Grassley asks Justice Department to closely review Dow-DuPont deal

Source: By Christopher Doering, Des Moines Register • Posted: Thursday, June 16, 2016

WASHINGTON — Iowa Sen. Chuck Grassley said Tuesday he was concerned by the rapid pace of consolidation among seed and chemical producers and would ask the Justice Department to conduct “a careful analysis of the Dow-DuPont merger.”

Grassley, who sent a letter to the nation’s top law enforcement department Tuesday outlining his concerns, said the deal, along with two others in agriculture, could hurt farmers and give companies “outsized” pricing power for seed and chemicals. If these mergers were completed, the seed and chemical sector would be left with just four major players — including one owned by the Chinese government — which some fear could not only lead to higher prices for farmers but stifle innovation.

“I’ve asked them to consider the (Dow-DuPont) merger in the context of the current backdrop for three potential mergers which are being discussed,” Grassley told reporters. “Federal regulators need to thoroughly consider the implication on agriculture, farmers and consumers, of such a seismic shift in this industry before they sign off on a transaction.”

Analysts and farm groups speculate that depressed commodity prices and plunging farm income across the Corn Belt are prompting the wave of consolidation among seed and chemical companies. With shrinking profits and pressure to churn out new products faster, there is more incentive for businesses to combine to tap into a deeper pool of resources.

Monsanto, the world’s largest seed company, recently turned down Bayer AG’s $62 billion acquisition offer but said it was open to talks with the German drug company. In addition, ChemChina and Syngenta — along with DuPont, parent of DuPont Pioneer, in Johnston, and Dow Chemical — are in the midst of their own deals.

The $130 billion Dow-DuPont merger, announced in December, is expected to become final in late October or early November, before the combined company moves ahead with splitting into three operations — agriculture, material sciences and specialty products — within two years.

The move essentially leaves Pioneer as it is, with the business operations staying in Johnston and the corporate side remaining in Wilmington, Del., where it has been since DuPont purchased Pioneer in 1999.

Grassley said the impetus for his letter came from Iowa town hall meetings, where numerous farmers expressed concern about how the mergers could affect them.

Iowa produces more corn, soybeans, ethanol and pork than any other state.

The Justice Department is reviewing the Dow-DuPont deal and could scuttle the hookup, ask the companies to divest some products or approve it. Grassley has not called for any specific action.

The Iowa Republican, who is chairman of the Senate Judiciary Committee, said Tuesday he hasn’t decided whether to hold a hearing on the Dow-DuPont merger but said “it’s something that we’re looking at.”

In a two-page letter sent to the Justice Department’s antitrust division, Grassley expressed concern the deal would “decrease competition … adversely impact choice and price of products for farmers and consumers … and raise barriers in the market for smaller companies and potentially harm innovation.”

A Justice Department spokesperson declined to comment or say whether the department received the letter.

Dan Turner, a DuPont spokesperson, said the company expects a thorough review of the deal. “We are cooperating with regulatory authorities as they review the proposed merger transaction, which we believe is pro-competitive and good for farmers and consumers,” he said.

David Miller, director of research at the Iowa Farm Bureau Federation, said the agricultural community favors asking the Justice Department and other agencies that have jurisdiction “to do a full and comprehensive investigation or study of the ramifications or potential consequences” of the three mergers.

“At this point, do we have anything that says any one of those three is extremely problematic in and of itself? Probably not,” said Miller, who also farms part time in southern Iowa. “But, again, it’s the context of three big mergers potentially happening concurrently. I think it is somewhat unprecedented, at least in the agricultural industry, to have this much happening in this sort of a time frame at such a rapid (pace).”