10.6.2017   

EN

Official Journal of the European Union

C 186/8

(1)

ChemChina is a Chinese State-owned enterprise (‘SOE’). ChemChina is active in the agrochemical sector through its agrochemical company China National Agrochemical Corporation (‘CNAC’). In particular, CNAC controls its wholly-owned subsidiary ADAMA Agricultural Solutions Ltd (‘Adama’). Adama is an Israel-based company which, until recently, was jointly controlled by the Israeli company Koor Industries Ltd (‘Koor’) and ChemChina. Adama is primarily active in the manufacturing and/or distribution of off-patent formulated products for crop protection and professional pest control, including a wide range of herbicides, insecticides and fungicides, seed treatment, and products for lawn and gardens. It also sells active ingredients (‘AIs’). Adama is active at a global level. CNAC manufactures and sells chemical products for agricultural uses (crop protection), including off-patent AIs, and formulated products used for agricultural crop protection products, mainly outside the European Economic Area (EEA).

(2)

Syngenta is a global business operating in the agro-chemical sector, with its headquarters in Switzerland. It produces and sells crop protection products, seeds, and products for lawn and gardens. It is active on a vertically-integrated basis in the research, development, manufacture and marketing of a wide range of crop protection products and seeds

(3)

On 23 September 2016, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertaking ChemChina acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of the undertaking Syngenta by way of purchase of shares (the ‘Transaction’). ChemChina and Syngenta are collectively referred to as the ‘Parties’, whilst the undertaking that would result from the Transaction is referred to as ‘the merged entity’.

(4)

By Decision dated 28 October 2016, the Commission found that the Transaction raised serious doubts as to its compatibility with the internal market and initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

(5)

The in-depth investigation confirmed the competition concerns preliminarily identified.

(6)

The Parties submitted the final commitments on 27 January 2017 (‘Final Commitments’) that render the Transaction compatible with the internal market.

(7)

The draft Decision was consulted with the Member States during the Advisory Committee on Concentrations on 23 March 2017, which provided a favourable opinion. The Hearing Officer provided its favourable opinion on the proceedings in his report which was submitted on 24 March 2017

(8)

Raw materials are inputs used, among other things, for the production of chemical products. The Commission considers each raw material as a distinct product market. The relevant geographic scope is worldwide, since they are traded on a global basis.

(9)

Active ingredients (‘AI’) are the key components of crop protection products which produce the desired biological effect (i.e. eliminating the pest). The Commission considers each AI as a distinct product market. The Commission will leave the exact scope of the geographic market definition for AIs open and carry out its assessment at the most restrictive level i.e. at least EEA-wide.

(10)

Crop protection products are used for application in agricultural production (and for certain domestic uses) in order to protect a crop from biological organisms (pests) that can negatively affect the crop development. Different categories of crop protection product include herbicides, insecticides, fungicides, Plant Growth Regulators (‘PGR’), seed treatments, post-harvest treatments, nutrients and lawn and garden products.

(11)

Herbicides are crop protection products that control weeds. A distinction between (i) selective herbicides and (ii) non-selective herbicides and by crop is relevant for the assessment of competition.

(12)

Insecticides are crop protection products aimed at killing or suppressing insects so as to promote plant growth and improve crop yields. It is appropriate to assess insecticides at the crop and segment level (foliar/soil insecticides) and distinguish between chewing and sucking insects.

(13)

Fungicides prevent deterioration of plants and plant products from fungi and moulds before and after harvesting. The Commission carries out its assessment at the most restrictive level i.e. segmentations by foliar and soil application, by crop and disease level.

(14)

Plant growth regulators are agrochemical products that inhibit, stimulate or modify plant growth and development. They have to be separated by individual crops. Seed treatment is the so-called dressing of seeds with specific crop protection formulations to protect them at early stages of their development. They have to be segmented between insecticides and fungicides and by crop.

(15)

These markets are assessed at national level because regulatory barriers exist across different countries in view of different labelling and national registration requirements.

(16)

In the present case, the Transaction leads to horizontal overlaps as regards fungicides, selective herbicides, insecticides, PGR and seed treatment in a number of national markets as regards cereals, oilseed rape, sugar beet, corn, fruit, vegetables, sunflower and other crops (cotton and soybean).

(17)

The Commission’s competitive assessment has been focused on the narrowest segmentation for which data is available, that is, the Crop/Sector/Segment/Sub-segment level.

(18)

Overall, for 2015 and at the level of Crop/Sector/Segment/Sub-segment, the Commission has identified a total of 462 markets where both Parties are present with combined market share equal or above 20 %.

(19)

The Commission has defined two sets of criteria to identify affected markets where the Transaction is unlikely to raise competition concerns.

(20)

The first set of criteria identifies markets where the level of concentration and the increase in concentration brought about by the Transaction are unlikely to be problematic. These unproblematic markets include the following:

(21)

The second set of criteria identifies markets which are unlikely to be problematic in view of the Parties’ modest combined market shares (below 30 %) and the presence of at least three significant alternative competitors.

(22)

Other markets have been cleared by the Commission on the basis of an assessment that took into account the level of market share, the degree of closeness of competition between the Parties’ products (based on active ingredients and pricing), the presence of other generic players and the absence of pipeline products in the Parties' portfolio.

(23)

On the basis of a competitive assessment taking into account the level of market share, the closeness of competition between the Parties’ products, the existence of pipe-line products in the Parties ‘portfolio and the lack of generic competition besides Adama, the Commission has concluded that the Transaction would lead to a significant impediment of effective competition (‘SIEC’) in 115 crop protection markets covering seven different crop categories.

(24)

The markets in which the Commission found a SIEC are:

(25)

The Transaction brings about horizontal overlaps between the Parties’ activities in the market for merchant AIs, which is the sale of AIs to other companies active in the downstream market for the supply of crop protection products.

(26)

The Commission found that the concentration was not likely to significantly strengthen the Parties’ market position in the merchant AIs markets and/or substantially alter the existing market structure. The merchant market for AIs is characterised by a certain degree of spare capacity and alternative suppliers exist in addition to the Parties, particularly in Asia and China.

(27)

The Commission has also assessed the Parties’ ability and incentives to foreclose competitors from access to the downstream distribution channel through the implementation of bundling strategies. The Commission concluded that the Transaction would not materially affect the Parties’ or other R & D players’ ability and incentives to engage in bundling strategies.

(28)

Certain market participants have raised concerns that the Transaction may make it harder for smaller generic agrochemical players to maintain and renew registrations of AIs and products in the EEA.

(29)

The Commission concluded that such concerns are, to a large extent, not merger specific, as the challenges for smaller generic players in maintaining and renewing authorisations and registrations of AIs and products in the EEA results mainly from the existing regulatory framework which encourages agrochemical companies to cooperate but does not grant a right to access the necessary existing data and task-forces.

(30)

The Commission examined whether, further to the Transaction, the merged entity would have the ability to restrict access to raw materials/intermediates to the detriment of Syngenta’s downstream competitors in the crop protection markets.

(31)

For AIs supplied by both Parties, as previously established the Transaction is unlikely to significantly impede effective competition. For AIs provided by ChemChina or Syngenta, they are either covered by the remedies (see below) or enough alternative suppliers exist. This is also true in relation to raw materials.

(32)

The Commission has also examined whether, further to the Transaction, the merged entity would have the ability to restrict access to the downstream market of crop protection products by reducing its purchases of AIs from its upstream rivals. The Commission found that the merged entity would not be able to implement customer foreclosure in relation to AIs. This is also true in relation to raw materials.

(33)

In order to address the aforementioned competition concerns, the Parties have submitted the undertakings described below.

(34)

In order to render the Transaction compatible with the internal market in relation to the crop protection markets that have been identified by the Commission as raising competition concerns, the Parties submitted commitments pursuant to Article 8(2) of the Merger Regulation on 9 and 10 January 2017 (‘the Initial Commitments’). The Commission launched a market test as regards these commitments. The market test indicated that the Initial Commitments were insufficient to entirely eliminate the concerns raised by the Transaction. In order to address the issues raised in the market test, the Notifying Party submitted a final set of commitments on 27 January 2017 (‘the Final Commitments’).

(35)

The Final Commitments submitted by the Parties consist essentially in the divestment to a single buyer or multiple buyers of a large part of Adama’s and some of Syngenta’s assets in crop protection (the ‘Divested Business’). The Commitments included:

(36)

The three Portfolios shall be marketed for sale by the Parties as a single business but may also be sold individually to different purchasers, or in different parts and combinations to separate purchasers, provided that all products from all portfolios are sold, and that a sale to multiple purchasers has no effect on the viability and competitiveness of the Divestment Business.

(37)

The Commission concluded that the Final Commitments are adequate and sufficient to eliminate any significant impediment to effective competition in the crop protection markets where competition concerns have been raised

(38)

For the reasons mentioned above, the decision concludes that the proposed concentration will not significantly impede effective competition in the Internal Market or in a substantial part of it.

(39)

Consequently the concentration should be declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.