Brussels has issued a stark warning to the world’s leading agrichemical companies that they will need to make significant concessions in the coming months if they want to complete a wave of mega-mergers.

Margrethe Vestager, the EU’s competition commissioner, on Thursday opened an in-depth investigation into the proposed $130 billion tie-up between Dow and DuPont. The deal between the two U.S. chemical giants would create the world’s largest crop protection and seed company.

The unusual breadth of Vestager’s probe into Dow/DuPont is a signal that the Commission is also going to take an equally rigorous approach to ChemChina’s $43 billion bid for Syngenta and Bayer’s $65 billion swoop on Monsanto.

Dow and DuPont had offered some initial concessions to try to secure approval for the deal on July 20, but the Commission batted these back to open an intensive Phase 2 probe.

The massive scale of the simultaneous consolidation of the agrichemical industry has sparked intense concern among farmers and NGOs across Europe, who worry about the implications for the pricing of core agricultural products and the variety of chemicals that will be available.

We are worried that this merger ... will lead to less diversity in crop protection products" — Michael Lohse, spokesman for the German Farmers' Association

The Commission said it was cooperating closely with the U.S. Department of Justice and antitrust authorities in Brazil and Canada.

“The livelihood of farmers depends on access to seeds and crop protection at competitive prices. We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products,” Vestager said on launching the Dow/DuPont probe.

Her concerns were immediately echoed by Michael Lohse, spokesman for the German Farmers' Association.

“We are worried that this merger, like the other mergers between the biggest agrichemical companies, will lead to less diversity in crop protection products. We are already facing a situation where for some bugs there is only one product available on the market. This is of particular concern because pests can become resistant to that one pesticide.”

Vestager gave a sweeping list of Dow/DuPont's business areas that would require scrutiny from the Commission.

The Commission will investigate herbicides for crops such as cereals, beets and oilseed rape, as well as insecticides, particularly those used to fight “chewing insects.” It will also study the market for forthcoming fungicides and products to protect against nematode worms.

“The Commission also has preliminary concerns that the merger may lead to a reduction of innovation in crop protection as a whole,” the Commission said in a statement.

Investigators also identified potential problems arising from the combination of the two firms’ seed businesses, in particular whether they would continue to license “gene editing” technologies to third-parties.

Vestager has a preliminary deadline of December 20 to rule on the merger, although that can be pushed back if the parties make further concessions.

Despite the number of business divisions under investigation, Lars Kjølbye, a partner at Latham & Watkins law firm, said that there was a potential comparison with commitments in pharmaceutical mergers, where mergers can give rise to hundreds of overlaps.

"In the chemical and pharmaceutical industries, you can relatively easily identify problems and ways to fix them," Kjølbye said. "Divesting a few products won’t normally kill the deal rationale unlike in other sectors. You can sell factories, facilities, patents — with people who can move across."

But divestments become more difficult in an environment when there is a massive sectoral consolidation because fewer rivals are in the market to buy.

The two companies said that they still expected to close the deal by the end of this year.

"Dow and DuPont will continue to work constructively with the Commission to address their concerns and to obtain clearance for the merger, which we are confident will be achieved," they said in a joint statement.

When asked about the farmers' concerns, they added: "We believe the merger is procompetitive and good for customers and consumers. As one focused agriculture company, the combination of portfolios and research capabilities will enhance the ability of the intended new [agricultural] company to deliver innovative products and solutions for farmers that generate competitive price for value."

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