Symposium
Last updated on Apr 05, 2017
Agricultural and Biotech Mergers Symposium
Agricultural and Biotech Mergers: Implications for Antitrust Law and Economics in Innovative Industries
On March 27, 2017, the European Commission cleared the merger of Dow and DuPont, subject to conditions including divestiture of DuPont’s “global R&D organisation.” As the Commission noted:
The Commission had concerns that the merger as notified would have reduced competition on price and choice in a number of markets for existing pesticides. Furthermore, the merger would have reduced innovation. Innovation, both to improve existing products and to develop new active ingredients, is a key element of competition between companies in the pest control industry, where only five players are globally active throughout the entire research & development (R&D) process.
In addition to the traditional focus on price effects, the merger’s presumed effect on innovation loomed large in the EC’s consideration of the Dow/DuPont merger — as it is sure to in its consideration of the other two pending mergers in the agricultural biotech and chemicals industries between Bayer and Monsanto and ChemChina and Syngenta. Innovation effects are sure to take center stage in the US reviews of the mergers, as well.
What is less clear is exactly how antitrust agencies evaluate — and how they should evaluate — mergers like these in rapidly evolving, high-tech industries.
These proposed mergers present a host of fascinating and important issues, many of which go to the core of modern merger enforcement — and antitrust law and economics more generally. Among other things, they raise issues of:
- The incorporation of innovation effects in antitrust analysis;
- The relationship between technological and organizational change;
- The role of non-economic considerations in merger review;
- The continued relevance (or irrelevance) of the Structure-Conduct-Performance paradigm;
- Market definition in high-tech markets; and
- The patent-antitrust interface
This symposium brought together a stellar lineup of scholars to consider these and related issues.
In This Symposium
Conglomerate effects and the incentive to deal reasonably with other providers of complementary products
Modern agriculture companies like Monsanto, DuPont, and Syngenta, develop cutting-edge seeds containing genetic traits that make them resistant to insecticides and herbicides. They also develop crop protection chemicals to use throughout the life of the crop to further safeguard from pests, weeds and grasses, and disease. No single company has a monopoly on all the ... Conglomerate effects and the incentive to deal reasonably with other providers of complementary products
Understanding innovation markets in antitrust analysis
Today, three of the largest proposed mergers — Bayer/Monsanto, Dow/Dupont, and ChemChina/Syngenta — face scrutiny in both the U.S. and Europe over concerns that the mergers will slow innovation in crop biotechnology and crop protection. The incorporation of innovation effects in the antitrust analysis of these agricultural/biotech mergers is quickly becoming more mainstream in both the U.S. ... Understanding innovation markets in antitrust analysis
Contestability theory in the real world
Though concentration seems to be an increasingly popular metric for discussing antitrust policy (a backward move in my opinion, given the theoretical work by Harold Demsetz and others many years ago in this area), contestability is still the standard for evaluating antitrust issues from an economic standpoint. Contestability theory, most closely associated with William Baumol, ... Contestability theory in the real world
Patents and mergers
How should patents be taken into consideration in merger analysis? When does the combining of patent portfolios lead to anticompetitive concerns? Two principles should guide these inquiries. First, as the Supreme Court held in its 2006 decision Independent Ink, ownership of a patent does not confer market power. This ruling came in the context of ... Patents and mergers
Innovation trends in agriculture and their implications for M&A analysis
The US agriculture sector has been experiencing consolidation at all levels for decades, even as the global ag economy has been growing and becoming more diverse. Much of this consolidation has been driven by technological changes that created economies of scale, both at the farm level and beyond. Likewise, the role of technology has changed ... Innovation trends in agriculture and their implications for M&A analysis
Finding your way in the seeds/agro-chem mergers labyrinth
The recently notified mergers in the seed and agro-chem industry raise difficult questions that competition authorities around the world would need to tackle in the following months. Because of the importance of their markets’ size, the decision reached by US and EU competition authorities would be particularly significant for the merging parties, but the perspective ... Finding your way in the seeds/agro-chem mergers labyrinth
Mergers, innovation, and agricultural biotechnology: Putting the squeeze on growers and consumers?
Innovation Competition in the Spotlight Innovation is more and more in the spotlight as questions grow about concentration and declining competition in the U.S. economy. These questions come not only from advocates for more vigorous competition enforcement but also, increasingly, from those who adhere to the school of thought that consolidation tends to generate procompetitive ... Mergers, innovation, and agricultural biotechnology: Putting the squeeze on growers and consumers?
Effects of gene editing on ag-biotech antitrust
Commenting on Microsoft’s antitrust suit 18 years ago, Milton Friedman said the following: Your industry, the computer industry, moves so much more rapidly than the legal process, that by the time this suit is over, who knows what the shape of the industry will be. Though the legal process seems to be moving quickly in ... Effects of gene editing on ag-biotech antitrust
Antitrust review of ag-biotech mergers: Appropriability versus cannibalization
This symposium offers a good opportunity to look again into the complex relation between concentration and innovation in antitrust policy. Whilst the details of the EC decision in Dow/Dupont remain unknown, the press release suggests that the issue of “incentives to innovate” was central to the review. Contrary to what had leaked in the antitrust ... Antitrust review of ag-biotech mergers: Appropriability versus cannibalization
Innovation-driven market structure in the ag-biotech industry
Dynamic versus static competition Ever since David Teece and coauthors began writing about antitrust and innovation in high-tech industries in the 1980s, we’ve understood that traditional, price-based antitrust analysis is not intrinsically well-suited for assessing merger policy in these markets. For high-tech industries, performance, not price, is paramount — which means that innovation is key: ... Innovation-driven market structure in the ag-biotech industry
Innovation as a shield and a club in the agribusiness mergers
People need to eat. All else equal, the more food that can be produced from an acre of land, the better off they’ll be. Of course, people want to pay as little as possible for their food to boot. At heart, the antitrust analysis of the pending agribusiness mergers requires a simple assessment of their ... Innovation as a shield and a club in the agribusiness mergers
Ag-biotech merger symposium wrap-up
On Thursday, March 30, Friday March 31, and Monday April 3, Truth on the Market and the International Center for Law and Economics presented a blog symposium — Agricultural and Biotech Mergers: Implications for Antitrust Law and Economics in Innovative Industries — discussing three proposed agricultural/biotech industry mergers awaiting judgment by antitrust authorities around the globe. These proposed ... Ag-biotech merger symposium wrap-up