On 29 May 2018, Bayer AG sold $9 billion agricultural business assets to BASF to get the US Department of Justice approval to acquire Monsanto Company for $66 billion. Bayer also promised to make structural divestitures and sell some of its intellectual property and research facilities (Mangan). On the same day, 29 May 2018, the US Department of Justice filed a civil antitrust lawsuit with the US District Court in Washington, DC, to prevent the alleged merger of Bayer and Monsanto (Mangan).
The Complaint states that “the United States of America brings this civil antitrust action to prevent Bayer AG from acquiring Monsanto Company” (US District Court, DC). Case violations mentioned on the case webpage include a horizontal merger, monopolization, decree violation, civil contempt, and vertical merger. Bayer AG, Monsanto Company, and BASF Societas Europaea (SE) act as defendants in the final judgment, Bayer AG and Monsanto Company are defendants in the Complaint; the U.S. is a plaintiff.
A week later, on 7 Jun. 2018, Bayer AG finally completed the acquisition of Monsanto Company. Bayer received conditional approval from the US Department of Justice, with permission to begin integrating Monsanto into Bayer as soon as the sale of BASF assets is complete, which was anticipated to happen over the next two months (“Bayer Closes Monsanto”). However, the fact that before issuing a conditional approval, the Ministry of Justice filed a civil antitrust lawsuit a week earlier, is a bit unusual.
In the “Violations Alleged” section of the Complaint, it was said that acquisition is likely to have substantial anticompetitive effects in the relevant markets. The plaintiff also stated that Bayer’s acquisition of Monsanto violates Section 7 of the Clayton Act, 15 USC. § 18. The anticompetitive effects of this merger were meant to “eliminate competition between Bayer and Monsanto, and lessen innovation” (US District Court, DC). It could also “raise prices for farmers and other purchasers, and reduce quality, service, and choice for farmers and other purchasers” (US District Court, DC). The plaintiff described these effects in more detail in Introduction, Relevant Markets, including Genetically Modified Seeds and Traits (A), Foundational Herbicides (B), Seed Treatments (C), Vegetable Seeds (D), and Anticompetitive Effects sections.
Also, the plaintiff asked to “permanently enjoin Bayer and Monsanto from consummating acquisition” or any other form of mutual control on the assets or businesses of Bayer and Monsanto. According to the Request for Relief section, the plaintiff insisted that the Court should confirm a violation of Section 7 of the Clayton Act, 15 USC. § 18 (US District Court, DC). So, the consequences of horizontal merger, vertical merger, and monopolization were described here.
Analysis Relevant to the Case
The most comprehensive review of the reasons why the acquisition of Monsanto Company by Bayer AG violates the antitrust laws was given in the sections of the Complaint mentioned above. The results included a decrease in the intensity of scientific developments on the relevant markets, which is a violation of the rights of consumers and other market participants. For example, in the Relevant Markets (D) section, it was noted that Bayer AG and Monsanto Company are leaders in traditional plant selection.
Particularly, Monsanto is the largest vegetable seed company in the world, and Bayer is the fourth largest. However, if the merger proceeds, in the United States, “it would harm competition for five distinct vegetable species: carrots, cucumbers, onions, tomatoes, and watermelons” (US District Court, DC). Also, section (A) described the potential harm to the market of genetically modified seeds and traits. And section (B) emphasized the importance of scientific research for the new types of herbicides development to satisfy the growing market demand. Finally, in section (C), the importance of investigations in the field of seed treatments was noticed, namely the development of effective pest control methods.
Monsanto Company is the main competitor to Bayer AG; companies always compete to sell seeds and chemicals for crops. Monsanto Company has its headquarters in St. Louis, Missouri, whereas Bayer AG is a German corporation with its headquarters in Leverkusen. In all likelihood, the deal did not gain approval in either Europe or the United States. Noteworthy, the transfer of assets in favor of BASF was taken after the European Competition Commissioner investigated the possible consequences for competition issues (Small Farms). As mentioned above, the sum of sold assets was as high as $9 billion, but this did not help the companies achieve their goal. Anyway, six months after the transaction, the Court ordered to ban the merger and divest the assets.
It is also curious that after the Court passed the final judgment, the companies appeared together again in the following high-profile case in 2019-2020 regarding the Roundup pesticides. This case investigated the effects of Bayer-Monsanto Roundup glyphosate pesticide use, which was proved to be safe by the United States ECHA in February 2020. The pesticide was previously thought to cause cancer, in particular leukemia, and 46,000 victims filed 11,000 lawsuits against Bayer-Monsanto in this regard. Meanwhile, France has banned the use of this pesticide due to health risks.
The Outcome of the Case
According to the final judgment dated 8 Feb. 2019, companies were recommended to divest assets during 90 calendar days, with a possible delay of no more than 60 calendar days. In particular, the Court stated that “Bayer and Monsanto are ordered and directed to divest the Divestiture Assets to BASF in a manner consistent with this Final Judgment” (US District Court, DC). The Court also indicated that during the implementation process, companies should take care of non-disclosure of shared confidential information.
The court decision on the divestiture of the company assets is fair and protects the interests of American consumers and market participants. As mentioned above, competition between companies stimulates expensive and time-consuming scientific research, particularly on the genetic modification of seeds. Also, the court decision will support the previous scientific efforts of both companies, which were aimed at the creation of pesticide-resistant cultures, selected vegetable cultures, and less harmful pesticides. Pesticides are still widely used in agriculture in Europe and the US and are in high demand among farmers.
Also, the separation of assets will result in Bayer not acting in the interests of Monsanto, and against the interests of other participants of the industry who have a smaller market share. For example, this applies to the prices for pesticides used on genetically modified corn seeds, as Bayer, unlike Monsanto, does not have herbicide-tolerant corn crops. Thus, the separation of assets protects the interests of end consumers and small farmers and supports further scientific research in the field of agribusiness.
“Bayer Closes Monsanto Acquisition.” Bayer Global. 2018. Web.
United States District Court for the District of Columbia. Complaint: US v. Bayer AG and Monsanto Company. 2018, pp. 1-22. Web.
United States District Court for the District of Columbia. Final Judgment: US v. Bayer AG, et al. 2019, pp. 1-46. Web.
Mangan, Dan. “US Forces Germany’s Bayer to Shed $9 billion in Agricultural Business in Biggest Ever Antitrust Sell-Off”. CNBC, 2018. Web.
Small Farms, Bayer-Monsanto Deal, Post-Brexit Trade. Produced by Lucy Taylor, presented by Caz Graham, B.B.C., 2018.