CADE approved with restriction license agreement between Monsanto and Bayer

The Administrative Council for Economic Defense – CADE, approved under conditions, on 23 January, a transaction under which Monsanto do Brasil Ltda. grants Bayer S/A with a license of development, production and commercialization of soybean seeds with the technology Intacta RR2 PRO™.

The technology Intacta RR2 PRO™ endows plants with resistance to insects and tolerance to herbicide glyphosate, used to control weeds.

The merger approval was conditioned to the modification of some provisions of the license agreement, which could grant Monsanto with the capacity of having unduly control and influence over Bayer’s activities on the soy market.

“A mechanism  of creation, maintenance and expansion of control of the licensor over the licensed party is embedded in the contract. This conditions the licensed company’s activities in the soy market as a whole and extrapolates, or even denatures, the characteristic of a technology license”, said Reporting Commissioner, Alessandro Octaviani. In his opinion, some clauses “harm the possible or incoming competitors, reducing the options to agriculturists and the whole chain”.

The royalties billing mechanism structured by Monsanto, for example, grants to the company access to Bayer’s sensitive commercial information. Since every agent that act or may act in the productive chain of Intacta soybean are registered, Monsanto could map the commercial relationship between them and have access to information that do not present direct relation with Intacta soybean’s production and commercialization.

CADE’s understanding states that this would increase the company’s control over the licensed party, and raise unduly the market power already detained by Monsanto in the transgenic soy.

The Council determined yet the modification of other provisions that could ease Monsanto’s interference in Bayer’s possible business with competitor licensees. Among the imposed restrictions is the withdrawal of a provision on Monsanto’s preference rights in case of a possible acquisition, by Bayer, of related companies in the soybean market.

To the Commissioners, the imposition of any right regarding Bayer’s expansion in the soybean market would result in undue interferences of Monsanto over the licensed company’s activities, with negative effects to all licensees and to the analyzed market.