Competition Bureau statement regarding BASF’s purchase of assets from Bayer AG following its acquisition of Monsanto Company
On June 27, 2018, the Commissioner of Competition (the Commissioner) entered into a consent agreement with BASF SE (BASF) relating to BASF’s proposed purchase of assets that are to be sold by Bayer AG following Bayer’s acquisition of the Monsanto Company. The assets to be sold are set out in the Bayer AG consent agreement. The Commissioner is satisfied that the consent agreement with BASF addresses his conclusion that BASF’s acquisition of the assets to be sold by Bayer would likely have substantially lessened or prevented competition in the supply of canola seeds and traits due to BASF’s pre-existing position in that market. In light of the BASF consent agreement, the Commissioner has approved BASF as the proposed buyer of the assets to be divested by Bayer and Monsanto under the Bayer consent agreement.
In carrying out its investigation the Bureau consulted extensively with, and obtained information from, a wide range of stakeholders including growers, grower organizations, competitors and government departments. It also relied heavily on the analysis of documents and data obtained from the parties and third parties.
The Parties and the Proposed Transaction
BASF is a publicly-traded company engaged in the production and sale of chemicals, performance products, functional materials and solutions, oil and gas, and agricultural solutions. It is headquartered in Ludwigshafen, Germany. Bayer is a publicly-traded global pharmaceutical, consumer health, animal health and crop protection science company headquartered in Leverkusen, Germany.
On October 13, 2017, BASF entered into agreements with Bayer to acquire certain assets that Bayer would be required to sell in conjunction with its acquisition of Monsanto. These initial agreements have been subsequently amended, expanded and supplemented by further agreements to encompass, among other things, the assets that must be sold pursuant to the consent agreement between the Commissioner and Bayer.
The Commissioner’s competition concerns in respect of the BASF matter relate to the market for canola seeds and traits. Background information about this market is set out in the Bureau’s position statement regarding Bayer’s acquisition of Monsanto. To summarize that information, nearly all canola varieties sold in Canada contain one of three herbicide tolerance traits:
- Bayer’s LibertyLink trait, which is contained in all canola varieties sold by Bayer, and which confers tolerance to the active ingredient glufosinate ammonium;
- Monsanto’s Roundup Ready trait, which confers tolerance to the active ingredient glyphosate, and which Monsanto uses in all its own canola varieties, but also broadly licenses to competitors including Corteva Agriscience, Brett Young, Canterra and Nutrien; and
- BASF’s Clearfield trait, which is contained in certain canola varieties of a number of seed companies, including Brett Young, Canterra, Corteva Agriscience, and Nutrien, and which confers tolerance to a family of chemicals known as imidazolinones.
Approximately 55% of canola seeds sold in Canada contain Bayer’s LibertyLink trait, approximately 40% contain Monsanto’s Roundup Ready trait, and approximately 5% contain BASF’s Clearfield trait. Bayer and BASF are the only firms selling a herbicide compatible with their respective traits, and Monsanto is the leading seller of glyphosate in Canada.
Through its proposed acquisition of the Bayer assets, BASF seeks to acquire Bayer’s LibertyLink canola business. The Bureau concluded that this acquisition would have substantially lessened or prevented competition in the supply of canola seeds and traits by reducing rivalry between the LibertyLink and Clearfield trait systems. This loss in rivalry would likely have been felt by growers in the form of higher canola seed prices, higher canola herbicide prices and increased payments related to the use of Clearfield intellectual property. The Bureau was also concerned that these likely effects would have blunted the incentives of seed companies to continue to invest in breeding canola varieties containing the Clearfield trait, resulting in a loss of choice for growers.
In response to the Commissioner’s finding that BASF’s proposed acquisition of the Bayer assets is likely to result in a substantial lessening or prevention of competition with respect to the supply of canola seeds and traits, BASF has agreed to sell the Clearfield Production System for Canola (including the herbicide tolerance trait in North America, compatible imidazolinone herbicides in Canada and supporting intangible assets) to a purchaser acceptable to the Commissioner.
The Commissioner is satisfied that the consent agreement with BASF addresses the competitive issues arising from the BASF/Bayer transaction.
This publication is not a legal document. The Bureau's findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.
However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau's assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.
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The Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
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