By Valentina Pop and Natalia Drozdiak
BRUSSELS — The European Union’s antitrust authority on Thursday opened a full-blown investigation into plans by Dow Chemical Co. and DuPont Co. to merge, on concerns the deal would reduce competition in the global agricultural sector.
The European Commission said it would investigate whether the deal may reduce competition in areas such as crop protection, seeds and certain petrochemicals. Announced in December, the proposed merger aims to create an American industry giant with a combined market cap of about $ 122 billion.
“The livelihood of farmers depends on access to seeds and crop protection at competitive prices. We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products,” said European competition commissioner Margrethe Vestager.
Dow and DuPont on July 20 sought to address some of the concerns raised by the EU, the commission said. However, the commission found their commitments “insufficient to clearly dismiss its serious doubts” about the merger being in line with EU rules.
Given the scale of the two companies, the commission said it was “cooperating closely” with other competition authorities in the U.S., Brazil and Canada, which are also scrutinizing the deal.
DuPont and Dow on Thursday said they had expected “a thorough review” by regulators, but were still confident about the deal closing by the end of the year.
A final EU decision is expected by Dec. 20.
The EU’s statement comes as other agriculture companies have also signaled plans to merge, partly due to sliding commodity prices. The deals could place a significant share of the corn-seed and pesticide market in the hands of just three companies.
China National Chemical Corp. has already agreed to acquire Swiss pesticide and seed company Syngenta AG, while Bayer AG and Monsanto continue to informally discuss the possibility of a takeover by the German life-sciences company.
The consolidation of the agriculture market in a relatively short time-span poses a challenge for competition regulators who want to keep prices competitive while safeguarding innovation but who normally assess the affects of a merger on the market on an individual basis.
In a letter to members of European Parliament sent in late June, Ms. Vestager suggested the EU would consider the context that several mergers in the sector would be taking place at the same time in any review of a Bayer-Monsanto deal.
However, Dow and DuPont is the first and so far only deal of the group to be officially notified by the EU.
“Of course, (antitrust regulators) look to the market, but they don’t have an industry approach in their merger reviews, they have to develop a targeted approach,” said Ioannis Lianos, a professor of global competition law at University College London.
The EU will likely be stricter in its review of the deals, compared with other regulators, when analyzing whether the mergers create more barriers to entry for other rivals, Mr. Lianos said.
Write to Valentina Pop at valentina.pop@wsj.com and Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires 08-11-161306ET Copyright (c) 2016 Dow Jones & Company, Inc.
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