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EU Commission raises concerns over Dow DuPont merger

By Jenny Eagle+

12-Aug-2016
Last updated on 19-Aug-2016 at 12:22 GMT2016-08-19T12:22:27Z

Dow and DuPont both have a portfolio of herbicides for crops for cereals, beets and oil seed rape.
Dow and DuPont both have a portfolio of herbicides for crops for cereals, beets and oil seed rape.

The European Commission says it has opened an investigation to see if the proposed merger of Dow and DuPont is in line with the EU Merger Regulation.

The proposed merger between the two US companies would create the world's largest integrated crop protection and seeds company and producer of petrochemical products that are used in packaging and adhesive applications.

Margrethe Vestager, commissioner, Competition Policy, The European Commission, said its main concerns were crop protection, seeds, and competition over petrochemical products polyolefins and monomer.

“The livelihood of farmers depends on access to seeds and crop protection at competitive prices. We need to make sure the proposed merger does not lead to higher prices or less innovation for these products,” she added.

Crop protection

Dow and DuPont both have a portfolio of herbicides for crops (e.g. cereals, beets and oil seed rape), as well as of insecticides. The Commission has preliminary concerns that the proposed merger could reduce competition on these markets and the reduction in the intensity of competition may have an impact on price, quality, choice and innovation.

The Commission's investigation will also be looking into Dow and DuPont's activities in nematicides, which are products used to protect against nematode worms, as well as into the companies’ product pipelines in fungicides.

The Commission also has preliminary concerns the merger may lead to a reduction of innovation in crop protection as a whole. Dow and DuPont are important innovators in the crop protection industry, which is characterised by a limited number of global companies with significant R&D capabilities. The transaction would lead to the elimination of one of the few companies able to develop and launch new active ingredients.

Seeds

Dow and DuPont both develop so-called “gene editing” technologies that could be used to materially accelerate the breeding of new seed varieties. The Commission has preliminary concerns that, after the proposed transaction, the companies may have fewer incentives to license these technologies to competitors or may make the development of competing technologies more difficult.

Petrochemical products - polyolefins and monomers

Dow and DuPont are strong suppliers of specialty polyolefins, which are thermoplastics derived from petrochemical products and used in packaging and adhesive applications. The Commission is investigating the effect of eliminating one competitor and creating new vertical links in these concentrated markets.

The transaction was notified to the Commission on June 22, 2016. The Commission now has 90 working days, until December 20, 2016, to take a decision.

On July 20, 2016, Dow and DuPont submitted commitments to address some of the Commission’s preliminary concerns. However, the Commission considered these commitments insufficient to clearly dismiss its serious doubts as to the transaction's compatibility with the EU Merger Regulation. The Commission therefore did not test them with market participants.

Given the worldwide scope of Dow and DuPont's activities, the Commission is cooperating closely with other competition authorities, notably with the Department of Justice in the US and the antitrust authorities of Brazil and Canada.

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