The European Commission is launching an in-depth antitrust review of the $130 billion merger between Dow Chemical and DuPont. The regulator says the deal will join business in markets—agriculture and petrochemicals—that are already highly concentrated.
The EC’s concerns lie primarily in the combination of the two firms in seeds and crop protection. DowDuPont would have $16 billion in annual agriculture sales, making it the sector’s largest player.
The EC will look into overlaps between the two companies in herbicides and insecticides, especially insecticides that work against chewing insects. The body will also investigate their businesses in nematicides and fungicides.
The regulators have a broader worry that the merger will have a deleterious effect on agricultural innovation by eliminating a firm able to develop new crop protection chemicals.
“The livelihood of farmers depends on access to seeds and crop protection at competitive prices,” says Commissioner Margrethe Vestager. “We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products.”
In addition to agriculture, the EC will look at specialty polyolefins used in packaging and adhesives. Both Dow and DuPont have leading businesses in these areas.
The companies have already tried to address some of the EC’s issues. “However, the commission considered these commitments insufficient to clearly dismiss its serious doubts,” the EC said.
In a joint statement, Dow and DuPont promise they “will continue to work constructively with the commission to address their concerns and to obtain clearance for the merger.” The EC has until Dec. 20 to complete its review.
The merger may face obstacles across the Atlantic as well. In June, Iowa Sen. Chuck Grassley (R) asked the U.S. Department of Justice to closely scrutinize the deal. Like the EC, he voiced reservations about its effect on competition in seeds and crop protection chemicals.
Regulators are contending with a wave of consolidation in agricultural chemicals. In a deal expected to beapproved by the end of this year, ChemChina is buying Syngenta for $43 billion. Bayer has made an unsolicited $65 billion bid for Monsanto, which is reportedly in talks to purchase BASF’s agricultural chemicals business.