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Today, the Commission decided to approve a merger between Dow and DuPont. We were able to do so because of the significant commitments the companies offered to meet our competition concerns.
Both Dow and DuPont produce a wide range of chemicals. For some of them, the two companies complement each other rather than compete. But their activities overlap significantly in other areas. In particular both sell products used by farmers to control pests that can harm their crops - in other words pesticides.
These products affect all of us. They literally affect our daily bread. So they matter to farmers, to consumers and also to the environment.
Effective competition in this sector allows farmers to choose from a range of products at affordable prices. It also pushes companies to continue developing new products that meet the high regulatory standards in Europe.
And we do need new products in this sector: that are ever safer for people and better for the environment.
Our job, as a competition authority, is to make sure a merger doesn't deny Europeans the benefits of competition. That is why we always look at what a merger would change – not just today but also tomorrow. We need to ensure that a merger does not lead to higher prices for existing products or reduce choice. But it is just as important to ensure that it does not reduce innovation for new and better products.
And in this case we had concerns in both of those areas.
Our in-depth investigation showed that Dow and DuPont are strong competitors in pesticides. There are very few comparable competitors present. The merger would have significantly reduced competition for these products, had it gone ahead in its original form.
The first issue was how the merger would affect today's markets. We were concerned that in a number of EU countries, the merger would have reduced competition for existing pesticides.
There are different pests that can harm a farmer's crop. There are insects that chew on fruits and vegetables. Others infest the plants by sucking on them. For each of those, you can use a specific type of insecticide. Similarly, you can use specific herbicides to control different types of unwanted weeds. Together, the parties would have held very large market shares for many of these products.
They also compete for a limited number of fungicides.
For all these products, the merger would have led to higher prices and less choice.
Our second concern was that the merger would have reduced innovation for the future.
As I have already said, innovation is particularly important in the agro-chemical industry. To discover and develop new products that are less toxic or more efficient. And to deal with the fact that pests adapt and may become resistant to existing products over time.
Getting such new and innovative products to market is a complex process. It starts with discovering, developing and testing new active ingredients. Finally, getting the approvals of regulators and manufacturing the product. Only then can it be sold on the market. There are only five companies that can do this on a global scale from start to finish. Two of those are Dow and DuPont.
Both companies have a number of similar projects under way to develop new products. These could ultimately compete head-to-head. The new pesticides would work against the same problems.
These projects are very costly. And our investigation showed that after the merger, the companies would have wanted to pull the plug on some of these projects. More broadly, they would have incentives to reduce their effort to develop new products.
So we could not approve this merger in its original form. We were only able to agree to it, because the companies offered to sell off a significant part of their business, to preserve effective competition.
To deal with competition today, the companies agreed to sell all of DuPont's pesticides in the areas we were concerned about. Those products account for about half of the sales of DuPont's pesticide business. The sale includes all the assets you need to make and sell those products. This means that whoever buys those assets will be able to take DuPont's place on the market immediately.
The sale also includes a number of new products that DuPont is developing, and its worldwide research and development organisation for pesticides. That will protect competition for the future. It will make sure that the divested product portfolio remains viable and competitive on a lasting basis. It will also allow the buyer of the divested business to develop new, innovative products.
We also had a third concern, about a very different type of product. Dow and DuPont are also significant competitors for two types of petrochemical products. They are used, for example, to coat the surface of milk cartons or produce labels on plastic drink bottles.
After the merger, the parties would have had a large share of both markets. But they have agreed to answer that concern by selling Dow's factories and contracts for these products.
Combined, Dow and DuPont's commitments fully address our competition concerns. They allow us to approve the transaction under EU merger rules.
Of course, Dow and DuPont compete throughout the world, not just in Europe. So we've worked closely with competition authorities in many different countries, which are looking at how the merger affects their own markets. That includes the Department of Justice in the United States and also the Chinese Ministry of Commerce.
Also, when it comes to pesticides there are of course other vital concerns in addition to competition. An obvious key issue is the safety of the products. This falls under the responsibility of my colleague Vytenis Andriukaitis. Here in Europe, we have strict standards that have at their heart the protection of human health and the environment. Of course they will remain just as strict after this merger as before it.
All these aspects must come together to make sure the agro-chemical industry serves the needs of consumers, farmers and the environment. Our decision today is one part of that.
Thank you for your attention.