The European Commission approved on Monday (27 March) the proposed $130 billion merger of Dow Chemical and DuPont. But the decision triggered a strong reaction from environmentalists, who believe that such mergers lead to “major monopolies”.
Dow Chemical and DuPont, two of the oldest US companies, announced their tie-up in December 2015 to create the world’s biggest chemicals and materials group.
“Due to significant commitments on products and the worldwide research and development organisation, the merger of Dow and Dupont can be approved,” EU Competition Commissioner Margrethe Vestager said.
The European Commission had been concerned that the merger of two of the biggest and oldest US chemical producers would have few incentives to produce new herbicides and pesticides in the future.
It said that the asset sales would ensure competition in the sector and benefit European farmers and consumers.
“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,” Vestager said in a statement.
“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,” she added.
In return for the EU’s green light, DuPont will divest large parts of its global pesticides business, including its global research and development organisation.
Calming down Trump
According to AFP, the decision spares the EU from angering the Trump Administration, just days before Vestager visits Washington.
Vestager has not been shy about tackling big US companies since she took on the competition brief in 2014, winning praise in Europe but criticism across the Atlantic.
Dow and Dupont are dominant players for a huge range of chemical products, but the manufacturing of pesticides and fertilisers has drawn the most attention.
The products developed by the Dow and DuPont “affect each and every one of us. They literally affect our daily bread”, Vestager said in a news conference in Brussels.
To win approval, the companies agreed to sell off key DuPont pesticides units, including sensitive research and development capabilities.
Dow will be required to sell two manufacturing plants in Spain and the US, with German giant BASF widely seen as a potential buyer.
The Dow-DuPont merger is part of a broader wave of consolidation in the agro-chemicals sector that has worried environmental activists and small farmers.
In the coming days, the EU is expected to decide on the $43-billion takeover bid by ChemChina for Swiss rival Syngenta.
The EU is also to decide on German giant Bayer’s $66-billion offer for US firm Monsanto, another mega-merger in the industry that has angered activists.
Reacting to the Commission’s decision, DuPont issued a press release saying that the regulatory milestone is a significant step towards closing the merger transaction, with the intention of creating three independent publicly traded companies.
“The transaction is expected to create significant cost synergies of approximately $3 billion with the potential for $1 billion in growth synergies,” the company said.
Risk of major monopolies
In the meantime, more than 200 organisations across the EU, including environmental NGOs, agriculture groups and trade unions, on Monday (27 March) released a letter objecting to the merger of six large agriculture corporations.
The letter, signed by the likes of Friends of the Earth Europe, Greenpeace and Pesticide Action Network (PAN) Europe, calls on the European Commission to reject the merging of Dow Chemical with DuPont, Monsanto with Bayer AG and Syngenta with ChemChina.
Environmentalists are also calling on the executive to consider the impact of all three proposed mergers together and address the existing concentration in the food and farming sector, by setting clear limits to the amount of market share a corporation is allowed to control.
The letter describes the risk of major monopolies by these companies in an already concentrated agri-business market, with resulting threats to both the producers and consumers of agriculture. If the mergers go through, three companies will dominate 70% of the world’s agro-chemical sector and more than 60% of commercial seeds.
Likely impact of mergers
Less competition would reduce seed diversity, restricting farmer choice and increasing farmer dependence on these corporations, the organisations write.
The reduced diversity of farming means a greater dependence on chemicals and pesticides, which can harm humans, the environment and biodiversity.
The letter emphasises that the three mergers will also decrease food choice for EU consumers and could increase the costs of diverse and healthy foods. Greener businesses and initiatives across Europe would be limited as well if large corporations were to gain even more market power.
The organisations emphasise that the mergers would also harm farmers, consumers and whole communities in the Global South. They would make reaching Sustainable Development Goals more difficult, especially goal two, which aims to “end hunger, achieve food security and improved nutrition and promote sustainable agriculture”.
Ramona Duminicioiu, peasant seed producer of the agricultural organisation European Coordination Via Campesina, told euractiv.com, “Approving these mergers works completely against the rights of peasants, with far reaching effects in our society.”
“When the Commission says that small family farms are the backbone of European agriculture ,does it honestly believe that or is it just lip service? The already fragile rights of peasants regarding seeds, land and markets risks of being obliterated by these mega-corporations and our food sovereignty abducted,” she added.
Pekka Pesonen, Secretary General of the EU farmers’ association Copa & Cogeca, said that it is important to keep a competitive market “with a good range of Plant Protection Products and other agricultural inputs with a long-term commitment to product development for European agricultural needs”.
“This needs to be respected with these mergers,” he noted.
Derailing food production
Lidia Senra, an Alternativa galega de esquerda en Europa MEP from Spain (GUE/NGL), recently told EURACTIV that big agri-food mergers could derail the food production.
Referring to the article titled “Monsanto, Bayer y el control digital de la agricultura,” published by the Erosion, Technology and Concentration (ETC) Group, in 2015, she noted that farm machinery company John Deere agreed with Monsanto to buy Precision Planting LLD.
“But this agreement was sued before the Department of Justice, which suspended the purchase because John Deere would dominate the market of precision agriculture systems and could raise prices and slow innovation at the expense of American farmers who rely on these systems, since between John Deere and Precision Planting LLD would control 85% of precision crops,” the Spanish lawmaker emphasised.
Social Democrat MEP Paolo De Castro (S&D) told EURACTIV that the European Commission confirmed how the consolidation trend in the agro-science sector is gaining momentum.
"In this context, we have to ensure that our farmers can continue to provide safe, nutritious, high quality and affordable food to all Europe's consumers. In order to do this, price competition and innovation within the agro-science industry should be strongly defended and the commitments that the two companies Dow and DuPont offered to the European Commission appear to go in this direction," he said.
"Now it is crucial to constantly monitor and guarantee that our farmers will not face any increase in the costs for the set of inputs they need and, at the same time, that the new company will continue to bring new innovations to the market," the Italian MEP added.