply to our agriculture.
It is an important debate that goes beyond this transaction and competition policy. We have strict regulatory standards in the EU that protect human health and the environment. These are overseen by my colleague Vytenis Andriukaitis and national regulatory authorities for health and environment.
For example, the Commission is preparing a proposal to further restrict the use of certain insecticides called "neonicotinoids". That's because there is a lot of scientific evidence demonstrating their use represents a risk to wild bees and honeybees.
And we will of course remain just as strict to protect these standards no matter whether this merger goes ahead.
Finally, just a few words on digital change. As with any part of the economy, digital technology is also changing the face of conventional agriculture. As digital agriculture and the use of big data become increasingly important, the question of who controls access to the data matters here, too. The agricultural sector is currently working on an industry Code of Conduct on data ownership and access. Last September, the Commission proposed a framework on the free flow of non-personal data in the EU, which encourages the development of such rules across sectors to facilitate data access and portability.
And that also shows why we have both regulation and competition enforcement. Markets that are open to competition still need the right regulation. There are some things, like our health, our environment, our data, that cannot just be left to the market. Because it is when competition enforcement and regulation each fulfil their role that we get a market that really serves European consumers, farmers and the environment.
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We have also taken a second competition decision today. We fined producers of capacitors a total of 254 million euros for taking part in a global 14-year cartel. The nine companies involved are all based in Asia.
Capacitors are electrical devices which store energy. They are used in almost all electric and electronic products such as televisions, PCs, smartphones or refrigerators. So most European households are affected by this cartel.
The cartel contacts took place mostly in Asia, but the cartel behaviour was implemented globally, including in Europe. The companies met each other regularly and exchanged commercially sensitive information on future prices and on future supply and demand needs.
The cartelists concealed the existence of the cartel. For example, emails between them included reminders such as "Discard after reading" and "After reading this email, please destroy it without stowing it away". This shows that the participants were fully aware that their behaviour was wrong.
Also in this case, our intervention is part of a global effort. The competition authorities in Brazil, Japan, Singapore and Taiwan have already imposed fines to participants in the capacitors cartel. Investigations are still ongoing in the US and Korea.
Today's cartel decision again demonstrates that we will not tolerate anti-competitive behaviour by companies that may affect European consumers, even if the coordination takes place outside Europe.
Thank you.
