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.
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:
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.
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.
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.