The Bayer-Monsanto Merger – Antitrust Concerns and What’s at Stake

Posted on by Kevin Kenney

On September 14, 2016, Monsanto Co.—a St. Louis based agribusiness giant and seed company—announced its agreement to be acquired by the German chemicals multinational Bayer AG in a deal that would ultimately be worth $63 billion.1 From the start, the deal “that would create the world’s largest integrated pesticides and seeds company” has raised critical regulatory concerns in the United States and across the globe.2

Consider that, before the announcement, the world’s six largest agribusiness companies (or “Big Six”)—which deal in products like seeds, pesticides, and herbicides, and include Monsanto and Bayer—already controlled “75% of the global agrochemical market, 63% of the global seed market, and conducted more than 75% of private sector agricultural research on seeds and pesticides.”3 Add to that the fact that Monsanto’s announcement came right off the heels of two other mega-merger announcements involving Big Six companies—the Dow-DuPont merger agreement announced December 2015, and ChemChina-Syngenta agreement announced February 2016—and it is no wonder the spotlight is shining so bright.4

On December 14, 2016, Senator Mike Lee and Senator Amy Klobuchar, the chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, sent a joint letter to the Federal Trade Commission and Department of Justice, Antitrust Division, “calling for ‘careful consideration’ of [the] three recent proposed agribusiness mergers” while citing concerns brought to light in a September 2016 Senate Judiciary Committee hearing suggesting such a merger could work to the great detriment of U.S. farmers and consumers.5 Similarly, in a forceful report counseling against U.S. approval for the merger, two former Justice Department attorneys highlight the fact that if approved, the Monsanto-Bayer merger would serve to increase market concentration in an already overly-concentrated industry, detrimentally eliminate direct competition for “traits, herbicide, and crop seeds,” violate U.S. antitrust law, and “[l]ikely lead to higher input prices, less choice and higher food prices for consumers.”6

Proponents of the Monsanto-Bayer merger, however, continue to emphasize not only operational synergies and increased shareholder value as justification for the deal, but also the fact that “feeding [an expected] world population of over 9 billion in 2050” necessitates major innovation today—innovation possible only where two market leaders are allowed to come together.7 Werner Bauman, the CEO of Bayer, spoke of the deal as “the kind of revolutionary approach to agriculture that will be necessary to sustainably feed the world.”8

But while the deal certainly has its ardent advocates, many remain unconvinced. In an article considering the effect all three active Big-Six mergers would have on the global food chain, CUNY Law Professor Rebecca Bratspies asks presciently whether, “if one company owned all the seeds for all the food crops planted around the world,” food security would truly be further guaranteed.9 Professor Bratspies asserts that if all three mergers close, “Dow/DuPont and Monsanto/Bayer [would] have a duopoly that controls 75% of the U.S. market for corn seeds, 65% of the market for soybeans, and more than half of the market for crop chemicals”10 and that “[p]ast experience with mergers in [the agribusiness] industry has shown that consolidation leads to increased prices, decreased choice, decreased innovation, and less access to information.”11 If ever there were a circumstance warranting discerning regulatory scrutiny, this must surely be one of them.12

However, U.S. regulators and the Department of Justice have been conspicuously silent on the issue, though allegedly the Department of Justice is “considering the merger.”13  Indeed, it actually seems more likely than not the merger will be approved in the U.S. given that, as early as January 2016, the CEOs of both Bayer and Monsanto met with then President-elect Trump—in what has been characterized as a “productive meeting”—after which “it was announced that following approval … the combined company would commit $8 billion in U.S.-based research and development, as well [as] add additional high-skilled jobs.”14

Indeed, the biggest hurdle for Monsanto and Bayer to date has not been U.S. scrutiny but rather a detailed inquiry launched in August 2017 by the European Commission, the executive arm of the EU, on concerns that the merger might reduce competition in the European pesticides, seeds, and plant development industries and result in “higher prices, lower quality, less choice and less innovation.”15  Pursuant to this investigation, and as recently as October 13, 2017, Bayer agreed to sell a portion of its herbicide assets and “essentially all” of its field crop seeds business to rival BASF SE for 5.9 billion euros in its ongoing effort to secure regulatory approval from the European Commission.16

Undeterred by the ongoing EU investigation, the deal is expected to close in late January 2018 following the scheduled completion of the EU probe that same month.17 Only time will tell if U.S. regulators will make any major demands or initiate a detailed investigation of their own before then.

  1. See Ludwig Burger, Bayer cuts Monsanto deal value to $63.5 billion on revised debt, Reuters (Oct. 26, 2017), https://www.reuters.com/article/us-bayer-results/bayer-cuts-monsanto-deal-value-to-63-5-billion-on-revised-debt-idUSKBN1CV0GK. ↩

  2. Chad Bray, Bayer-Monsanto Deal Faces Deeper Scrutiny in Europe, N.Y. Times (Aug. 22, 2017), https://www.nytimes.com/2017/08/22/business/dealbook/bayer-monsanto-eu.html. ↩

  3. Rebecca Bratspies, Owning All the Seeds: Consolidation and Control in Agbiotech, 47 Envtl. L. 583, 591 (2017); see also Sylvie Bonny, Corporate Concentration and Technological Change in the Global Seed Industry, Sustainability (Sept. 14, 2017), http://www.mdpi.com/2071-1050/9/9/1632/htm. ↩

  4. Bratspies, supra note 3, at 584; see generally Leslie Picker & Michael J. de la Merced, Dow Chemical and DuPont Set Merger and Plans to Split, N.Y. Times (Dec. 11, 2015), https://www.nytimes.com/2015/12/12/business/dealbook/dow-chemical-and-dupont-merger.html. ↩

  5. Press Releases Klobuchar Call For “Careful Consideration” of Three Agribusiness Mergers, Mike Lee US Senator for Utah (Dec. 14, 2016), https://www.lee.senate.gov/public/index.cfm/press-releases?ID=31457244-3F8B-47D5-8381-1C6F4BA9B0D9; see also Jad Chamseddine, Bayer, Monsanto strike $66 billion deal amid antitrust scrutiny, CQ Roll Call (2016), available at Westlaw. ↩

  6. See Maurice E. Stucke & Allen P. Grunes, An Antitrust Review of a Bayer-Monsanto Merger (2016), https://s3-us-west-2.amazonaws.com/sou-assets/Konkurrenz-findings-on-Bayer-Monsanto.pdf; see generally Letter from Nat. Res. Def. Counsel to Renata Hesse, Acting Assistant Attorney Gen., U.S. Dep’t of Justice Antitrust Div. (Dec. 12, 2016) (on file with author), available at  https://www.nrdc.org/sites/default/files/letter-to-doj-re-bayer-monsanto-merger-20161212.pdf. ↩

  7. Steve Forbes, Why the Bayer-Monsanto Deal Deserves Approval, Real Clear Politics (Sept. 26, 2017), https://www.realclearpolitics.com/articles/2017/09/26/why_the_bayer-monsanto_deal_deserves_approval_135088.html; see generally Dana Varinsky, Trump could approve a giant merger that’s scaring American farmers, Business Insider (Feb. 5, 2017, 11:22 PM), http://www.businessinsider.com/bayer-monsanto-merger-trump-farmers-worried-2017-2 (“By the time 2050 rolls around, the world will have 10 billion people, and the demand for food will double.”). ↩

  8. Bratspies, supra note 3, at 585; see generally Drew Harwell, Bayer and Monsanto to merge in mega-deal that could reshape world’s food supply, Wash. Post (Sept. 14, 2016), https://www.washingtonpost.com/news/business/wp/2016/09/14/bayer-and-monsanto-merge-in-mega-deal-aimed-at-domi-worlds-food-supply/?utm_term=.59257f7e36d1 (“The companies portrayed the deal as a landmark that would help them invest more in seeds, pesticides and technology for the global harvesting of fruits, vegetables, corn, cotton, soybeans and other crops.”). ↩

  9. Bratspies, supra note 3, at 584. ↩

  10. Id. at 591. ↩

  11. Id. at 608. ↩

  12. See Hannah Lownbrough, This merger would threaten food supplies around the world. Who will stop it?, The Guardian (Aug. 23, 2017, 4:00 PM), https://www.theguardian.com/commentisfree/2017/aug/23/bayer-monsanto-merger-agricultural-control-farming (“If approved, the merger would be an extremely risky consolidation of corporate power, not to mention a serious threat to food supplies and farmers around the world.”). ↩

  13. Jacob Rund, Bayer sells crop assets in bid for regulatory approval of its Monsanto deal, CQ Roll Call (2017), available at Westlaw; see generally John Boyd & Mike Weaver, Agriculture giants Bayer, Monsanto merging could ruin American farmers, The Hill (Jun. 18, 2017, 2:00 PM), http://thehill.com/blogs/pundits-blog/energy-environment/338085-agriculture-giants-bayer-monsanto-merging-could-ruin (“These mega-mergers are happening with barely a murmur of concern from elected officials in Washington.”). ↩

  14. Forbes, supra note 7; see generally Bratspies, supra note 3, at 608 (“[I]t seems clear that antitrust regulators are prepared to approve all three mergers.”). ↩

  15. Rund, supra note 13; see generally Robert-Jan Bartunek & Ludwig Burger, EU starts in-depth probe of Bayer, Monsanto deal, Reuters (Aug. 22, 2017, 9:03 AM), https://www.reuters.com/article/us-monsanto-m-a-bayer-eu/eu-starts-in-depth-probe-of-bayer-monsanto-deal-idUSKCN1B21GJ (“The Commission has preliminary concerns that the proposed acquisition could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice and less innovation.”). ↩

  16. Rund, supra note 13. ↩

  17. See Gil Gullickson, 8 Points to Know About the Bayer-Monsanto Merger, Agriculture.com (Sept. 19, 2017), http://www.agriculture.com/news/crops/eight-points-to-know-about-the-bayer-monsanto-merger; Natalia Drozdiak, Bayer-Monsanto merger faces in-depth EU probe, Market Watch (Aug. 22, 2017, 10:36 AM), http://www.marketwatch.com/story/bayer-monsanto-merger-faces-in-depth-eu-probe-2017-08-22; Adam Jones, Monsanto-Bayer Deal Completion Will Be Delayed, Market Realist (Sept. 20, 2017, 8:30 AM), http://marketrealist.com/2017/09/now-bayer-monsanto-deal-completion-delayed/. ↩

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