On 27 March 2017, the Commission approved a merger between the two chemical manufacturers DOW and DuPont. Both nationally and globally, both companies are among the leading companies on the market of agricultural pesticides. According to the Commission, the merger is the first of many mergers in the agricultural chemical sector.
The merger agreement was announced in December 2015, and final notification to the Commission was made in June 2016. The matter proceeded to phase 2 after long-term discussions concerning a commitment that could meet the Commission's concerns concerning the merger. The matter shows that the Commission does not only attach importance to market overlap and divestiture when assessing mergers on concentrated markets. The future possibilities of product development and innovation are important factors in connection with the commitments that have resulted in an approval of the merger.
In connection with the approval, the European Commissioner Margrethe Vestager said: "Pesticides are products that matter – to farmers, consumers and the environment. We need effective competition in this sector so companies are pushed to develop products that are ever safer for people and better for the environment. Our decision today ensures that the merger between Dow and DuPont does not reduce price competition for existing pesticides or innovation for safer and better products in the future."
THE COMMISSION'S MERGER CONCERNS
The Commission was concerned about three matters that the companies had to meet prior to the approval.
1) The companies' aggregate market shares on several pesticide markets reducing the price competition and the product range.
2) Less incentive to innovate because the companies compete directly on improving and developing new agricultural pesticide products. This is particularly important as the demand for new products containing less chemicals is great, and as companies with global R&D are few.
3) The companies' aggregate market share on the market of chemicals used for packaging and adhesives, which will reduce the price competition and the product range.
THE COMPANIES' MERGER COMMITMENT
To meet these concerns, the parties made a commitment that DuPont will sell a significant part of its existing pesticide business within a number of sub-categories. Further, DuPont will sell most of its R&D department, and DOW will sell its business within chemicals used for packaging and adhesives.
This commitment has fully met the Commission's concerns about the merger, which has now been approved. According to the Commission, this matter was handled in close cooperation with several jurisdictions outside the EU, with whom the Commission also shared and exchanged information.