Through Resolution No. 488/2021 of the Secretariat of Domestic Trade (hereinafter referred to as “Resolution 488/2021”), the Technical Opinion dated April 29th, 2021, issued by the National Antitrust Commission was considered as the objection report under the terms of Article 14 of the Antitrust Law (Law No. 27,442), regarding the acquisition of Nidera by Syngenta.
Previously, on August 13th, 2018, the economic concentration operation consisting of the acquisition of the seed business of COFCO International Netherlands B.V. (hereinafter referred to as “COFCO”) by Syngenta Crop Protection AG (hereinafter referred to as “Syngenta”), thus gaining control of the company Nidera Seeds Holging B.V. (hereinafter referred to as “Nidera”) had been notified to the National Antitrust Commission. This acquisition indirectly implied the acquisition of all the issued and outstanding shares of Nidera.
Thus, the economic concentration operation involves the acquisition by the market leader firm (Syngenta) of the second largest company in terms of annual sales of sunflower seeds (Nidera), whereby the merged company would account for more than 60% of total sales, increasing the concentration of supply and increasing the gap with the second competitor to a level of between 45% and 50%.
In its Technical Opinion, the National Antitrust Commission argued that the operation under analysis would imply the strengthening of Syngenta’s research and development activity (“R&D”), through the combination of its genetic bank with the one of Nidera’s company, which, in turn, would allow it to have a combined portfolio of leading hybrids in all regions of the country. The National Antitrust Commission also expressed that such merger would generate a company with the capacity to develop a high performance and profitable seed portfolio, not replicable by its competitors, as well as the possibility of setting seed prices autonomously (aggravating the barrier to entry into the market derived from R&D).
In this regard, the National Antitrust Commission stated that the economic concentration operation under analysis would eliminate a substantial competitor, up-stream and down-stream, and would increase the power of the merged companies in the commercialization of sunflower seeds with potential effects on their prices.
In addition, the National Antitrust Commission understood that in the long term it would be feasible that the companies, given the strengthening of their market power resulting from the consolidation of their products in the face of a captive demand and given the lack of rivalry in the commercialization activity of the product involved, would lose their own motivation to reinvest part of their profits in research and development activities, leaving a reduced final supply and lacking the expected technological level.
In this way, the National Antitrust Commission preliminarily concluded that the economic concentration operation has the potential to restrict or distort competition, in such a way that it may be detrimental to the general economic interest, in relation to the sunflower seeds market.
Following the recommendations of the National Antitrust Commission, the Secretariat of Domestic Trade considered the Technical Opinion of the National Antitrust Commission as the objection report under the terms of Article 14 of Law No. 27,442.
Thus, Resolution 488/2021 granted a term of 15 days for Syngenta and COFCO to make the considerations they deem appropriate or offer solutions that may mitigate the potential effects on competition arising from the objection report.
Resolution 488/2021 also called for a special audience to be set by the National Antitrust Commission to consider the measures offered by the companies to mitigate the potential negative effect on competition arising from the objections.
Finally, Resolution 488/2021 maintained the suspension of the term established in Article 14 of Law No. 27,442, until the parties carry out the considerations they deem appropriate or offer solutions that may mitigate the potential effects on competition arising from the objection report, or in the absence thereof, until the term granted for such purpose expires, and the audience convened is held.
Access the full text of the resolution in Spanish here.
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