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Bayer-Monsanto Deal: European Union Showing Concern

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European Commission’s update

The European Commission for Competition opened its review of the proposed Bayer-Monsanto (MON) merger in August 2017. Like other regulators, the European Commission outlined its concerns related to the merger.

Three concerns were identified in the European Commission’s August 22, 2017, press release. The first concern was related to the limited choice of pesticides that control weeds. According to the European Commission, Monsanto and Bayer are two companies among a handful of players that have the capability to develop new solutions in this field.

High market share

The European Commission expressed concern over the high market share for seeds among companies in Europe as well as around the world. Bayer and Monsanto are two of the few players that innovate, sell, and compete in the seeds sector. A merger between the two could play against the farmers who could get squeezed on prices.

The European Commission also stated that Monsanto is among the handful of companies that develop plant products that can tolerate insects or resist disease. Monsanto has the dominant position in this market, according to the European Commission, while Bayer is among the few competitors in the segment.

Significant overlap in the Americas

In the above chart, we see that the Americas market, which includes North America and South America, is a significant market for both Bayer and Monsanto. Given the size of the market share, the deal could attract similar investigation by the FTC (Federal Trade Commission) in the United States, which still hasn’t approved the deal.

The FTC is also reviewing the proposed merger between PotashCorp (POT) and Agrium (AGU), which are two of the largest players in the fertilizer (MOO) (MOS) space.

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