“Our job, as a competition authority, is to make sure a merger doesn't deny Europeans the benefits of competition,” said EU competition commissioner, Margrethe Vestager.
She said the Commission agreed to the proposed merger, which was first announced in December 2015, once the companies said they would sell off a significant part of their business:
“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 also includes a number of new products that DuPont is developing, and its worldwide research and development organization for pesticides. That will protect competition for the future.”
As regards certain petrochemical products, where both companies are important players, the parties said they will divest relevant assets in Dow's petrochemical business to preserve effective competition.
Opposition to agribusiness consolidation
There has been a lot of opposition to the Dow and DuPont proposed merger, as well as to the pending alignment of other agri-giants, Bayer and Monsanto, Syngenta and ChemChina, also awaiting regulatory approval in the EU.
"Syngenta and ChemChina, Dow and DuPont and Monsanto and Bayer – this is a significant decrease in competition when farmers are hurting already,” Barbara Patterson, government relations representative with the National Farmers Union (NFU) in the US.
Vestager noted concerns about a potential monopoly in the area of pesticides were the alignment do go ahead unheeded:
“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.”
In terms of insecticide, herbicides and fungicides, she said the merger would have led to higher prices and less choice.
She outlined her wariness that the amalgamation as originally presented would have also reduced future innovation.
“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.
“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.”
The Commission said it had been in close contact other competition authorities also reviewing the transaction including the US Department of Justice and the competition authorities of Australia, Brazil, Canada, Chile, China and South Africa.
Reacting, Dow and DuPont said the Commission’s approval was “a significant step” toward finalizing their deal. They plan to split the merged entity into three independent publicly traded companies.
The companies said they are continuing to work constructively with regulators in the remaining relevant jurisdictions to obtain clearance for the amalgamation.