On April 4, 2017, the FTC entered into a settlement agreement with China National Chemical Corporation (“ChemChina”) and Syngenta AG whereby the parties agreed to divest three types of pesticides, in order to resolve antitrust concerns with its merger.
Syngenta is the leading pesticide supplier worldwide. ChemChina is currently active in pesticide markets in the United States through Adama, its wholly-owned Israel-based subsidiary. Unlike Syngenta, which produces pesticides based on active ingredients it has developed itself, Adama only produces generic pesticides based on active ingredients developed by third parties for which the patent has expired. Adama is the world’s largest producer of such generic pesticides.
According to the FTC’s complaint, the merger as originally proposed would have caused competitive harm in the United States in three pesticide lines:
- – the herbicide paraquat, which is used to clear fields prior to the growing season;
- – the insecticide abamectin, which protects primarily citrus and tree nut crops by killing mites, psyllid, and leafminers; and
- – the fungicide chlorothalonil, which is used mainly to protect peanuts and potatoes.
Syngenta owns the branded version of each of the three products at issue whereas ChemChina’s subsidiary ADAMA focuses on generic pesticides and is either the first- or second-largest generic supplier in the United States for each of these products. The FTC alleged that the merger would eliminate the direct competition between Adama and Syngenta’s branded products. The FTC was concerned that the acquisition would lead to higher prices even though Adama offers generic versions of Syngenta’s branded products.
To resolve the FTC’s concerns, the proposed settlement requires ChemChina to sell all rights and assets of Adama’s U.S. paraquat, abamectin and chlorothalonil crop protection businesses to California-based agrochemical company AMVAC.
Although the FTC encourages divestitures of an ongoing business over a more limited divestiture package because divestitures of ongoing businesses have a higher success rate than limited divestitures, the FTC allowed a divestiture of a more limited set of assets to an approved upfront buyer. The FTC will accept a more limited divestiture package only if the merging parties and the buyer can establish that the divestiture will restore and maintain competition.