2004/304/EC: Commission decision of 17 April 2002 declaring a concentration to be compatible with the common market and the EEA Agreement (Case COMP/M.2547 — Bayer/Aventis Crop Science) (Text with EEA relevance) (notified under document number C(2002) 1462)
Date: 2002-04-17
Institutions: European Commission
Subjects: chemical industry, economic concentration, exchange of information, merger control, plant health product

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(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 17 April 2002

declaring a concentration to be compatible with the common market and the EEA Agreement

(Case COMP/M.2547 — Bayer/Aventis Crop Science)

(notified under document number C(2002) 1462)

(Only the English text is authentic)

(Text with EEA relevance)

(2004/304/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the opinion of the Advisory Committee on
Concentrations (3),

Having regard to the Treaty establishing the European Com-
munity,

Having regard to the final report of the Hearing Officer in this
case (4),

Having regard to the Agreement on the European Economic
Area, and in particular Article 57 thereof,

Whereas:

Having regard to Council Regulation (EEC) No 4064/89 of
21 December 1989 on the control of concentrations between
undertakings (1), as last amended by Regulation (EC) No 1310/
97 (2), and in particular Article 8(2) thereof,

Having regard to the Commission’s decision of 4 December
2001 to initiate proceedings in this case,

(1)

(2)

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission,

On 29 October 2001 Bayer AG (Bayer) notified the
Commission of its intention to acquire all shares in
Aventis Crop Science Holding SA (ACS), constituting
the agrochemical business of Aventis SA.

After examination of the notification, the Commission
has concluded that the notified operation falls within
the scope of Regulation (EEC) No 4064/89 (‘the
Merger Regulation’) and raises serious doubts as to its
compatibility with the common market and with the
EEA Agreement. Therefore, on 4 December 2001, the
Commission decided to initiate proceedings pursuant
to Article 6(1)(c) of the Merger Regulation.

(1) OJ L 395, 30.12.1989, p. 1; corrected version in OJ L 257,

21.9.1990, p. 13.

(2) OJ L 180, 9.7.1997, p. 1.

(3) OJ C 91, 15.4.2004.
(4) OJ C 91, 15.4.2004.

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(3)

(4)

(5)

Following a detailed investigation of the case, the
Commission has come to the conclusion that the
proposed concentration as notified would indeed cre-
ate or strengthen dominant positions on a number of
markets as a result of which effective competition
would be significantly impeded in a substantial part of
the common market. However,
the commitments
entered into by Bayer modify the proposed concen-
tration in such a way that the concentration concerns
identified in respect of the concentration are resolved.

I. THE PARTIES

Bayer is an international public quoted company,
which is active in four business segments: healthcare,
agricultural business, polymers and chemical business.
The agricultural business segment, which is relevant
for this transaction, comprises the crop protection and
the animal health business groups. The crop protection
business group develops, produces and markets crop
protection products to control plant diseases, pests
(insects, other little animals) and weeds in crops. The
animal health business group produces a wide range
of veterinary medicines and vaccines to maintain the
health of life stock and companion animals as well
as a variety of grooming products. Other products
developed and supplied by the animal health business
groups are agents designed to protect food supplies
and to control disease vectors.

insecticides,

ACS is the combination of AgrEvo (the former
Hoechst/Schering joint venture), and the Rhône-Pou-
lenc agriculture division and was formed in 1999. ACS
comprises four business segments: The crop protection
business is active in the development, production
and marketing of agricultural crop protection agents
including herbicides,
fungicides, plant
growth regulators and seed treatments, ACS’s environ-
mental science business develops, produces and distrib-
utes non-agricultural products including household
insecticides, industrial weed agents, and products for
lawn and garden. The seed business is active in the
research, production and breeding of field seeds and
vegetable seeds. Finally, the bioscience business of ACS
is active in the development of technologies to enhance
plant value using input traits, agronomic traits and
output traits.

II. THE OPERATION

(7)

(8)

(9)

(10)

Bayer currently ranks seventh of all agrochemical
companies in terms of worldwide sales. ACS ranks
fourth on the worldwide scale. Together they will
become the second largest in the world with a market
share of about [20 to 30] %, just behind the largest
agrochemical company, Syngenta, but ahead of BASF,
Dupont, Dow and Monsanto.

III. COMMUNITY DIMENSION

Bayer and ACS have a combined aggregate worldwide
turnover in excess of EUR 5 000 million (5) (Bayer:
EUR 30 971 million; ACS: EUR 4 034 million). Each
of them has a Community-wide turnover in excess of
EUR 250 million (Bayer: EUR 10 905 million; ACS:
EUR [...] million), but
they do not achieve more
than two thirds of their aggregate Community-wide
turnover within one and the same Member State.
The notified operation therefore has a Community
dimension and constitutes a cooperation case under
the EEA Agreement, pursuant to Article 57 of that
Agreement.

IV. COMPETITIVE ASSESSMENT

INTRODUCTION

The proposed merger will have an impact primarily on
the markets of agricultural crop protection products
comprising a large variety of products that are designed
to protect crops against all forms of damage which
might be caused by insects, weeds or fungi.

The parties have overlapping activities in the following
main areas: agricultural insecticides, herbicides, fungi-
cides and seed treatment. Other, smaller areas of
overlap include active substances (the actual molecules
which have activity against weeds, insects, or diseases),
industrial weed control and insecticides for pro-
fessional pest control.

(6)

The transaction involves the acquisition of all shares in
the ACS business by Bayer. The proposed concen-
tration gives rise to an acquisition of sole control
within the meaning of Article 3(1)(b) of the Merger
Regulation.

(5) Turnover calculated in accordance with Article 5(1) of the Merger
Regulation and the Commission notice on the calculation of
turnover (OJ C 66, 2.3.1998, p. 25). To the extent that figures
include turnover for the period before 1 January 1999, they are
calculated on the basis of average ECU exchange rates and
translated into euro on a one-for-one basis.

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(11)

Non-agricultural crop protection products for home
and garden, small animal ectoparasiticides and house-
hold insecticides constitute vertically affected markets.

(15)

the potential competitive constraint of
Moreover,
generic companies is reduced by the fact that off-
patent products and active substances may be further
protected by patented technical know-how of pro-
duction. Essential know-how is not accessible and not
necessarily transparent from the published patents or
scientific literature. This means that the best technology
is generally protected significantly longer than the
original patent protection period.

(12)

(13)

(14)

INDUSTRY DRIVEN BY R & D COMPETITION

The crop protection industry is characterised by a few
large international companies involved in research and
development of new and more effective products
and a large number of ‘generic producers’ without
substantial research and development activities. The
R & D-based companies are currently Syngenta, Aven-
tis, BASF, Bayer, DuPont, Dow and Monsanto.

(16)

The last few years have seen strong consolidation
among this group of firms. Dow in 2001 bought the
agrochemical business of Rohm & Haas. Syngenta was
formed in 2000 by the spin-off of the agrochemical
businesses of AstraZeneca and Novartis. BASF in
2000 bought American Cyanamid, the agrochemical
business of American Home Product. There are further-
more several Japanese R & D-based companies, which
however do not have strong positions in Europe but
often choose to license their products to companies
with strong sales organisations in Europe. Among the
generic producers, the largest are Makhteshim Agan
and Cheminova.

It has been argued that the dynamics of the agrochem-
icals industry results largely form R & D and market
access. In the last three years, the industry has suffered
a general downward trend which has led to intensified
competition in a falling market. Growth has occurred
only where major innovative modes of action have
been introduced into the market. It has also been
argued that the main source of competition in this
industry is non-price R & D competition between
R & D companies. On the one hand, effective research
and development allows a firm to exploit the advan-
tages offered by new chemistries and obtain a wide
portfolio of new products that can be leveraged to
sustain a strong market position across a broad range
of markets. For instance combining off-patent products
with new patented products into a joint product
offering or the development of new mixtures including
patented active substances can prolong the life cycle
of an off-patent product and limit the competitive
constraint of generic companies.

In markets subject to intensive R & D, potential entry
cannot be generally expected in the short to medium
term, firstly because of the length of time required
for development of equally effective substances, and,
secondly, due to the costs involved in the development
of a product capable of competing with the new or
improved one. Market entry by means of innovative
products is extremely difficult and resource-intensive.
As regards the agricultural crop protection industry,
the costs of R & D and registration programs vary
widely, but for innovative products, the cost can exceed
EUR 100 million and the total
time can exceed
10 years.
In particular, new product development
requires over a decade for chemical synthesis, labora-
tory testing, formulation, process development, pilot
production, pilot trials, field trials, testing for toxicity,
environmental testing, data collection, product regis-
tration, and construction of production facilities. Once
a product is introduced in the market, several years are
often required to gain customer acceptance through
demonstrated safety, performance and reliability over
a variety of weather conditions. Only R & D-based
firms seem to have the capabilities and sufficient
economic strength to conduct these activities and enter
the various European product and geographic markets
and/or to expand sales and market share.

(17)

Following the merger, the R & D capabilities of the
new entity will be one of the biggest in the industry.
Based on third party estimates, the R & D budget of
the merged entity will be USD 750 million and, thus,
similar to the R & D budget of Syngenta. This will be
twice as much as the other R & D companies such as
BASF and DuPont. The investigation shows that, in the
crop protection industry, new product launches are
the primary driver of market share growth. The more
money a company can afford to invest in R & D, the
more new molecules it will discover and can afford to
bring to market.

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(18)

(19)

(20)

It has been indicated that the merging of two strong
product portfolios leads to a number of immediate
opportunities for product development based on new
mixtures. In addition to the potential effect of new
mixtures in foreclosing generic competitors, such new
products could make the commercial opportunities for
competing new R & D work less attractive. Third
parties have further indicated that the operation would
strengthen the parties’ position in the pipeline where,
before the merger, development of new products
would have infringed existing patents. Following the
merger, such patent restrictions would disappear and
new developments would become possible and be the
nucleus of a very strong market position. Finally, third
parties have argued that the proposed operation results
in the removal of a competitor from the market and
could lead also to the reduction of the total R & D
potential on the market by reducing the number of
research centres.

In the past the Commission has often seen reasons for
concern in the grouping of companies with strengths
in R & D and innovation. For the purpose of this
decision, the Commission considers that the parties
R & D capabilities and incentives have to be taken into
account as regards the potential elimination of future
competition in current product markets and future
markets. Moreover, where appropriate,
the Com-
mission considers it may be necessary to concentrate
on the effects of the concentration on R & D compe-
tition between the parties and in the overall R & D
potential.

CALCULATION OF MARKET SHARES

In order to assess whether the proposed transaction
results in any affected market regarding formulated
products including insecticides, herbicides, fungicides
and seed treatment products, the parties have provided
estimated market shares on the basis of a database
called Agrowin, which in turn is based on ‘panel
surveys’ as far as the larger Member States are con-
cerned. These panel surveys provide for detailed data
regarding the plant-protection business in various
Member States. They are produced by independent
market research companies such as Kleffmann, often
specialised in particular Member States. In the case of
smaller Member States, which are not covered by any
panel survey, market share calculations are based upon
best estimates of the parties.

share data only for 1998, 1999 and 2000. The
Commission has requested corresponding data also
from third parties. The Commission has verified the
data provided for by the parties by comparison with
data supplied by other market participants.

RE-REGISTRATION OF CROP PROTECTION PRODUCTS BY 2003

(22)

(23)

As part of a Community policy initiative in the
environmental field, Council Directive 91/414/EEC of
15 July 1991 concerning the placing of plant protec-
tion products on the market (6), as last amended by
Regulation (EC) No 806/2003 (7), requires all compani-
es that intend to continue selling their crop protection
products to enter into a re-registration process. All
manufacturers of agrochemical products are legally
obliged to withdraw those products from the market
which have not been re-registered. In practice, this
means that all those products, which have not been
submitted for re-registration, will disappear from the
market in 2003. Registration will typically not be
sought for a number of older products, since they are
typically less environmentally friendly and/or they
generate only modest turnover. It has been estimated
that some 600 of the 900 existing active ingredients
will not be re-registered.

The ongoing re-registration process will affect the
assessment of the case in two ways: Firstly, it has to be
taken into consideration that the market shares of
today may not be indicative of market positions in the
near future. Secondly (this issue being directly related
to the first one), as regards the position of the generic
companies, the removal of a large number of older and
less profitable products in the near future could weaken
the position of a number of generic producers. It
has effectively been suggested that the re-registration
process will hit hard especially on the generic compani-
es as they are typically active in older, off-patent
products and in low value market niches.
In this
respect, it has been suggested that whereas large R & D-
based companies can spread the cost of re-registration
on a large number of products, generic companies do
not have the same possibility. Therefore, it has been
argued that the re-registration could increase the cost
of the generic producers and the price of older products
could consequently rise in the future. It has also been
indicated that re-registration is very costly and could
have a negative impact also on some of the other,
smaller companies active on the market.

(21)

Due to merger activity and internal accounting reasons,
the parties have been able to provide reliable market

(6) OJ L 230, 19.8.1991, p. 1.
(7) OJ L 122, 16.5.2003, p. 1.

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(24)

(25)

(26)

RELEVANT GEOGRAPHIC MARKETS

The parties have submitted that, due to already visible
trends towards standardisation at the European level,
the relevant geographic market for all crop protection
products is EEA-wide in scope.

The parties have referred to the effects of Directive 91/
414/EEC. According to the parties, the Directive does
not only establish a positive Community list of active
substances which are deemed in advance to be accept-
able for human and animal health and for the environ-
ment, but also establishes a system of authorisation by
the Member States of different formulations containing
active substances listed in its Annex I in accordance
with requirements laid down in the Directive and
according to uniform principles. The parties have also
argued that the Directive acknowledges a system of
mutual recognition of authorisation by the Member
States provided that plant health, agricultural and
environmental conditions are comparable in the
regions concerned. This system allows the Member
States to recognise the registration of a product in the
country where it was first introduced. Although the
Directive has not yet come into full effect, all compani-
es which want
to continue selling specific active
ingredients have to enter into a re-registration process.
The information which must be provided by the
companies under this process must be produced by
May 2003. The parties have argued that, even though
at present individual screening of products in every
Member State is still required, it can be expected that
due to the mutual recognition procedure the time for
registration procedures will be uniform.

The Commission found in its decision in Case M.1806
— AstraZeneca/Novartis that the markets for formu-
lated products and growth regulators had to be con-
in scope. The Commission gave a
sidered national
detailed argumentation for
this conclusion. One
important reason was that crop protection products
must still be registered in a Member State before
they may be marketed. Furthermore, distribution is
organised on a national basis, with suppliers having in
most cases national sales organisations or distributing
via the sales organisation of another manufacturer
operating in the relevant Member State. Parallel-
imported products are seen as difficult to commercial-
ise, among other reasons because brand names and
formulations may vary between Member States,
because registration fees may be high, and because it
may take a long time to register the products.

in biological conditions and treatment patterns of
farmers leads to the fact that products may differ from
one country to another. The market position of the
players varies in different Member States depending
e.g. on the fit of the products to the markets’ needs and
the strength of the sales organisation.

(28)

The markets for crop protection products (insecticides,
molluscicides, herbicides, fungicides, seed treatment,
professional pest control, small animal ectoparasiticid-
es and non-agricultural crop protection agents for
home and garden) will therefore be assessed on a
national basis.

A. AGRICULTURAL INSECTICIDES

A.1. Relevant product markets

(29)

(30)

(31)

Both Bayer and ACS are active in the development,
production and distribution of agricultural insecticides.
Agricultural insecticides are products designed to con-
trol insects that damage cultivated plants, especially
food crops.

In accordance with previous Commission decisions (8),
the parties have proposed to define the insecticides
markets on a crop-by-crop basis, rather than on a
insect-by-insect basis, because they claim that most
insecticides are designed to combat a whole range of
insects infecting particular plants. The Commission has
found in previous decisions that a breakdown of
insecticides by type of plant rather than by insects is
appropriate in general. The main reason is that there is
only one plant-specific insect that affects a major crop,
namely the cornborer affecting maize. For all other
main crops a variety of
insects infests the plant.
Therefore, it was found that most insecticides combat
a range of insects.

In its decisions in BASF/American Cyanamid and
Case M.1806 — AstraZeneca/Novartis (Syngenta), the
Commission noted that a differentiation could be
envisaged between sucking and chewing insects. While
the Commission noted in those cases that this describes
rather the way of feeding than the mode of action of
insecticides, the question of whether such a breakdown
is appropriate was left open in both cases.

(27)

The market investigation in this case has confirmed
that the reasons given in Case M.1806 — AstraZeneca/
Novartis for finding national markets are still largely
valid. The investigation has confirmed that differences

(8) Cases IV/M.737 — Ciba Geigy/Sandoz (Novartis)

(OJ L 201,
29.7.1997, p. 1), IV/M.1378 — Hoechst/Rhône-Poulenc (Aventis)
(OJ C 254, 7.9.1999, p. 5), IV/M.1806 — AstraZeneca/Novartis
(Syngenta) and M.1932 — BASF/American Cyanamid (OJ C 354,
9.12.2000, p. 38).

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(32)

(33)

(34)

Division of insecticides into soil and foliar insecti-
cides

The parties have argued that a division should be made
between soil and foliar insecticides. In this respect, they
have argued that the major concern of the farmer,
who is confronted with certain pests, is whether the
respective insect problem is above ground or below
ground since this determines the kind of product
required and the kind of application equipment necess-
ary. According to the parties, the spray equipment
used for foliar application normally differs from that
required for soil application (9). Furthermore, the par-
ties have argued that soil and foliar insecticides are, in
general, based on different active substances which
cannot be substituted for each other. The parties
therefore submit that soil insecticides, designed to treat
soil insects within the soil by applying them on or into
the soil, and foliar insecticides applied to the crops
by spraying, constitute separate markets. The parties
submit nevertheless that for a number of crops, e.g.
maize, beets and cereals, the farmer has the choice of
using soil or foliar insecticides and, hence, there is a
certain degree of substitution between these two types
of products.

Division of insecticides into sucking and chewing
insects

As regards the soil segment, the parties have argued
that since there are no sucking pests of any conse-
quence in the soil, differentiation between sucking and
chewing pests in soil has no relevance.

As regards the question whether, in addition to dividing
the market by crop and into foliar and soil applications,
a further division into sucking and chewing insects
should be made in foliar applications, the parties have
argued that a division of the market along the lines of
different pest groups, and into sucking and chewing
insects, is not appropriate.

(35)

More particularly, the parties have submitted that
farmers generally purchase products combating groups
of harmful insects whose composition may vary by
type of plant. The parties have argued that farmers are

(9) The only exception is broadcast spray application of a soil
insecticide and foliar application to low growing crop, i.e. one to
six leaf cereals.

(36)

(37)

thus inclined to purchase either products with a
broad spectrum of activity, combination products or
insecticides with a narrow spectrum which they mix
themselves. Hence, the parties have argued, from the
farmers’ point of view, broad spectrum insecticides and
insecticides with a narrow spectrum are substitutable
and, thus, a breakdown of markets by type of plant
already contains a breakdown of insecticides by the
spectrum of pests they are designed to control.

The parties have furthermore argued that there is no
clear separation for the farmer between sucking and
chewing insects as he/she can be confronted with one
or the other or both depending upon crop, season and
climate. The parties have argued that sucking and
chewing insects can occur as foliar pest either individu-
ally or together depending on the life cycle of the
particular pest, which is influenced by the crop, season
and climate. Therefore, the parties have submitted that
the farmer is in need of insecticides which are effective
against both sucking and chewing insects.

The parties have also claimed that products belonging
to the main insecticides classes, including organophos-
phates, pyrethroids, carbamates and neonicotinoids,
are active against both sucking and chewing insects.
The definition of insecticides markets encompassing
both sucking and chewing insects is according to the
parties supported by the fact that a large number of
insecticides are used to combat both sucking and
chewing insects.
the parties have
In this respect,
insecticides of almost all chemical
submitted that
classes (e.g. Deltamethrin, Cyfluthrin, Beta-Cyfluthrin,
Cypermethrin, Parathion-Methyl, Carbaryl) are used on
both insect pest groups. In this respect, the parties
have argued that pyrethroids are used, inter alia, in
potatoes against Colorado potato beetle (chewing
pests) and aphids (sucking pests) at the same time,
whereas organophosphates can be used on some fruits
against codling moth (chewing pests) and aphids
(sucking pests). The parties have further submitted that
even products with a specific efficiency against sucking
pests also offer control of chewing pests. Imidacloprid,
for example, is according to the parties effective against
white flies and scales (sucking insects) but also controls
leaf miners (chewing insects) in citrus fruit.

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(38)

(39)

(40)

(41)

Third parties have generally agreed that it is meaningful
to divide the relevant market into the soil and the foliar
segment. However, as regards the questions whether a
further subdivision should be made for sucking and
chewing pests, most third parties have disagreed with
the parties. While it is broadly agreed that the distinc-
tion is not relevant for the soil segment, third parties
have argued that, as regards foliar applications, group-
ing insects and insecticides based on feeding habit is a
valid and meaningful categorisation scheme. Some
respondents have even suggested that sucking and
chewing insects constitute separate markets.

(42)

Therefore, if farmers use a broad-spectrum insecticide
and apply it once, they will be able to get good control
of such pests as are occurring during that application
from partial
window but
they can only benefit
It has
additional side effects against other pests.
therefore been argued that there is no broad-spectrum
insecticide which could result
in satisfactory total
control of all the various pests that occur during
a growing season.
It has been submitted that no
substitutability exists between narrow and broad spec-
trum insecticides but substitutability exists between
products with activity against key pest to be combated.

The investigation shows that while there is a certain
relation between insects and crops,
in reality, crop
groupings are often artificial divisions created by
government registration agencies and chemical com-
panies. Registration is based on a particular crop
or crop grouping. Chemical companies may pursue
registration on certain crops based on the economic
value of that crop while not registering on others
where efficacy is similar. A company which is able
to offer an insecticide with activity against insects
occurring in different crops can potentially cover the
whole range of crops with this product. Therefore, a
breakdown of markets by type of plant would not
necessarily reflect the full potential of a compound.
While some species are plant specific, most economi-
cally important pests occur across many crops.
Especially sucking pests such as aphids and whitefly
are not isolated pests of single host plants but occur
on many different crops.

It has been indicated that farmers are faced with
various insect pests occurring on different crops and at
different times during a growing season. Each of these
different insect pests has to be combated at a given
time, i.e. when the pest actually occurs and certain
economic thresholds are reached. The exact time of
combating the different insect pests during a growing
season is not the same for the various insects infesting
a certain crop.

Because insecticides have different residual activity
profiles, it is critical that the products are applied at
the best time to get effective control of the targeted
pest: a late application, which can mean only two to
three days, can result in substantial crop damage and
an application made too early will not result in effective
the targeted pest either. Consequently,
control of
there is only a relatively narrow window for optimal
application. Even though it is correct that sucking
and chewing insects can occur as foliar pests either
individually or together depending upon the life cycle
of the particular pest as influenced by the crop and
the season, this does not mean that the very short
application window for such pests coincides. It is in
fact rare that two different insect pests have their
optimal application window at the very same time.

(43)

In this respect, it has also been pointed out that the
vast majority of insecticides products will only provide
good control of either sucking or chewing pests, but
not of both of these groups of pests. It has been
indicated that even broad-spectrum products are pri-
marily targeted against either sucking or chewing
insects. It is therefore not normally true that farmers
can use products that control a wide group of insect
pests.

(44)

it

Therefore, it has been submitted that key pests have to
be considered and, generally,
is one key pest
exceeding economic threshold which triggers a treat-
ment to prevent damage to the crop. Accordingly, the
farmer’s choice regarding the appropriate insecticide is
based upon this key pest of major concern. Two
observations underline the importance of key pests:
first, registration of insecticides is granted for a specific
crops with an indication of the pest spectrum and for
the application at a defined point of time with a defined
dose rate. This is done in order to address the issue of
selectivity, as only key pests occurring at a certain
point of time should be combated without harming
beneficials. Second, it has been argued that the 80 to
90 % of insecticides only contain one active ingredient

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with a certain spectrum of activity. It has been argued
that
the ready-made mixtures with several active
ingredients are the exception and are mostly used to
overcome resistance or enhance the activity on key
pests. It has been further argued that tank-mixing of
insecticides by the farmer is not a common practice. In
this respect,
it has been pointed out that mixing
narrow-spectrum products to achieve a broader spec-
trum of control
is normally more expensive than
applying various narrow-spectrum products sequen-
tially as the pests occur and reach economic thresholds.
The parties themselves have submitted in their reply to
the statement of objections for herbicides that ‘a tank
mixture is not as easy to handle as a single product’
and that the cost is higher. The parties have not
provided arguments why the same submission would
not apply also to insecticides.

Differences between sucking and chewing insects

(45)

(46)

Insects can be classified first into collembola (spring-
tails) and pterygota (winged insects). Pterygota can be
further classified into three large subgroups: blattoid-
orthopteroid, hemipteroid and endopterygote. Blatto-
id-orthopteroid are insects with biting mouth-parts
(e.g. cockroaches, termites), hemipteroid are insects
with sucking mouth parts and endopterygote are
insects which go though a complete metamorphosis
and pupate. Hemipteroid are sucking insects and
endopterygote are chewing insects.

The most important subclass of hemipteroid are hem-
iptera, which includes most importantly aphids, whitef-
ly and leafhoppers. Endopterygote include most
importantly lepidoptera (butterflies and moths) and
coleoptera (beetles and weevils). It has been indicated
that these three classes of insects — hemipteroid,
lepidoptera and coleoptera — are commercially the
most important insecticides in Europe. Aphids and
whitefly are the most important sucking insects in
Europe. The relative size of the hemiptera market
(sucking insects) is more or less the same as lepidoptera
and coleoptera (chewing insects) put together.

(47)

Sucking insects refer to those insects, which feed
on sap and liquid plant components (sap-feeders).
Chewing insects tear apart and digest plant com-
ponents. The different feeding habits of sucking and
chewing insects cause a fundamental difference in their

physiology: chewing insects need to excrete a lot of
solid while sucking insects need to excrete a lot of high
sugar content liquid (honeydew). Sucking insects cause
damage by transmitting disease, feeding on the plant
and causing fungus infection because of honeydew.
They reproduce very fast and, as a consequence, can
develop resistance quickly.

Sucking insects are less visible since they do not
consume foliage. Chewing pests such as hornworms
and cutworms are very visible to the farmer since
the damage is completely visible even on cursory
inspection. Aphids, whitefly and others are very small
and are often first noticed by the honeydew they
deposit than by any overt damage. No preventive
warning of infestation to control sucking insects is
possible and monitoring generally takes place by
looking for infestation. Because sucking insects repro-
duce very fast, the infestation must be tackled quickly.
Sucking insects tend to appear in early season.

Chewing insects have a long and complex life cycle
and consequently they take a longer time to develop
resistance. Infestation can often be monitored via adult
traps and preventive applications are possible (e.g. the
presence of eggs indicates that larvae will soon be
infesting the crop). For chewing insects, slower control
is possible. Chewing insects can infest the crop at any
time.

One fundamental difference between sucking and
chewing insects is where they can be found on a plant.
While chewing insects can be found anywhere on the
plant, sucking insects are normally found under the
leaf. This is because sucking insects suck the plant
liquid and there are fewer plant waxes under the leaf,
thereby facilitating sucking.

As regards the efficiency of insecticides, this means
that sucking insects are more difficult to control than
chewing insects, which can be found anywhere on the
plant: in order to control sucking insects, some contact
under the leaf is required. Compounds hitting only the
surface of the leaf and not moving are not very
effective. What is required is some ability for the
compound to move in the plant (systemic properties)
or, as a minimum, ability to move from one side of the
leaf to the other (translaminar properties). This means
that to be effective for sucking insects, the substance

(48)

(49)

(50)

(51)

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must be able to at least to penetrate the leaf. Older
chemistries, such as carbamates and organophosphat-
es, have some translaminar function and they are able
to move in the plant but generally only to a limited
extent. Neonicotinoids, on the other hand, are systemic
in the way that if e.g. only part of the plant has been
sprayed, the substance will move within the plant and
protect the whole plant against sucking insects.

(52)

Third parties have indicated that the division between
sucking and chewing insects is made in industry
positioning papers and advertising for a particular
insecticide. Bayer itself uses the terms sucking pest or
sap-feeder to classify a product. In reviewing web sites
and advertising for Bayer products, it is apparent that
sucking insect control is a key consideration tied to the
commercial viability of their products.

Division by chemical class

(53)

(54)

(55)

As regards the question whether the relevant product
market should be defined along the lines of chemical
classes, the parties have argued that this is not meaning-
ful. In this respect, the parties have contended that the
farmer, who is faced with a certain pest in a given crop,
does not select insecticides along the lines of chemical
classes but according to the product’s price and
efficiency on certain insect pests in a given crop.

The parties have argued that the same type of pest can,
in general, be controlled by a number of insecticides
belonging to different chemical families. In light of the
interchangeability of different chemistries as regards to
their ability to provide an efficient control of certain
pests, the definition of submarkets along the lines of
chemical classes is not, according to the parties,
appropriate. The same is true, the parties have argued,
in cases where a certain crop can be protected most
effectively by insecticides of one and the same chemical
class.

Some third parties have argued that the market should
be divided according to chemical classes. They have
submitted that, generally, insecticidal active ingredients
are clustered into chemical classes which usually go
hand in hand with a certain mode of action. It has
been argued that mode of action and different classes
of insecticides are critical for resistance management
both in solving the problem when it arises and in
avoiding it in the first place.

Substitutability between soil and foliar treatments
for maize, beets and cereals

As regards the parties’ submission that for maize, beets
and cereals the farmer has the choice of using soil or
foliar insecticides, third parties have indicated that the
substitutability is generally limited. The parties have
corrected their statement and submitted at a later stage
of the investigation that the issue is not relevant for
cereals.

Third parties have indicated that in sugarbeets, maize
and cereals, the early season sucking pests are mainly
controlled through seed treatment and that seed treat-
ment has virtually eliminated any market for control
of early sucking pests by foliar application in these
crops. At
the later growth stage, however, other
methods are required to control pests.

(56)

(57)

(58)

Similarly, some systemic soil insecticides might substi-
tute at least one foliar application. However, foliar
pests arising in a later growth period can not be
effectively treated with soil insecticides. They still have
to be controlled by foliar application.

(59)

It has also been indicated that soil insecticides, which
are used to control foliar pests, can not be simply
insecticides are
replaced by foliar insecticides. Soil
often used to protect plants against foliar pests in the
early growth period, where the crop is very sensitive
to pest attacks. In this early growth period, foliar
insecticides do not give sufficient protection, since
spraying conditions are not optimal and, therefore,
application of foliar insecticides is difficult.

(60)

Therefore, while the market for soil and foliar appli-
cations for these crops may be growing smaller as a
result of seed treatment or the soil applications may
reduce the need for foliar applications, the investigation
does not lend support to the parties’ argument that soil
and foliar applications are substitutable.

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Official Journal of the European Union

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(61)

(62)

Conclusion

(65)

For the purposes of this decision and following the
Commission’s practice in this field, the relevant market
for insecticides is defined by type of crop and subdiv-
ided into foliar and soil insecticides. Special attention
has been paid in this decision to the particular strength
of the parties in the sucking and chewing insects,
which are included in the overall market definition.
Special attention has also been paid to neonicotinoids
and pyrazoles, which also are included in the overall
market definition.

A.2. Competitive assessment

Introduction

(66)

Following the merger, the new entity would hold a
particular strong position on the insecticide market,
both at the EEA-wide level and also at the national
level. A large number of third parties have indicated
that the parties’ position in insecticides would be
significantly strengthened in the near future due to
their position in the ‘new’ chemical classes, neonicoti-
noids (10) and pyrazoles (11). This strengthened position
would take place both in the existing products and
also in the future products

(63)

The market investigation shows that there are five key
step changes in the insecticides technologies:

— organochlorines in the 1950s,

— organophosphates in the 1960s,

— carbamates in the 1970s,

— pyrethroids in the 1980s,

terms. The global sales of

According to the Wood Mackenzie study, recent years
have seen a considerable decline in the market for the
older insecticides chemistry classes. Sales of organ-
ophosphates, carbamates and pyrethroids all peaked in
1995 and over the past few years the average growth
rate of each of these categories has been a decline in
real
the older product
chemistries such as the organophosphates, carbamates
and pyrethroids all declined in 2000. The only positive
and strong growth was seen in the new natural based
products and neonicotinoids,
led by Imidacloprid.
Neonicotinoids grew by 8,3 % in 2000. The real
growth rate of neonicotinoid insecticides was 10,6 %
in 1995 to 2000 and it has been estimated as 8,7 % in
2000 to 2005.

Few categories of insecticides are expected to achieve
real growth in the next five years; those that are
include neonicotinoids, pyrroles and fiprols. Bayer’s
Imidacloprid has enjoyed significant growth and Imida-
cloprid is now the leading insecticide worldwide. As
well as proving to be a realistic alternative to older
insecticide chemistries, Imidacloprid has also created
new markets such as stem application and as a
component in several seed treatments. This class is
expected to grow at high rate. Sales of the pyrazole
Fipronil are also growing rapidly. According to the
the
market research company Phillips McDougall,
growth rate of the pyrazole insecticides in 2000 to
2005 is 8,4 %, similar to that of the neonicotinoids.
For all the other insecticides chemistry classes, the
growth rate is expected to be much slower or even
negative.

— neonicotinoids/pyrazolesin the 1990’s/2000.

Neonicotinoids

(64)

According to the Wood Mackenzie study (12), in con-
trast to the other sectors of the agrochemical market,
in insecticides fewer chemical classes have been found
to possess useful activity. The search for other active
chemistries produced relatively few successes between
the introduction of the synthetic pyrethroids in the
mid 1970s and the introduction in the early 1990s of
the fiproles, the neonicotinoid derivatives, the pyrroles
and the spinosyns. These products offer different
modes of action from existing chemistries and hence
have improved the options available to the farmer.

(10) Also referred to as chloronicotinyls.
(11) Also referred to as phenylpyrazoles.
(12) Reference volume of the Agrochemical Service — Key agrochemi-
cal product groups, Agrochemical Service, update of the products
section, November 2001.

(67)

Neonicotinoids are acetyl choline receptors. They are
extremely effective insecticides which act on the central
nervous system of insects, blocking the transmission
of neural impulses. As a result, the insects stop feeding,
become paralysed and die from starvation, dehydration
or predation. This novel mode of action and the site of
action, which is different from those of carbamates,
organophosphates and pyrethroids, makes neonicoti-
noids suitable for use in resistance management stra-
tegies as they also control pests that have developed
resistance against conventional insecticides. Neonicoti-
noids are very effective against aphids and whitefly, the
commercially most important sucking insects in the
EU.

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(68)

(69)

(70)

(71)

(72)

(73)

(74)

Bayer has developed successfully the neonicotinoid
chemistry and has already commercialised one prod-
uct, Imidacloprid, which is currently the world’s largest
selling insecticide and ranks first in sales also in Europe.
Bayer is also developing two other neonicotinoids:
Thiacloprid and Clothianidin [...]. ACS is developing
Acetamiprid [...] (*). Each of these products will be
discussed in the following.

(a)

I m i d a c l o p r i d

Imidacloprid took only six years to develop. It has
been on the market since 1991 under the trade names
Gaucho, Confidor, Admire and Provado. It is sold in
over 80 countries for use in over 60 different crops.

Imidacloprid is an active ingredient with systemic
activity. Systemicity means that the substance is active
within the plant, as opposed to non-systemic substanc-
es which are applied on the plant.

(75)

Imidacloprid can be applied as seed treatment, soil
treatment or foliar treatment. As seed treatment, the
seed is covered with the active ingredient, which moves
to the emerging plant and covers it against pest attacks
during the early stages of development. When applied
as soil treatment, the active ingredient is transferred
from soil into the roots and thence to the leaves with
the sap. As seed and soil treatment,
Imidacloprid
protects crops during the most vulnerable stages of
development. Applied as foliar treatment, Imidacloprid
protects the plant
from insects even with small
amounts of active ingredient present in the leaf. It
leads to deterrence against feeding and a diminished
reproduction rate. Imidacloprid is also used in new
areas, such as stem treatment.
In stem treatment,
Imidacloprid is applied on the trunk of the tree, where
the active ingredient is distributed with the ascending
sap.

Imidacloprid is very efficient with a broad spectrum of
action. It provides long-lasting protection over a period
of several weeks or months primarily against sucking
insects such as aphids, leaf hoppers, whitefly, and some
thrips, scale insects, and mealy bugs. It is active against
some chewing insects, such as various species of
coleoptera (beetles like Colorado beetle and weevils),
some diptera (flies) and a limited number of lepidoptera
(leaf miners).
Imidacloprid has no activity against
nematodes (soil insects) or mites (sucking insects).

Imidacloprid has favourable toxicological properties
and it
Its
systemic action spares beneficial organisms.

tolerated by plants.

is particularly well

(b) T h i a c l o p r i d

Like Imidacloprid, Thiacloprid interferes with the trans-
fer of chemical signals within the insect’s nervous
system.
It has systemic action. Thiacloprid targets
mainly sucking insects (aphids, whitefly, thrips, scales,
bugs, mealy bugs, psyllids) but has some control also
in the chewing pest segment (weevils,
leaf beetles,
grubs, leaf miners, codling moth and stemborer). It is
said to be more active than Imidacloprid on several
pests, especially as regards foliar application, and safer
to bees and other pollinating insects. Thiacloprid does
not harm beneficial
insects and it shows only low
toxicity to warm-blooded animals.

The parties have argued that Thiacloprid [...]. Third
parties have indicated that Thiacloprid has the benefit
that it controls codling moth and related insects in
fruits and nuts as well as aphids (sucking insect) while,
at the same time, being safe to bees in the flowering
period. Bayer has [...].

(76)

Bayer has submitted that, [...].

(77)

(78)

(79)

[...] are the most important crops for Thiacloprid, and
the market shares in these crops significant drivers for
the value of Thiacloprid. Strategic documents show
that Bayer expects the sales in EU to attain EUR [...]
million in [...] and EUR [...] million in [...] by 2004.
Sales revenues have been forecast also [...], although
Bayer has submitted that [...].

Thiacloprid will be under patent protection in the EU
until 2007, [...]. Bayer has explained that an extension
of patent protection through an SPC is granted when
the time period between filing the patent application
and the first registration is very long. [...].

(c) C l o t h i a n i d i n

Bayer’s Japanese subsidiary Nihon Bayer Agrochem
(NBA) and [...] conducted research independently from
each other in the field of insecticidally active neonicoti-
noid compounds in the late 1980s. As a result of such
research, NBA found a new group of insecticidally
active compounds. [...].

(*) Parts of this text have been edited to ensure that confidential
information is not disclosed; those parts are enclosed in square
brackets.

(80)

In [...].

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15.4.2004

(81)

[...].

(82)

[...].

(83)

[...].

(84)

Clothianidin is active against [...]. Bayer has reported
that Clothianidin [...]. Compared to Imidacloprid, Clo-
thianidin [...].

(d) A c e t a m i p r i d

(85)

Also ACS is developing neonicotinoids. [Confidential
information of ACS].

(86)

[Confidential information of ACS].

(87)

[Confidential information of ACS].

(88)

[Confidential information of ACS].

(89)

(90)

Acetamiprid controls [confidential
information of
ACS]. According to the parties, Acetamiprid competes
with [...] and will become a significant competitor
particularly to Imidacloprid [...] in Europe.

Third parties have indicated that Acetamiprid is not
particularly efficient for seed treatment, as its ability to
stay within the plant is limited as compared with
Imidacloprid or Clothianidin. It is therefore considered
to be suitable for foliar treatment but not for seed
treatment. ACS has submitted the registration plans
for Acetamiprid to the Commission. [Confidential
information of ACS].

Other neonicotinoids

(91)

The parties have submitted that a number of other
neonicotinoid compounds will be launched in the EEA:
Thiamethoxam, Dinotefuran, Flonicamid, AKD-1022
and Nitempyram. These will be briefly discussed below.

(a) T h i a m e t h o x a m

(92)

Thiamethoxam is active against sucking, leaf-weeding
and soil-dwelling insects. Active at low dose rates, the
product provides a rapid kill. It can be used as a foliar
treatment or as a seed treatment
treatment, soil
product.

(93)

Third parties have indicated that Thiamethoxam is a
very versatile insecticide with the same mode of action

as Imidacloprid and the other neonicotinoids. It stays
within the plant for a long time and is therefore
suitable for seed treatment.

(94)

Syngenta’s competitive position was severely restricted
over a period of time as a patent dispute with Bayer
excluded it effectively from competing on all the main
EEA markets. Thiamethoxam is currently registered
only in Spain, Finland and Austria for some limited
crop uses. Bayer and Syngenta settled this patent
dispute on 20 December 2001. According to the
agreement between Bayer and Syngenta, the latter will
have full and undisputed access to the world market
for Thiamethoxam and can launch insecticides based
on this active ingredient in every national market.

(b) D i n o t e f u r a n ( M T I - 4 6 6 )

(95)

The parties have claimed that this neonicotinoid prod-
uct developed by Mitsui has a large spectrum of
activity, which should enable it to be used on a broad
variety of crops. The market launch of Dinotefuran is
expected for Japan in 2003 and in Europe for 2004/
05. The parties have argued that Dinotefuran will
become a significant competitor in the near future.

(96)

[Confidential information concerning Dinotefuran].

(c)

F l o n i c a m i d ( I K I - 2 2 0 )

(97)

(98)

The parties have
submitted that Flonicamid is
developed by Ishihara in collaboration with FMC. It is
expected to be registered in Japan by 2003/04 and in
Europe in 2005/06. According to the parties, Flonica-
mid targets mainly aphids, leaf hoppers, thrips and has
an excellent systemicity and IPM-fit.

All third parties have indicated that Flonicamid has a
different structure and mode of action from the
neonicotinoids and cannot therefore be considered to
be a neonicotinoid. Third parties have also indicated
that, as a slow acting anti-feedant aphicide, Flonicamid
is not a competitor to neonicotinoids. Neonicotinoids
have a relatively fast action and they are effective
against a wide spectrum of homoptera, not just aphids.
The anti-feedant action means that there is a probability
that the aphids will not be affected until after they have
transmitted any viruses to the plant. One of the major
impacts of aphid attack in many crops is the virus
diseases they transmit.

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(d) A K D - 1 0 2 2

(104)

Third parties have indicated that pyrazoles are the
current state of the art insecticides against coleoptera
(beetles) and soil-born diptera (flies).

(99)

The parties have submitted that AKD-1022 is a new
neonicotinoid developed by Agro-Kanesho. According
to the parties, this product has a fairly large spectrum
of activity, which should enable it to be used on a
broad variety of crops. However, as according to the
parties the development of this product is pending, its
competitive effect on the EEA market will not be
assessed any further for the purposes of this decision.

(e) N i t e m p y r a m

(100)

Takeda has developed a neonicotinoid Nitempyram
and introduced it in 1996 in Japan for use on rice,
fruit, tea and vegetables. Nitempyram has not been
launched in the EEA and there are no indications that
it will be launched in the near future. Therefore, the
competitive effect of Nitempyram on the EEA market
will not be assessed any further for the purposes of
this decision

Pyrazoles

(101)

The pyrazole chemistry is unique to ACS. ACS has two
existing molecules in this class, Fipronil and Ethiprole.
Fipronil has been commercialised throughout the EEA
in several crops and applications. Ethiprole has not
been registered in the EEA.

(a)

F i p r o n i l

(105)

The investigation shows that Fipronil is a [confidential
information of ACS]. Outside agricultural use, it is also
information of ACS].
effective against [confidential
Fipronil is applied most commonly through soil appli-
cations and seed coating, but also through foliar
application, and is said to be competing with neonicoti-
noids for these usages.

(106) According to the information submitted by the parties,
as regards the control of chewing insects, [...]. Third
parties have, however, indicated that both Fipronil and
Imidacloprid are excellent on coleoptera (chewing
beetles) and particularly on elateridae (wireworms)
insect
which are arguably the most important soil
group. Both Imidacloprid and Fipronil are also reason-
able for the control of the main lepidoptera, agrotis
(cut worms), which attach the plant as the first foliage
emerges from the ground. For diptera (soil-born flies),
which are important in a range of cereals and veg-
etables, third parties have argued that both Imidaclop-
rid and Fipronil show high levels of activity depending
on the exact species.

(107) While Fipronil [confidential information of ACS].

(108)

(102)

The parties have argued in their reply to the statement
of objections that they are not the only ones with
pyrazole chemistry. They have submitted that both
Mitsubishi Chemical and BASF have pyrazoles in their
pipeline. According to the parties, Mitsubishi Chemical
is the patent owner of the ETK-I inhibitor Tolfenpyrad
(OMI 88) which shows activity on aphids, thrips,
whitefly, plutella, rust mite and broad mite in fruits
and vegetables. The parties have further argued that
BASF enjoys patent protection for the active ingredient
Chlorfenapyr, which according to the parties is a
pyrazole analog uncoupler of oxidative phosphoryla-
tion.

(103)

The Commission’s investigation, however, shows that
although Chlorfenapyr and Tolfenpyrad both contain
pyrazoles, they are not pyrazoles. They act at a different
site, have a different spectrum and are, in fact, in every
way different. These products will therefore not be
assessed any further in this decision.

Third parties have indicated that, as mainly a chewing
insect pesticide, Fipronil does not in general compete
directly with neonicotinoids for the control of sucking
insects. They have indicated that as Fipronil does not
move very well within the plant, it does not therefore
have the same potential as neonicotinoids. Third
parties have however indicated that Fipronil is used for
foliar application e.g. against thrips and coleoptera (e.g.
Colorado potato beetle). Third parties have further
indicated that the effect on competition by combining
Imidacloprid and Fipronil in the parties’ portfolio is
twofold: First, it has been argued that the pest spectrum
covered with new chemistries is extended and com-
pleted. Both compounds are applicable to a wide range
of crops, provide high effectivity and secure control of
the key pest and offer a new mode of action capable to
break existing resistance against other chemical classes.
In this respect, the parties’ possibilities to offer techni-
cally superior treatment programs would be unique
and unmatched by any competitor. Therefore, third
parties have argued that combining Imidacloprid’s

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Official Journal of the European Union

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superior sucking pest control with Fipronil’s superior
chewing pest control would lead to competition con-
cerns. Second, because of the target pest does overlap
and the different mode of action of Imidacloprid and
Fipronil there are powerful opportunities for resistance
management by rotation between both products in
those areas, where the two products target the same
pest.

(b)

S p i r o d i c l o f e n

(116)

Spirodiclofen [...]. An acaricide, Spirodiclofen [...].

(117)

Spirodiclofen [...].

(b)

E t h i p r o l e

(c)

S p i r o m e s i f e n

(109)

Ethiprole is a [confidential information of ACS] fiprol
insecticide. Third parties have indicated that Ethiprole
is a second generation Fipronil product. [...].

(118)

Spiromesifen [...].

(110)

Ethiprole can be used on [confidential information of
ACS]. The toxicological profile is said to be better than
that of Fipronil. [...].

(119)

(111)

The parties have submitted that [confidential infor-
mation of ACS]. The Commission notes in this respect
also that a dormant patent prevents entry and limits
competition.

(c) A c e t o p r o l e a n d V a n i l i p r o l e

(112)

the
Third parties indicated in the first phase of
investigation that ACS is developing two other com-
pounds in the pyrazoles class: Acetoprole and Vanili-
prole. As regards these active ingredients, the parties
have submitted that [confidential information of ACS].
These products will therefore not be assessed any
further in this decision.

The parties’ other pipeline products

(113)

In addition to neonicotinoids, Bayer has also other
pipeline products which are to be launched on the
market in the near future; Methoxyfenozide, Spiro-
diclofen and Spiromesifen.

(a) M e t h o x y f e n o z i d e

(114) Methoxyfenozide [...].

Competitive effects of the parties’ portfolio of new chemistries

Following the merger, the new entity would have in
their product offering four of the six current and future
neonicotinoids, which are or will be introduced in the
EEA. The parties would have Imidacloprid, Thiacloprid,
Clothianidin and Acetamiprid covering, to a varying
extent, the whole range of foliar, soil and seed treat-
ment applications. The only effective competitor to
these active substances, Syngenta’s Thiamethoxam,
would remain outside the parties’ portfolio. Takeda’s
Clothianidin will be introduced in the EEA, [confiden-
information concerning Clothianidin] (13). The
tial
Commission also notes that [...]. Moreover, the oper-
ation would add, in the EEA, the pyrazole Fipronil
into Bayer’s product offering. No other company has
products from this chemical class.

(120) As regards Syngenta’s Thiamethoxam, as will be shown
below, the Commission does not consider that Thiame-
thoxam will be able to offset the market power of the
new entity, who will have three neonicotinoids and
one pyrazole (and Ethiprole) in their product offering
for foliar and soil applications. The parties have argued
in their reply to the statement of objections that
the Commission has not considered the competitive
impact of competing neonicotinoids and submitted
that ‘only after two months after the settlement of the
patent dispute between Bayer and Syngenta, Thiame-
thoxam has been registered in Spain, Finland and
Austria’. While the parties attempt to demonstrate with
this example how quickly Thiamethoxam will enter
the EEA markets after the patent settlement,
the
Commission notes that Thiamethoxam was already
registered in these Member States before the patent
dispute was settled because Imidacloprid is not under
patent protection in Spain, Finland and Austria and the
patent dispute did not therefore concern these Member
States.

(115) According to the parties, Methoxyfenozide [...].

(13) Confidential information concerning Clothianidin.

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(121)

The investigation shows that both neonicotinoids and
pyrazoles belong to the fastest growing classes of
insecticides, which are expected to grow at the expense
of the older chemistries. Therefore, third parties have
argued that the parties’ position on the insecticide
markets, particularly in the sap feeding segment, and
in all three applications, soil, foliar and seed, will be
significantly strengthened in the near future.

it has
In addition to neonicotinoids and pyrazoles,
been argued that the parties have also other R & D
activities which would strengthen the competitive
position of the new entity in insecticides further. In
this respect,
it has been indicated that ACS has a
patent on acetylcholine agonists, which would be
complementary to the existing neonicotinoids. Accord-
ing to third parties, also a new nematicide (thienyl
pyrazole) could lead to particular strength in soil insect
and nematode control when coupled with the top
carbamates and organophosphates and a strong tech-
nology presence in seed treatment. Finally, it has been
argued that ACS is developing isobutylamides, which
could be efficient for lepidoptera control. ACS has
indicated that [confidential information of ACS].

the future, the overall importance of neonicotinoids
and pyrazoles will grow in the future.

(125) As regards the specific examples the parties have given
above, third parties have indicated that bezoylhydra-
zines are not a new class and that e.g. Diflubenzuron
was launched on the markets several years ago. The
other new classes mentioned by the parties have a
relatively narrow spectrum of application and have a
much smaller market potential. They control mainly
chewing pests (tetronic acids can only be used to
control acaricides). Bezoylhydrazines are mostly sold
in the vegetable and pome fruit markets. Bezoylhydraz-
ines only represent a low market share and are destined
for niche products since they are slow-acting and active
by ingestion only, in other words, they have no contact
activity and no systemicity. Carboxylates have mainly
ingestion and some contact activity.

(126) None of the chemical classes mentioned by the parties
compete at the same level with the neonicotinoids in
the market for control of sucking pests as foliar, soil or
seed applications. Neonicotinoids are according to the
market investigation the only state of the art insecti-
cides in these markets. None of them compete with
Fipronil at the same level either.

The parties have submitted in their reply to the
Commission’s request for information that neonicoti-
noids and pyrazoles do not represent the latest chemis-
try classes in insecticides. They have argued that that
neonicotinoids have been sold on the market since
1990 and pyrazoles entered the market in 1994.
Therefore, the parties argue that both chemical classes
are established rather than new chemistry and do
not represent the latest technology. New generation
insecticides coming onto the markets include according
to the parties bezoylhydrazines, tetronic acids, spino-
syns and carboxylates.

The parties claim that
competition

the transaction will not affect

(127)

The parties have argued that, even if assessing the
proposed operation at the national level, the concen-
tration does not give rise to concerns over market
dominance in any of the affected markets. The parties’
arguments are discussed in the following.

Substitutable products

Third parties have, however, indicated that although it
is true that newer chemistries than those represented
by neonicotinoids and pyrazoles have been or will be
launched, the newness of these compounds relative to
neonicotinoids and pyrazoles is from a commercial
point of view not relevant. Neonicotinoids and pyra-
zoles are said to be commercially far more important
than any of the above mentioned chemical classes. The
market potential of neonicotinoids and pyrazoles is
further increased as they serve as replacement products
for those products which will not be re-registered
and for older chemistry with resistance problems.
Therefore, while a number of products from the older
chemistry classes will be re-registered and used also in

(128)

The parties have argued that the Commission has
overestimated the importance of neonicotinoids and
pyrazoles. They have argued that, even after the re-
registration process, organophosphates, carbamates
and pyrethroids will still belong to the leading chemical
classes. According to the parties, quite a large number
of products belonging particularly to older classes of
insecticides will be available on the market after 2003.
Due to their pricing,
the parties have contended,
these products will remain extremely competitive,
particularly in comparison to neonicotinoids and pyra-
zoles.

(122)

(123)

(124)

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(129)

The parties have further argued that there are substitut-
able products for neonicotinoids and pyrazoles in
all chemistry classes. The parties have argued that
Parathion-Methyl, for example, is used for both sucking
and chewing insect control as a foliar spray. Potential
replacements for the control of sucking insects are
also according to the parties organophosphates (e.g.
Acephate, Lambda-Cyhalothrin) offer the same range
of biological activity as Bayer’s Imidacloprid and
the
could thus entirely substitute any product of
neonicotinoid family. In this respect, the parties have
also argued that Imidacloprid is not active against all
types of sucking pests but that it is particularly efficient
as for the control of homoptera (plant suckers).
The parties have argued that Syngenta’s Lambda-
Cyhalothrin is as efficient as Imidacloprid to control
these pests and Dow’s Spinosad is more effective on
thrips. Chewing insect control can according to the
Indoxacarb and
parties be achieved by Spinosad,
organophosphates.

(130)

The parties have further argued that not all the phased-
out products can be replaced either by neonicotinoids
or pyrazoles. As regards e.g. organophosphates, the
parties have contended that neither Imidacloprid nor
Fipronil can cover the entire insect spectrum of broad-
spectrum organophosphates. The parties have argued
that the farmers are not likely to buy two products to
replace organophosphates but, instead, they will seek
the cheapest and most efficient alternative based on
the insect spectrum they want to control.

(131)

The parties have also argued that the submission that
neonicotinoids are environmentally friendly is only
partially correct. The parties have contended that
Imidacloprid, for example,
is not safe to bees and
therefore cannot be used during the flowering period
of crops. [...]. The active ingredient Indoxacarb (from
DuPont) belonging to the chemical class of Carboxylat-
es, for example, does not have these effects.

(132)

Finally, the parties have argued that as regards for
instance Imidacloprid, the investment to be made by
the farmer when applying crop protection products
consist of the product price and the application costs
(tractor, gasoline, water, etc.). Thus, even if the product
price of a given product per hectare and per treatment
might be higher than the price of a substitutable
product, the application costs may deviate since the
cheaper product has to be applied more often. For
this reason, the parties have argued that the overall
expenses for the farmer, in these cases, do not deviate

substantially and demand-side substitutability between
the products in question therefore exists.

Third parties’ views

(133)

Third parties have indicated that, already now, it is a
fact that more than 55 % of the insecticides will
disappear. Furthermore, it cannot be expected that a
positive Annex 1 decision will be reached for all active
substances which are still in the re-registration process.
Therefore, it has been argued that the number of active
substances may drop below 45 %. Considerably fewer
active ingredients belonging to the older classes of
insecticides will be available in the future. The re-
registration process will lead to fewer uses, both as
regards crops and pests, for older products. According
to Wood Mackenzie, especially organophosphates are
currently ‘under the most stringent reviews’ by the
American and EU regulatory authorities due to prob-
lems associated with their long-term use and chronic
toxicity. Organophosphates are together with organo-
chlorines the fastest decreasing chemistry class by
2005 with a negative growth of 8,7 % according to
Phillips McDougall. With the re-registration process,
the older families of technologies will be gradually
phased out and the new chemical classes are expected
to be the main replacements and increase their share
in the overall market.

(134) Very importantly, the investigation shows that, today,
the environmental impact has become a key consider-
ation alongside with better efficacy of the product.
While purchase of a broad spectrum insecticide was
the norm in previous years,
in today’s competitive
environment the opposite is often true. It has been
argued that integrated pest management (IPM) stresses
control of the detrimental pest species with minimal
impact to beneficials and other species within the field.
In other words, IPM requires farmers to use insecticides
which are specifically targeted at a particular insect
pest and, thus, to avoid broad-spectrum insecticides.
Moreover, IPM requires that those products are applied
at such a time when they will provide the best results.
IPM aims at avoiding that broad-spectrum insecticides
are applied over a long period of time which will result
in unacceptable aggregated side effects on non-targeted
pests. Because products are specific for different pests,
farmers following IPM will always use IPM friendly
sucking-pest product against sucking pests and a
different, IPM friendly chewing-pest product against
chewing pests.

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(135)

Third parties have also indicated that as IPM and
farming become more complex, more and more
farmers are relying on professional crop consultants to
help determine which specific pests within the field
need control. Regulatory agencies give preference to
narrow-spectrum reduced-risk pesticides. According to
third parties, many University studies have been done
in the last several years to document the impact of
IPM and narrow-spectrum insecticide sprays. Products
fitting within this category are touted for this, both by
the chemical manufacturer, the scientific community
and regulatory agencies.

(136)

In this respect, it is to be noted that higher rates are
required e.g. in the case of carbamates and organophos-
phates as compared to the more recent chemistries.
While some 50 to 75 g/hectare is often sufficient
for neonicotinoids, 800 to 1 000 g/hectare may be
required for carbamates and organophosphates. The
higher rates required causes problems as regards
environmental safety and IPM. There is also a residue
problem and the time between the spraying and the
harvest affecting the pre harvest interval (PHI) which is
the time between which spraying and harvest are
permitted. It is also to be noted that the parties have
themselves recognised the importance of low-toxic
insecticides. They have submitted in their reply to the
statement of objections that formulations of neonicoti-
noids and pyrazoles are launched as ‘low toxicity
alternatives to organophosphates’.

(137)

For all the foregoing reasons, the investigation shows
that the use of broad-spectrum insecticides is fast
decreasing.

has itself rebutted the causal relationship between
Imidacloprid and the bees’ symptoms. In Bayer’s web-
site, it is argued that: ‘in numerous controlled experi-
ments Bayer has proven that the alleged relationship
cannot be supported by facts’. Therefore, bee toxicity
will not be considered in this case any further.

(139)

The investigation shows further that while older insec-
ticides, e.g. organophosphates, carbamates and pyre-
throids, have activity against both sucking and chewing
insects, newer insecticides are not generally effective
against both sap-feeding and chewing insects but are
more specialised than their predecessors. Although
both neonicotinoids and pyrazoles have some efficacy
in both sucking and chewing insects, the neonicotinoid
chemistry is targeting primarily sucking insects and the
pyrazole chemistry chewing insects.

(140)

The Commission requested competitors to indicate to
which of their products customers could switch if the
parties raised the prices of their products permanently
by 5 to 10 %. The Commission requested competitors
to consider products which are substitutable in terms
of e.g. mode of action, which are effective in the same
crop, which target the same insects or insect groups
and which are more or less comparable in terms of
price. As regards Imidacloprid, which is the only
neonicotinoid on the economically important markets,
the results of
the investigation clearly show that,
apart form other neonicotinoids, there are no viable
substitutes for Imidacloprid in the competitor’s prod-
uct portfolios. The same applies for Fipronil.

(138) As regards the parties’ submission in their reply to the
statement of objections that the Commission ‘gives an
unbalanced view of environmental implications’ and
that Imidacloprid [...], the Commission notes first that
third parties have indicated that a number of other
compounds on the market are [...] toxic to bees and
cannot be applied during the flowering period. [...].
Second, as regards the parties’ argument that Imidaclo-
prid has been temporarily suspended from the use in
sunflowers, the Commission notes that this measure is
limited only to France and that it only applies for seed
treatment. Third, the Commission notes that Bayer

(141)

Third parties have indicated that neonicotinoids are
highly effective and fast, which reduces the risk of
disease transmission. Neonicotinoids are also systemic
and with broad spectrum activity against sucking
insects, i.e. they have applications in a wide range of
crops. It has been argued that for combating whitefly,
neonicotinoids are the only effective insecticides avail-
able at present. Other products registered for use on
whitefly either have problems of efficacy (these are
older products where resistance is already present) or
speed of kill.

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(142) As regards the parties’ argument

that pyrethroids
are used in potatoes against Colorado potato beetle
(chewing) and aphids (sucking) at the same time, it has
been indicated that the two pests often have a different
they appear at
application window, meaning that
different times. Moreover, it has been indicated that
acceptable control of Colorado potato beetle is achiev-
ed only in western Europe, where the limited side effect
of pyrethroids is sufficient to control the pest which is
in the USA where
not a real problem. However,
Colorado potato beetle is a key pest, it has to be treated
specifically.

(146)

(143) As regards the parties’ example that organophosphates
can be used on some fruits against codling moth
(chewing) and aphids (sucking), it has been indicated
that while organophosphates are used this way in
apples, they are applied in specifically timed appli-
cations against each pest. It has further been indicated
the organophosphates primarily used against
that
codling moth (e.g. Gusathion) is not the best organ-
ophosphate against aphids. On the other hand, other
organophosphates such as Vamidothin and Dime-
thoate are primarily targeted against sucking insects
and have no effective control of chewing pests. They
are therefore not applied for the control of codling
moth.

(144) As regards the parties argument of overall expenses, a
number of third parties have indicated that that a
product has a number of parameters and that price is
only one factor influencing the buying decision of the
farmer. Other parameters are for instance technical
performance, image/brand, environmental profile and
the service provided either by the dealer or the
manufacturer. The farmer associates with a crop pro-
tection product certain value for money. As long as
this perceived value is in the mind of the farmer fair or
competitive, he/she will not see the need to switch to
other products.

(145)

these considerations result

It has been indicated in particular that an important
parameter for the end-user is the active ingredient’s
resistance status and selectivity on beneficials. It has
been argued that
in a
constant pressure to move away from older chemistries
— carbamates, organophosphates and pyrethroids —
and to use the latest introduced compounds with
best performance available in order to prevent and
overcome resistance as well as to select insecticides
with excellent selectivity on beneficials and lowest
impact on environment. According to third parties,
this pressure is strongly enforced by the authorities via

registration of new compounds and re-registration of
older compounds and by the demands of the end-
consumer.

It has also been argued that because the farmer cannot,
in general, foresee the number of insect attacks on his
field and he/she may therefore opt for applying newer
chemistry classes, which offer longer lasting control of
insects. In this way, the farmer obtains immediate
control as well as a certain degree of preventive
control provided by the longer lasting effect of newer
insecticide chemistries. When using an older product,
it may be that the product does not control the
insect attack efficiently and repeated insect infestations
increase the overall expenses for the farmer through
increased application costs. By way of example, broad-
spectrum insecticides often cause secondary pest out-
breaks, such as aphid blooms in cotton after treatment
for chewing insects. The overall expense may thus
result being higher with the older chemistries. It has
therefore been indicated that demand-side substituta-
bility does not exist between new chemistry products
such as Imidacloprid and the older chemistries.

(147)

For all the above reasons, the Commission concludes
that there are no effective substitutes for the neonicoti-
noids and Fipronil in the old chemical classes.

R & D competition

(148)

The parties’ have argued that the markets for agricul-
tural products are characterised by intense R & D
activity resulting in new products launched onto the
market in quick succession.

(149)

In view of the total number of pipeline products under
development for the EEA insecticides markets and the
fact that it takes some 10 years to launch a new
product, the Commission does not agree with the
parties that new products are launched in quick
succession.

(150)

Third parties have indicated that, compared to previous
periods, the major companies are today spending a
bigger portion of their sales returns in order to meet
the requests of Directive 91/414/EEC for re-registration
of their existing product portfolios. Moreover, many
of the new product launches are actually new formu-
lations or combinations of existing active ingredients
rather than new active ingredients.

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L 107/19

(151) As discussed above, the dynamics of the agrochemicals
industry results largely form R & D and market access.
In this respect, the Commission notes that, according
to the Phillips McDougall study, Bayer and Aventis
have together introduced 39 new pest control products
since 1980, compared to 38 introduced by Syngenta.
The parties have currently 13 products under develop-
ment while Syngenta and BASF have eight products
each. All the other competitors have three or fewer
products under development.

(152)

Following the merger, the R & D capabilities of the
new entity will be one of the biggest in the industry.

(153)

In view of the foregoing and given the parties’ success-
ful insecticides pipeline so far, the Commission con-
siders that the new entity will be one of the few
companies in a leading position to launch new com-
pounds onto the insecticides market.

Fluctuating market shares

competition. Since generic competitors do not have to
invest in research and development, the parties have
argued that they enjoy a competitive advantage over
multinational suppliers, since they are able to approach
wholesalers and retailers in the various Member States
with relatively low prices and are thus able to ensure
free market access to all customers currently supplied
by the parties. The parties have contended that generic
companies are able to obtain and to maintain approvals
for off-patent active ingredients with fewer expenses
and very limited data packages compared to the efforts
which are requested by the authorities from the original
data owner in order to obtain and maintain a national
approval. Furthermore, marketing and distribution
costs are low since the original products are already
on the market and their competitive strength and
weaknesses are already known by the customers. The
parties have argued that the increasing presence of
generic manufacturers has resulted in fierce compe-
tition and in an appreciable price decline over the last
years in almost every market for crop protection
products.

(154)

Insecticide usage is directly dependent on intensity and
seasonality of insect attacks. Several factors such as
climate have an impact on the occurrence of insects.
Therefore, the total size of the market varies from one
year to the next.

(158)

(155)

The parties have argued that market shares fluctuate
sharply over time and even a strong market position at
a given point of time does not ensure that this position
can be maintained in the future.

(156) As discussed above, the parties have not been able to
submit market share data for longer than a three year
period for a reliable time series analysis. On the basis
of the submitted data, however, the Commission has
been able to conclude that market positions are usually
kept even though the total market size changes. This
has been also confirmed by the investigation.

It has been indicated to the Commission that if the
product profiles of a generic product totally match the
profile of the parties’ product (i.e. the formulation type
is identical), a price increase could lead to an increase
of sales of existing generic products. However, accord-
ing to some third parties this is rare in practice. Third
parties generally agree that, in such situations, generic
companies have had a downward pressure on prices to
some extent. Having said this,
third parties have
indicated that the competition between the R & D
producers is the main reason for any price decline.
Also, general problems in the agriculture sector and
the competition at the dealer level have largely con-
tributed to the pressure on prices.

Competition from generic companies

(159)

(157)

The parties have argued that all of the parties’ products
can be substituted by products which have been
produced not only by one of the other multinational
R & D companies, but by any supplier selling generic
products or readily available commodities. The parties
have argued that most of Bayer’s and ACS’s active
substances are already off-patent and subject to generic

The investigation shows that market penetration by
generic companies is much more cumbersome than
described by the parties. Despite the fact that most of
the parties’ products are off-patent and thus open to
generic competition, it has been argued that the parties
generally still have the leading market shares of
these products. This, according to generic companies,
illustrate that generic companies do not easily take
over significant market shares even if they have a more
competitive cost structure.

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Official Journal of the European Union

15.4.2004

(160)

In this respect, it has been argued that the technical
know-how of production is often protected by a series
of patents. This means that the best technology is
usually protected significantly longer than the original
patent protection period. Essential know-how is not
accessible and not necessarily transparent from the
published patents or scientific literature. Therefore,
generic companies often have to develop competitive
manufacturing processes for products coming off
patent. ACS has submitted in their internal documents
that process patents [confidential information of ACS].
In addition, while access to raw materials is crucial to
process development and production,
the original
producer may be able to block access to key raw
materials by commercial agreements or captive pro-
duction. In this respect, the Commission notes that the
internal documents of ACS show that the company is
[confidential
information of ACS]. In this way the
access to active ingredients by third parties could be
either blocked or at least controlled. Another reason is
to tie up capacity and keep the potential generic
producer off the market. Generic companies have also
indicated that it may be difficult to obtain production
permits for certain raw materials that are under
environmental and toxicological concern.

(161)

The investigation also shows that, in some markets,
the original producers have a very strong position due
to their company name as well as brand recognition at
the distributor and farmer level. Since trademark
protection does not expire like patents, generic com-
panies cannot use the original, well-established brand
names. It has been argued that products are recognised
by brands to a fairly large degree. In these cases, the
distributors/farmers require a substantial incentive to
switch to less well-known brands supplied by compani-
es not well recognised. ACS’s internal documents show
that [confidential information of ACS].

(163)

It has been argued that market access by generic
producers could be limited by sales of mixture products
containing a desired proprietary product, or rebate
systems that make purchase of an off-patent product
very attractive to the buyer if a desired proprietary
product is also purchased. It has been argued that a
competitor’s large portfolio can make life very difficult
for generic suppliers with a narrow product portfolio.
In conclusion, a generic supplier typically expects a
limited market share and, in a small and sometimes
declining market, also a lower profit.

(164)

Finally, it has been argued that because generic sup-
pliers are not able to spread the re-registration costs
across a large product portfolio like R & D companies,
the prices of the older active substances can be expected
to increase as a consequence of the high investment
associated with re-registering an off-patent ingredient.
Also, those products which will suffer label reductions,
will make them less competitive and leave a much
narrower market for obtaining the return of invest-
ment.

(165)

Therefore,
the Commission considers that generic
competition is not sufficient to offset the market power
of the new entity. As regards Imidacloprid particularly,
for the above reasons,
the Commission does not
consider that generic competitors would be able to
offset the market power of the new entity when the
Imidacloprid patent expires in 2006, contrary to what
has been submitted by the parties.

Products will not be re-registered

(162)

It has also been submitted that the new entity would
further limit generic suppliers’ access to distribution
via the parties. For example, generic companies do not
expect Bayer to distribute a generic version of a product
originally developed by ACS and vice versa. The parties’
complementary product portfolio will thus leave less
room for generic companies.

(166)

The parties have argued that a number of Bayer’s and
ACS’s products will not be re-registered according to
Directive 91/414/EEC and will thus be phased out in
2003 at the latest. Furthermore, the parties have argued
that TOX-I products, classified by the WHO as the most
toxic active ingredients available as crop protection
products, which suffer from the lack of political
acceptance and which might not survive re-regis-
tration, represent a fairly large proportion of Bayer’s
and ACS’s product portfolio.

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Official Journal of the European Union

L 107/21

(167)

The Commission does not agree with the parties’
argument. The fact that a number of the parties’
products will not be re-registered is not relevant for
determining the competition effects of the case because
all the other competitors, both R & D companies and
generic suppliers, will
face the same loss of their
portfolios. The Commission has received confidential
information from the parties’ competitors and con-
cludes that all competitors are faced with product
losses and label restrictions.

(168)

Therefore, in view of the foregoing, the Commission
does not consider that the parties’ argument is generally
relevant for the assessment of this case.

Third party agreements

— are sophisticated purchasers and exercise substantial
countervailing bargaining power and are well aware of
the supply sources that are readily available. Therefore,
facing this bargaining power, the parties could not
raise the prices as a consequence of the merger.

(172)

in
It has been indicated to the Commission that,
general terms, supply sources are getting fewer and,
hence, choice is becoming less available. Strong market
position will erode substantially the bargaining power
of purchasers. The Commission’s investigation shows
that the demand side is relatively unconcentrated. It is
also to be noted that as regards those markets, where
no effective substitutes exist for the parties’ products
(eg. Imidacloprid and Fipronil), the demand elasticity
is very low. Furthermore, customers cannot produce
the products in-house nor is inducing a new entry easy
(development and registration costs).

(169)

The parties have argued that part of Bayer’s and ACS’s
turnover in a number of markets is accounted for by
the distribution of third party products. Since the third
party products will in many cases interfere with the
product portfolio of the combined entity, the parties
expect that in most cases the supply of these products
will be discontinued by the respective supplier.

(173)

In general terms, most third parties expressing their
opinion believe that the new entity would be able to
raise prices or keep a high price level compared to the
rest of the market in those markets where they enjoy a
strong market position.

the merger,

(170) While the parties are correct in arguing that that the
third party products will probably
distribution of
be affected as a consequence of
the
investigation shows that those products which most
likely will be withdrawn are those which clearly overlap
with the new entity’s enhanced product portfolio and
which are not expected to be supported by the parties.
The parties are expected to review the new entity’s
product portfolio and replace some products with their
own solutions. Some third parties have also argued
that the parties’ third party portfolio would be largely
kept as the new entity would be very strong and
thereby attract such products. The investigation shows
that a number of third parties would rather be keen in
continuing the distribution relationship with the par-
ties but fear that their products will no longer be
supported by the parties, given the overlapping product
portfolio. Therefore, it may be argued that, overall, the
parties’ product portfolio will not be affected.

Countervailing bargaining power

(171)

The parties have argued that customers of agricultural
products — wholesalers and agricultural cooperatives

(174)

Therefore, the Commission does not consider that
buying power is relevant for the assessment of this
case.

Pricing of products

(175)

their
The parties have argued that almost all of
products are registered and marketed for a variety of
crops. Therefore, the parties have argued, a relatively
high market share in a secondary market does not give
rise to concerns of market dominance since the prices
for the products are determined according to the
competitive conditions in the main market, where the
product is primarily used or, if the sales accounting for
specific products are more or less equally spread
among a number of markets, prices are even fixed
according to the competitive situation in several mar-
kets. Since most of the products are used on various
crops and the competitive strength of the combined
entity varies in different segments, the manufacturer
will neither have the possibility nor the incentive to
raise prices for certain products in order to target a
distinct market. Since the main markets for the parties’
products are highly competitive, the combined entity
will not have the possibility of abusive pricing.

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(176)

(177)

The parties have also argued that price discrimination
and abusive pricing cannot be achieved by labelling
formulated products separately for each crop. The
parties have submitted that the development of a new
formulation on the basis of existing active ingredients
requires a financial investment of approximately EUR
[...], depending on the product involved, it takes about
[...] years to complete the registration process. Due to
the amount of costs incurred and the time necessary to
launch new products onto the market, at least each of
the R & D companies has the incentive to register its
products for the use on as many crops as possible.

Third parties have confirmed that, for those products
that can be used in several crops, the main target crop
and/or market or the most important ones together
determines the pricing positioning. The investigation
has also confirmed that price discrimination towards
growers of a particular crop and abusive pricing
in secondary crop markets cannot be achieved by
developing separate formulations and applying for
separate registrations for each crop. The Commission
has no evidence that labelling formulated products
separately for each crop would be common practice in
crop protection industry.

(180)

In this respect, the investigation shows that resistance
has developed against a number of older products and
that resistance management is one of the reasons why
the use of old broad-spectrum products is diminishing.
Because the application of a single type of insecticides
leads to resistance to the specific mode of action
from that chemical class, farmers change the class of
insecticides used.

(181) As a result of the notified operation, the parties would
have a broad range of active ingredients with different
modes of action. The combined product portfolio
comprises all chemical classes. Most importantly, how-
ever, the parties would have key active ingredients
from the neonicotinoids and pyrazoles chemistry class-
es. The novelty of the mode of action is important in
combating resistance.
Insects have not, as yet,
developed resistance against Imidacloprid and Fipronil
in the EEA. The parties’ insecticide portfolio is also
important in that it contains products with different
modes of action for controlling similar insects.

Effects of a large product offering

(178)

EPPO (14) has defined a number of resistance manage-
ment strategies, including that of alternation of prod-
ucts provided:

(182) Whereas the combination of products allows the
distributor the possibility for a one-stop shop for a
number of compounds, some third parties have voiced
concerns that this could have a negative effect on the
competition.

‘Alternations (rotations) are only effective if the alter-
nating partner or partners are known to be from
different cross-resistance groups and to control the
target pest. They work by reducing the exposure and,
thus, reducing the selection pressure. At the same time,
they allow any resistant biotypes that may develop to
be controlled by the alternating partner.’[GU]

(183)

(179)

Insects develop resistance against modes of action
throughout time. From a biological standpoint, a broad
product portfolio comprising active ingredients with
different modes of action will provide better resistance
management, because a range of active ingredients
with different modes of action can be rotated.

(14) Guidelines for the efficacy evaluation of plant protection, PP 1/

213(1) — Resistance risk analysis.

The merger would lead to a single dominant position
in a number of markets through a horizontal overlap
both in the foliar and the soil markets. Moreover, third
parties have argued that by combining neonicotinoids,
Fipronil and Ethiprole with the parties’ broad portfolio
in other chemical classes, e.g. acaricides, benzoylureas,
carbamates, nematicides, organophosphates, organo-
chlorines, pyrethroids, the parties would have access
to the by far broadest range of different modes of
action in the industry. Contrary to what the parties
have argued, they would be the only ones in the market
place who could offer a range of neonicotinoids and a
pyrazole,
thus having the most complete product
portfolio on the market in the key chemical classes.
While neonicotinoids and the pyrazole Fipronil overlap
in some target pests (thrips, Colorado potato beetle),
they also complement each other, thus giving the
parties a unique position to offer the most efficient
products to control both soil and foliar pests (and also
the most efficient seed treatment, as will be discussed
below).

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L 107/23

(184) Neonicotinoids and Fipronil but also the parties’ other
good products in the older chemistry classes would
give the new entity a unique position in resistance
management, where neonicotinoids and Fipronil are
likely to be used as the main drivers. This would render
the parties’ offering de facto indispensable, giving
them the power to increase prices and/or exclude
competition. As to the latter, the parties could offer
spraying programmes consisting of their own products
for resistance management purposes. In a programme,
products with differing modes of action are substituted
one for the other and products rotate in order to
control key pests in specific crop segments throughout
the course of the growing season. With a large enough
portfolio, a company can recommend a rotation
programme containing only their products.

tors could not match this offering, given the higher
prices that would have to be paid for the parties’
indispensable products on a stand-alone basis. Third
parties have indicated that this can exclude competi-
tors’ products from entering rotation and, thus, being
sold on such markets. The parties could offer also year-
end rebates on their total purchases including the
proprietary products and commodity products, there-
by giving substantial incentive for the wholesaler to
also buy the commodity products from the parties. In
this respect, it has been indicated that due to the re-
registration process, the number of suppliers of the
commodity active substances may be reduced. In some
cases, this may mean a few or only one supplier.
Should the parties be one of such suppliers, this could
further strengthen the parties’ position.

(185)

that

the fact

Bayer recommends specific spray programmes to the
customers to avoid resistance problems. Following
the merger, their ability to recommend programmes
containing only their own products would be signifi-
cantly enhanced. While the parties have argued that
there are no benefits arising from combining or
rotating two or three products belonging to the same
the parties would have three
class,
neonicotinoids against Syngenta’s one neonicotinoid
would, by definition, give them more opportunities to
build their spraying programmes. Third parties have
also argued that two or three products are better than
a single one because the pest control profile, within
the same chemical class, varies with different products.
Rotating products may not prevent resistance, but
selecting the most appropriate one will help against
resistance and enhance efficacy. Moreover, it has been
indicated that there is a whole spectrum of resistance
(e.g. penetration resistance, metabolic resistance) that
an insect may develop. Therefore, even if the insect
develops resistance against one neonicotinoid, other
neonicotinoid products could still work. There are
therefore clear advantages of having several products
belonging to the same chemical class in the product
portfolio.

(186)

The parties could in addition leverage their strong
market position and unique product offering through
rebate systems to the distributors. The parties could
leverage their strong market position, since both
neonicotinoids and Fipronil are products which the
distributors must supply. They could offer a discount
package deal for their spraying programmes. Competi-

(187)

(188)

(189)

Third parties have indicated that the product offering
with a number of strong proprietary products could
be strengthened by developing new mixtures between
proprietary products and commodity products. Such
offers could possibly prolong the life cycle of a product
which would much more rapidly decline without the
supporting effect of a strong technical innovation and
create ‘a second life’ for off-patent products under
patent protection. ACS submits in their internal docu-
ments that [confidential
information of ACS]. [...].
Combining off-patent products with proprietary prod-
ucts is also to fend off generic competition.

it

is sufficient

The parties have argued that since e.g. pyrethroids are
off-patent and easily available on the market as gen-
erics,
for a company to have one
neonicotinoid in its product portfolio in order to
develop these mixtures. Hence, the parties have argued
that the proposed merger will not enhance the possi-
bility of Bayer to combine for example Imidacloprid
with a pyrethroid since the company could already
today develop mixtures of Imidacloprid and its own
pyrethroids.

The Commission considers, however, that by definition
two or three neonicotinoids give more opportunities
to create combination products than only one. As
the parties would have three neonicotinoids in their
product offering against only one neonicotinoid by
their competitors each,
this will give them more
possibilities of creating combination products as com-
pared to their competitors. The Commission also notes
that the parties would be the only ones on the market
place with a pyrazole and the potential combination
of this product with any off-patent products could not
be matched by third parties.

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15.4.2004

(190)

Therefore, for the foregoing reasons, the Commission
considers that the operation as notified would lead to
the foreclosure of the market. The Commission notes
that the position of generic competitors could be
especially affected.

therefore cannot be expected. The parties have argued
that Imidacloprid is challenged not only by other
neonicotinoids but also by insecticides of other chemi-
cal families. The parties have forecast a substantial
decline in the sales of Imidacloprid due to the launch
of Syngenta’s Thiamethoxam.

A.3. Market position

Introduction

In 2000, the global crop insecticides market was valued
at USD 8 009 million, a 3 % decline from 1999.
Insecticides contributed 27,7 % of global crop protec-
tion chemical sales in 2000. Insecticides constitute the
smallest of
the three major product segments of
agrochemical products, behind herbicides and fungi-
cides.

the insecticides market
amounted

The value of
in the EEA
some
(excluding molluscicides)
EUR 900 million in 2000. Foliar insecticides account
for about 80 % of the total EEA-wide insecticides
market.

to

(191)

(192)

(193) Within the insecticides segment, the only EEA-wide
markets
exceeding
total
EUR 100 million are insecticides for fruits and nuts,
insecticides for vegetables, and insecticides for grapes.

turnover

with

a

(194)

In 2000, the EEA-wide turnover generated by Bayer
with insecticides
(and the related molluscicides)
amounted to EUR [...] million; the respective turnover
of ACS amounted to EUR [...] million. In terms of
1999 figures, the two companies were the global leader
in the total sales of insecticides.

The parties’ leading products

(195)

Bayer is present in the large majority of the crops (e.g.
beets, citrus fruits, cotton, fruits/nuts, grapes, hops,
ornamental plants, potatoes, tobacco and vegetables)
with its best selling product,
Imidacloprid, which
belongs to the neonicotinoid class. Imidacloprid has
been on the market since 1992 under the trade names
Gaucho, Confidor, Admire and Provado and it is under
patent protection until 2006. In 2000, Imidacloprid
accounted for some [...] of Bayer’s total insecticides
sales in the EEA. Out of some EUR [...] million
Imidacloprid total sales in the EEA in 2000, [70 to
80] % can be allocated to seed treatment, [20 to 30] %
to foliar applications and [0 to 10] % to soil. Some
EUR [...] million can be allocated for foliar and soil
application.

(196)

The parties have argued that Imidacloprid is close to
maturity and a further significant increase in sales

(197)

The investigation shows that the sales of Imidacloprid
have been increasing in every crop and in every
Member State steadily since the launch of the product.
In their sales forecasts, the parties expect the sales of
in light
Imidacloprid to [...]. As regards Syngenta,
of the investigation, the Commission considers that
Syngenta will have to face an established,
leading
producer of neonicotinoids whose product portfolio
will be considerable strengthened with the addition of
Acetamiprid and Fipronil (and later with Thiacloprid).
The Commission considers it therefore unlikely that
Thiamethoxam will become a viable competitor to the
merged entity in the near future and take away
the parties have
Imidacloprid sales to the extent
forecast.

(198)

Bayer is about to launch neonicotinoid Thiacloprid
[...]. Bayer has argued that [...]. Bayer expects Imidaclo-
prid sales of EUR [...] million in fruits and nuts (foliar
segment) in 2004 to be reduced to EUR [...] million in
2006 [...].

(199)

Bayer has argued that [...] while, at the same time, [...].
Bayer has submitted that Imidacloprid [...]. Bayer has
submitted that the business rationale behind [...].

(200)

[...].

(201)

The Commission’s investigation suggests that Bayer is
in the process of transferring part of the Imidacloprid
sales into Thiacloprid sales in connection with the
patent expiry of Imidacloprid. The transfer is supported
by the fact that Thiacloprid [...]. Imidacloprid will come
off patent in 2006. The patent expiry of Thiacloprid is
[...], but [...]. In any event, in light of the investigation
and Bayer’s explanations, the Commission considers
that the alleged cannibalisation will be limited to some
specific crops and situations. In markets, where the
parties have a strong market position, the question is
irrelevant because the overall sales will remain with the
same company. In segments, where Imidacloprid is not
active, e.g. [...], the sales of Thiacloprid can be expected
to increase.

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Official Journal of the European Union

L 107/25

(202)

The investigation also suggests that the transfer of part
of the Imidacloprid sales to Thiacloprid will work as a
safeguard against generic competition upon Imidaclo-
prid’s patent expiry. With a new patent-protected
product on the market, third parties have indicated
that it will make it less attractive for generic companies
to launch generic versions of Imidacloprid. This would
further strengthen the parties’ market position.

(208)

(203) Moreover, with Thiacloprid, Bayer will extended the
possibilities for the sales of rotation programmes. As
discussed above, two or three neonicotinoids are by
definition better than a single one and allows a wider
leeway to offer spraying programmes compared to
having only one neonicotinoid in the portfolio. There-
fore, the combined sales of Imidacloprid and Thiaclo-
prid can be expected to be at least maintained, but
most likely to grow in the near future. As regards
Imidacloprid, the Commission considers it likely that
the sales will continue to be strong even after the
product has lost patent protection due to the strong
brand and supplementary patent protection as regards,
for example, the manufacturing process.

(204) Although the parties have argued in their reply to the
statement of objections that, in terms of sales and
market penetration, Fipronil plays ‘only a minor role’
in the European insecticides market, Fipronil is together
with Deltamethrin and Aldicarb [confidential infor-
mation of ACS]. Fipronil is marketed under the trade
name Regent. Fipronil will be patent protected until
[confidential information of ACS].

Third party observations

Third parties have indicated that the operation would
create a dominant player in the insecticides markets.
Third parties have indicated in the Commission’s
investigation that the combined insecticide portfolio
of the new entity is particularly strong with examples
of every major insecticide class. It has been submitted
to the Commission that whereas,
in general terms,
there are a number of insecticides effective against
chewing insects, there are only few products against
sucking insects. It has been argued that the parties
would become particularly strong especially in the
sucking insects segment. In this respect, the combi-
nation of Bayer’s neonicotinoids with ACS’s Acetami-
prid has given rise to a particularly strong, negative
reaction. It has similarly been argued that the combi-
nation of Bayer’s neonicotinoids and ACS’s Fipronil
would lead to adverse competition effects. In this
respect, third parties have argued that the combined
strength of the two parties, both in neonicotinoids and
pyrazoles, added to the strong established market
presence of both companies in older chemistries such
as pyrethroids, organophosphates and carbamates,
means that the new company will have an unrivalled
range of insecticide technologies on offer. It has been
indicated that the large combined product offering
would lead to a strong position in the resistance
management and put competitors, especially generic
companies, in a worse position.

(209)

The analysis of the affected markets indicates that a
dominant position would be created or strengthened
in a number of crops at the national
level. These
markets are analysed in more detail below.

(205)

The parties have argued that the [confidential infor-
mation of ACS]. The Commission notes, however,
that the parties expect the overall sales of Fipronil
[confidential
information of ACS]. Furthermore,
Fipronil [confidential information of ACS].

General considerations

(206)

The parties have insisted throughout the early part of
the investigation that the new neonicotinoid Acetamip-
rid is a competing product. They have argued that
the marketing rights of Acetamiprid [confidential
information of ACS]. The parties have consequently
attributed market share of Acetamiprid to third parties
in their assessment and market forecast.

(210) On the overall EEA-wide insecticide market, the parties’
combined market share would be [30 to 40] % (Bayer
[10 to 20] %; ACS [10 to 20] %) according to their
own estimation. Syngenta accounts for [20 to 30] %
of the market and BASF [0 to 10] %. According to the
parties, a number of international and local generic
companies account for a combined market share of
[30 to 40] % at the EEA-wide level.

(207) However, [confidential information of ACS]. Therefore,
following the established practice, the Commission
considers that Acetamiprid market share will add to
that of the new entity in all those markets, where ACS
is currently distributing the active ingredient or will
distribute the active ingredient in the near future.

(211) At the national level, the parties’ activities overlap in a
large number of crops and Member States. According
to the information in the form CO, there are 63 insecti-
cides markets where the combined market share of the
parties is 35 % or exceeds this figure.

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Official Journal of the European Union

15.4.2004

(212)

Following the investigation, the Commission considers
that competition is unlikely to be negatively affected
on 31 markets, which were considered to be affected
markets in the notification. The Commission considers
that competition concerns are unlikely to arise on
these markets for one or more of the following reasons:
there is no overlap between the parties’ activities either
because of misallocation of market share or because
the overlap has ceased to exist for other reasons; the
market share increment is very small and the structure
of the market is unlikely to be affected by the operation;
the structure of the market is unlikely to be affected by
the operation as the pricing incentives of the parties’
products would not be affected; the parties have largely
overestimated their market position; and there are
strong competitors who are likely to be able to provide
effective competition on the market.

(213)

The Commission considers that the transaction would
create or strengthen a dominant position in 32 national
markets. These markets will be analysed in the fol-
lowing.

(a) Banana insecticides

(214)

(215)

Banana insecticides generate an overall market value at
the EEA-wide level of EUR 5 million. At the EEA-wide
level, the parties have a combined market share of [40
to 50] % in soil insecticides (Bayer: [20 to 30] %, ACS:
[10 to 20] %) and [30 to 40] % in foliar insecticides
(Bayer: [30 to 40] %, ACS: [0 to 10] %). In soil
insecticides, the largest competitor is FMC with [20 to
30] % of the market. In foliar insecticides, Syngenta
has [20 to 30] % of the EEA-wide market. The parties’
activities overlap in both foliar and soil insecticides
only in Spain. However, competition would be
adversely affected only in the soil market.

Soil insecticides in Spain account for the largest part of
the EEA-wide banana insecticides market with a market
value of EUR [...] million in 2000. On this market, the
parties’ combined market share according to their own
estimation amounts to [40 to 50] % (Bayer: [20 to
30] %, ACS: [10 to 20] %). Based on the information
submitted by the parties, Bayer’s market share has
declined from [30 to 40] % in 1998 to [20 to 30] % in
2000. ACS, on the other hand, has increased its share
of the market from [10 to 20] % in 1998 to [10 to
20] % in 2000. The market size has varied to some
extent but the trend has been a growing one. The
largest competitor according to the parties is FMC ([20
to 30] %) while DuPont accounts for [0 to 10] % of the

market. Generic companies together have [20 to 30] %
market share.

(216)

[Confidential information concerning the market pos-
ition of the competitors].

(217)

Bayer sells mainly the Fenamiphos-based product
Nemacur. Fenamiphos is an organophosphate. ACS
generates about [70 to 80] % of its turnover in the
Spanish soil insecticides market with its organophos-
phate Ethoprophos (sold under the brands Mocap and
Sanimul). The other ACS substance is a carbamate
Aldicarb (Temik). Both substances are off-patent.

(218)

The parties have argued that competition concerns
would not arise on this market. The parties have
submitted that [...]. The parties have therefore argued
their combined market share is expected to
that
decrease to [30 to 40] % in 2004.

(219)

(220)

The parties have further argued that their products
used for the protection of bananas are also applied to
other crops. Fenamiphos is also used on vegetables,
citrus fruits and tobacco whereas Ethoprophos is
applied to potatoes, vegetables and tobacco. Aldicarb
is also used on citrus fruit, cotton, potatoes, tobacco
and fruits and nuts. The parties have argued that only
[0 to 10] % of the turnover generated with Temik
can be allocated to bananas. Thus, the parties have
contended that insecticides used for the protection of
bananas are not priced particularly according to the
competitive situation on the banana market and any
price discrimination towards growers of bananas is
impossible.

The Commission notes first that there is no evidence
that [...]. Furthermore, the Commission notes that
Bayer generates [50 to 60] % of
its Fenamiphos
turnover (almost EUR [...] million) and ACS [40 to
50] % of
the turnover of Ethoprophos (EUR [...]
million) in bananas. The sales in the other segments
are far less for both products. Therefore, following the
parties’ argumentation, the Commission concludes that
the prices of both products are largely based on the
banana soil market. The two products together account
for more than [40 to 50] % of the parties’ present
market share and are thus considered as their most
important products on this market.

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(221)

The Commission notes that the parties’ combined
market share is almost twice as high as that of the
closest competitor. The Commission considers that the
transaction leads to a structural change of the market
and could have an appreciable affect on the parties’
pricing decisions. The Commission notes further that
ACS has been able to increase its market share in the
past few years. [Confidential information concerning
the product launches of the competitors].

(222)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for bananas in Spain.

(b) Beets insecticides

(223)

The total market for beets insecticides in the EEA was
EUR 34,4 million in 2000. Soil insecticides accounted
for roughly EUR [...] million and foliar insecticides
EUR [...] million of this market.

(224) At the EEA-wide level, the parties would become
the leading supplier of beets insecticides.
In soil
applications, their combined market share is [50 to
60] % (Bayer: [10 to 20] %, ACS: [40 to 50] %) and in
foliar applications [30 to 40] % (Bayer: [20 to 30] %,
ACS: [10 to 20] %). Syngenta is the largest competitor
in both segments, with [10 to 20] % of the soil
applications and [20 to 30] % in the foliar segment.
Other competitors (BASF, Du Pont, Dow, FMC) have
very small market shares at the EEA-wide level.

B e e t s f o l i a r i n s e c t i c i d e s

(225)

In the market for foliar insecticides for beets, the
parties market share exceeds 40 % in France ([40 to
50] %) and Greece ([70 to 80] %).

(226)

The French market for foliar insecticides is the largest
in the EEA, amounting to EUR [...] million in 2000.
On this market, the parties’ combined market share is
according to their own estimate [40 to 50] % (Bayer:
[20 to 30] %, ACS: [10 to 20] %). The market share of
the parties has been in the region of [40 to 50] % and
[50 to 60] % for the past three years. The competitors’
market shares have been more or less stable over the
same period of time. The parties have submitted that
BASF is the largest competitor with [20 to 30] % of
the market, followed by Syngenta ([20 to 30] %). Local
and generic companies are said to account for the
remaining [0 to 10] % of the market. The parties’
market share would be [50 to 60] % in sucking insects.

(227)

[Confidential information concerning the market pos-
ition of the competitors]. The Commission therefore
considers that the parties’ market position is likely to
be somewhere [above 40] %.

(228)

Bayer attains [...] turnover with Enduro EC, which is a
mixture of the active ingredients Oxydemeton-Methyl
and pyrethroid Beta-Cyfluthrin. Oxydemeton-Methyl
is an organophosphate and Beta-Cyfluthrin is a py-
rethroid. Enduro EC accounts for [20 to 30] % of the
total sales on this market. Bayer also sells the pyrethroid
Cyfluthrin. ACS sells mainly pyrethroid Deltamethrin
and Endosulfan, mostly as mixed formulations with
other active ingredients. Endosulfan, which currently
accounts for [0 to 10] % of the sales in this market,
has only been re-registered for cotton and tomatoes
and will thus not be used on beets after 2003. Out of
this reason, the parties expect ACS’s market share to
decline to [10 to 20] % and estimate, that the combined
market share of the parties would be only [30 to 40] %
by 2004.

(229)

The parties’ forecast of the drop in their market share
is based on the assumption that all other competitors
will retain their product portfolios. As discussed above,
this is not the case and the re-registration will affect
also the competitors.

(230)

(231)

It has been indicated in the market investigation that
Deltamethrin and Beta-Cyfluthrin are similar products
and that combining these two would guarantee the
new entity a strong position in pyrethroids. The parties
would have also a third pyrethroid in the portfolio,
Cyfluthrin. Third parties have indicated that Delta-
methrin is the best pyrethroid on the market in terms
of broad spectrum of activity. Only low dosages are
required and, compared to competing products, it is
cheap. Beta-Cyfluthrin has similar activity but is more
expensive. While the parties have forecast [...] sales of
these two products, the sales are expected to [...].

The parties have argued that Beta-Cyfluthrin and
Deltamethrin target the same pests in the French beets
market and are not complementary to each other. The
parties have further argued that these products belong
to the same chemical class and cannot be used
simultaneously in a rotational program for resistance
management. The parties have argued that there is no
reason why the combination of two products belong-
ing to the same chemical class targeting the same pests
could strengthen the parties’ position in the market.
The Commission however considers in line with the

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above that while resistance may develop against one
pyrethroid, it does not necessarily develop in the other.
The parties would have three pyrethroids in their
product offering which gives the parties better possi-
bilities to offer spraying programmes and discount
packages to the customers compared to their competi-
tors, who have only one pyrethroid in their portfolio.

(237)

The parties have submitted that [...]. [Confidential
information concerning the product launches of the
competitors].

(238)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for beets in Greece.

(232)

[Confidential
launches of the competitors].

information concerning the product

B e e t s s o i l i n s e c t i c i d e s

(233)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for beets in France.

(239) As regards beets insecticides for soil application, the
parties have very high combined market shares in three
Member States: Belgium ([80 to 90] %), France ([70 to
80] %), and the UK ([70 to 80] %). In Italy, the parties
would account for [40 to 50] % of the market.

(234)

In 2000, the Greek market accounted for EUR [...]
million.
It slightly increased from 1998 (EUR [...]
million). The parties’ combined market share amounts
to [70 to 80] % (Bayer: [0 to 10] %, ACS: [60 to
70] %) according to their own estimation. The largest
competitor in this market, BASF, accounts presently
[10 to 20] % of the market while Syngenta has only [0
to 10] %. The parties have projected that their com-
bined market share would drop only slightly to [60 to
70] % by 2004. In sucking insects, the parties have
estimated their market share as [60 to 70] %. In
chewing insects, their market share would be [90 to
100] %.

(235) ACS’s most important products on this market are
Deltamethrin (Decis) and Endosulfan (Thiodan). Delta-
methrin accounts for [30 to 40] % of the total market
Endosulfan attributes currently [20 to 30] % of ACS’s
market share. The parties have indicated that [...]. Bayer
sells several products, including Fethion (Lebaycid CD),
Cyfluthrin (Baythroid EC) and third party products
Parathion-Methyl (Folidol M-EC) and Azinphos-Methyl
(Gusathion M EC).

(236)

The prices of Deltamethrin and Endosulfan are largely
decided in the Greek [...] market, where the parties
have [40 to 50] % of the market. As discussed below,
the Commission considers that
the parties would
become dominant on this market. Deltamethrin is also
used in the fruits and nuts market, where the parties
would become dominant. Therefore, given this and in
view of the parties’ high market share and the absence
of strong competitors, the Commission considers that
the parties could raise the price of these products
without provoking a competitive reaction.

(240)

The Belgian market was estimated at some EUR [...]
million in 2000. On this market, the parties’ combined
market position would be according to their own
estimation [80 to 90] % (Bayer: [0 to 10] %, ACS: [80
to 90] %). The market share of each company has
remained relatively stable for the past three years. Of
the other large producers, Syngenta has de minimis
sales in Belgium in this market. Generic competitors
account for [10 to 20] % of the market. In their reply
to the Commission’s statement of objections,
the
parties have corrected their market share estimation.
They have submitted that a third-party product, Force,
based on the active ingredient Tefluthrin, was allocated
by mistake to the soil market; it is in fact used in
seed treatment applications. This would bring Bayer’s
market share down to [0 to 10] % and the combined
market share to [70 to 80] %.

(241)

[Confidential information concerning the market pos-
ition of the competitors]. Therefore, the Commission
considers that the parties’ estimate of their high market
position is correct.

(242) More than [90 to 100] % of ACS’s market share is
achieved with Regent Plus which is a mixture formu-
lation of the active substances pyrazole Fipronil and
the carbamate Aldicarb. The remaining [0 to 10] % of
ACS’s sales are generated with Fipronil (Syllit). Both of
ACS’s products are used to [90 to 100] % in beets and,
therefore, the pricing of the products is determined on
this market. Bayer generates more than [90 to 100] %
of its sales with the carbamate Carbofuran (Curaterr
GR), which is a third party product supplied by FMC.
The parties have projected their combined market share
to increase to [90 to 100] % by 2004 [confidential
information of ACS].

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(243)

The parties have submitted that the proposed trans-
action does not restrict effective competition on this
market. They have submitted that even though Fipronil
is under patent protection until [confidential infor-
mation of ACS], competing organophosphates and
carbamates are perfect substitutes for Fipronil-based
insecticides. The parties have also contended that [...].
Finally, the parties have argued that because Curaterr
has its main market in vegetables ([40 to 50] % of
the generated turnover) and that since the parties’
combined market share in the market for vegetable
insecticides only amounts to [20 to 30] %, there is no
possibility for abusive pricing of Curaterr in Belgium.

(248)

(249)

(244) As concerns Fipronil, [confidential

information of
ACS]. In light of the investigation, the Commission
does not consider older chemistry classes such as
organophosphates and carbamates substitutable for
Fipronil. As discussed above, the trend is to move away
from older, more toxic chemistries.

(245)

The Commission notes further that
there are no
indications that [...]. In view of the fact that [...], the
Commission considers that the parties are likely to
defend [...] vigorously. The integrated gross margins of
[...] are mostly in the region of [confidential infor-
mation of ACS] in different Member States. [...] [confi-
dential information of ACS].

(246) As regards the parties argument that Curaterr GR is
used mainly in vegetables, the Commission notes that
in the market data submitted for soil application for
maize, it is indicated that [50 to 60] % of the sales of
Curaterr GR are generated in beets and only [0 to
10] % in vegetables. The sales of Curaterr GR in
vegetables amount to EUR [...], in beets EUR [...] and
in maize EUR [...]. Given that the combined sales of
Curaterr GR in beets and maize are higher than in
vegetables and in view of the fact that Bayer has [40 to
50] % of
for maize,
the Commission considers that the resulting market
position in beets could have an effect on the pricing
incentives of Curaterr GR.

insecticides market

the soil

For all the above reasons, and given specifically the
high market share and the fact that the operation
would bring together the largest R & D competitors
on this market,
the Commission has reached the
conclusion that the proposed transaction will create or
strengthen a dominant position on the market for soil
insecticides for beets in Belgium.

France is the largest single market in the EEA for beets
insecticides. Insecticides for soil application account
for slightly less than [40-50 %] of the total French
market and, in 2000, accounted for EUR [...] million.
The total market decreased by almost [30 to 40] % in
2001, from EUR [...] million. During this period, the
parties more or less maintained their market position.
The parties have estimated that the total market will
decrease further still by 2004.

(250) On this market, the parties’ combined market share
amounts to [70 to 80] % (Bayer: [0 to 10] %, ACS: [70
to 80] %) according to their own estimation in the
notification. Other competitors on this market are very
small and comprise of local and generic manufacturers.
Competitors have estimated that the parties’ market
position is stronger, closer to [90 to 100] % of the
market. In their reply to the Commission’s statement
of objections, the parties have explained that the third-
party product, Force, based on the active ingredient
Tefluthrin, was allocated by mistake to the soil market,
and it is in fact used in seed treatment applications.
According to the parties, therefore, Bayer’s market
share is reduced to [0 to 10] % and the combined
market share of the parties to [70 to 80] %.

(251)

[Confidential information concerning the market pos-
ition of the competitors].

(252) ACS generates almost all of

its turnover with a
carbamate Aldicarb (Temik), which is the largest prod-
uct on this market with [60 to 70] % of the total sales.
ACS sells on the market also a formulation combining
Aldicarb and Fipronil (Cardinal/Trident). [70 to 80] %
of the turnover of Aldicarb is generated in this market,
showing that the price of Aldicarb is determined on
this market. ACS has also some limited sales of the
third party product Carbofuran (Stelon) supplied by
[...].

(247)

The parties have submitted [...]. The parties have
argued that Syngenta will
launch Fosthiazate onto
this market. [Confidential information concerning the
product launches of the competitors].

(253)

Bayer generates almost all of its turnover with active
substances produced by third party suppliers and the
carbamate Carbofuran (Carbofuran MF, [...]).

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Official Journal of the European Union

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(254)

The parties have argued that despite their high market
share, the transaction does not lead to any adverse
competition effects.
In particular, the parties have
argued that third-party suppliers are likely to discon-
tinue supplying their products to Bayer upon com-
pletion of the merger. The parties have further argued
that prices for Bayer’s Carbofuran cannot be raised
anti-competitively as the price is determined in the
competitive market for [...] insecticides. Moreover, the
parties have argued that Carbofuran has suffered a
considerable decline in sales prices over the last years.
According to the parties, this is mainly due to the fact
that the product is subject to vigorous competition
from generic suppliers. Since Carbofuran will be
defended in the re-registration process by [...], the
parties have argued that generic competition is expect-
ed to increase in the future. Finally, the parties have
argued that Otsuka is likely to launch carbamates
Benfuracarb and Alanycarb on the market in 2002/03.

(255)

The Commission notes first that there is no evidence
that any of the third party supply agreements will be
discontinued. The Commission also notes that the
parties have forecast to maintain their market position
by 2004 at a high level ([60 to 70] %). As regards
Carbofuran, the Commission notes in light of the
investigation that there has been a general price decline
in the European crop protection industry and that this
is caused by the general difficulties faced by the
agricultural industry rather than by generic compe-
tition.

(256) Concerning the pricing of Carbofuran, the Commission
notes that Bayer generates [80 to 90] % of its market
share on this market with products, which are only
sold in this market and where the pricing decisions
are taken on this market. Therefore, the pricing of
Carbofuran is not relevant in assessing the competition
effects of the merger. The Commission considers that
the dominant position, which will be achieved after
the merger, is likely to change the pricing incentives of
these other products.

(257)

The Commission considers that the operation will lead
to a substantial structural change of the market by
combining the two major R & D companies. This
position will be further reinforced by [confidential
information of ACS] (15). [Confidential
information
concerning the product launches of the competitors].
The Commission has no information about the alleged
launches of carbamates Benfuracarb and
product

(15) Confidential information of ACS.

Alanycarb. In any event, the Commission does not
consider it likely that these products, which represent
old chemistry classes the use of which will decrease
gradually in the EEA, will be able to offset
the
strong position of the parties, given especially that
[confidential information of ACS].

(258)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for beets in France.

(259)

The total market for soil insecticides for beets in the
United Kingdom amounted to EUR [...] million in
2000. The market has fallen by some [40 to 50] %
from 1998, when the total market amounted to EUR
[...] million. The parties have largely maintained their
market position throughout this period.

(260) According to their own estimation, the parties’ com-
bined market share amounts to [70 to 80] % (Bayer: [0
to 10] %, ACS: [60 to 70] %), a position they expect to
maintain also in the near future. Du Pont is the largest
competitor with [10 to 20] % of the market. Syngenta
has [0 to 10] % of the market.

(261)

The Commission has verified the sales figures of
third parties. [Confidential information concerning the
the competitors]. The parties’
market position of
market share could therefore be even higher than [70
to 80] %.

(262) All of ACS’s sales are derived from Aldicarb (sold under
the brand name Temik), whereas Bayer’s only product
in the United Kingdom is Carbofuran (sold as Yaltox
GR).

(263)

The parties have argued that no competition concerns
would arise on the market. They have contended that
since Bayer adds only a relatively small percentage to
the market share of ACS, the transaction will not lead
to a significant change of the current market structure.
This according to the parties is even more true since
Bayer’s only product Carbofuran is a third party
product supplied by [...]. As regards Aldicarb, the
parties have argued that despite ACS’s market share of
[60 to 70] %, the prices for Aldicarb have constantly
decreased in the British market over the last years. The
parties have argued that since Aldicarb is already
off-patent and subject
to generic competition, all
circumstances suggest that this price decrease will
continue in the future. Furthermore, the sales volume

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L 107/31

of Aldicarb in beets only accounts for only [10 to
20] % of the total sales of this product in the United
Kingdom. The main market for Aldicarb is potatoes
([80 to 90] % of sales) and therefore prices are
determined on the potato market rather than on the
beet market. The parties have further argued that
competitors would use any attempt by the combined
entity to raise prices to extend their sales and their
market shares and that, despite their small market
the
presence, competitors are able to countervail
market position of the newly merged entity. Finally,
the parties have contended that Otsuka is expected to
launch its new carbamate products Benfuracarb and
Alanycarb in 2002 and 2003 respectively, and these
will compete with the parties’ products.

(264)

The Commission notes, first, that considering ACS’s
already strong position and [confidential information
concerning the market position of the competitors] of
other competitors on the market the operation will
lead to a substantial change in the market structure. The
Commission does not consider that the competitors are
in a position to offset the market power of the new
entity. The Commission has no evidence that the
supply relationship with [...] will be discontinued. As
regards the price decrease of Aldicarb, the Commission
notes in line of the assessment above that there has
been a general price decline in the European crop
protection industry which has been caused by the
general difficulties faced by the agricultural industry
rather than by generic competition. The Commission
also notes that ACS has a strong position in the potato
market ([50 to 60] %), where the price of Aldicarb is
determined. As Aldicarb is sold only in potatoes
and beets in the United Kingdom, the Commission
considers that following the creations of a dominant
position in beets, this could change the pricing incen-
tives of Aldicarb. Finally, the Commission has no
information about the alleged product launches of
carbamates Benfuracarb and Alanycarb. In any event,
the Commission considers it unlikely that these prod-
ucts, which represent old chemistry classes the use of
which will decrease gradually in the EEA, will be able
to offset the strong position of the parties, at least in
the near future.

(265)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for beets in the United Kingdom.

(266)

In Italy, the total market size has been more or less
stable and was EUR [..] million in 2000. The market is
expected to increase to EUR [...] million by 2004.

(267)

The parties’ combined market share amounts to [40 to
50] % (Bayer: [10 to 20] %, ACS: [20 to 30] %)
according to their own estimation. The parties have
submitted that Syngenta has [10 to 20] % of the
market. The parties have contended that there is a large
number of local and generic companies, accounting
for a combined market share of [30 to 40] %.

(268)

[Confidential information concerning the market pos-
ition of the competitors].

(269) ACS generates all of its sales with Fipronil, marketed
under the brand Regent. Bayer’s market share is mainly
achieved with the third party carbamate Carbosulfan
(Marshall GR). Bayer sells altogether [...] products
on this market and Bayer’s own products include
Cyfluthrin and Methiocarb.

(270)

Fipronil [confidential information of ACS]. Fipronil
has succeeded to increase its share from [0 to 10] % in
1998 to [20 to 30] % in 2000 and the parties expect it
to increase further to [30 to 40] % by 2004. The
parties have estimated that their combined market
share would exceed [50 to 60] % by 2004.

(271)

The parties have argued that no competition concerns
would arise on this market as Cyfluthrin and Methi-
ocarb have their main use in other crops and are thus
priced according to the competitive situation in other
markets. The parties have also argued that a number
of
local and generic companies accounting for a
combined market share of far more than [30 to 40] %
can easily respond to any anti-competitive behaviour
of the newly merged entity. In addition to Syngenta’s
sales of Fosthiazate, these competitors offer a broad
range of products, including organophosphates and
carbamates, which the parties argue are equally effec-
tive as ACS’s Fipronil-based Regent and Bayer’s prod-
ucts. As in the French and in the British market, Otsuka
is expected to launch its new carbamate products
Benfuracarb and Alanycarb in 2002 and 2003 respect-
ively. The parties have argued that both products are
fully substitutable for the parties’ products.

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Official Journal of the European Union

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(272)

The Commission notes first that Bayer’s strongest
product Carbosulfan which, according to the infor-
mation available to the Commission, is the biggest
single product on the market after Fipronil, is used
mainly in this crop ([50 to 60] %). Therefore, the price
of Carbosulfan is largely determined in this market.
The dominant position which will be created on this
market may give incentives for the parties to raise the
price of Carbosulfan. The Commission also notes that
three other Bayer’s products are mainly used in this
market. In view of the small size of all the other players
on the market, the Commission does not consider that
they could offset the market power of the new entity.

(273) Moreover, the Commission does not consider that,
in light of the investigation, organophosphates and
carbamates can challenge the position of Fipronil. In
this respect, the alleged launch of two carbamates will
not, in the Commission’s view, have any appreciable
effect on the market in the near future, given in
particular that they will have to compete with the two
leading products. The market position of the parties’
will be further strengthened [confidential information
of ACS].

(274)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for beets in Italy.

(c) Cereal insecticides

I n t r o d u c t i o n

(275)

(276)

In Case COMP/M.1806 — AstraZeneca/Novartis, the
Commission found that despite the fact that various
insects attack cereal crops, aphids are the major pests
by far. Therefore, the cereal insecticides market can be
considered an aphid market. Aphids are foliar insects
and they are among the most
important sucking
insects.

The Commission also said in the decision on Case
COMP/M.1806 — AstraZeneca/Novartis (recital 422)
in its assessment of the cereals markets that the market
share of pyrethroids is likely to further increase since
insecticides based on the two other main chemical
classes, organophosphates and carbamates, face regu-
latory threat as concerns the registration process. The
Commission also noted in that decision that,
in
the EEA, Lambda-Cyhalothrin is the number one

pyrethroid, ahead of Deltamethrin (Aventis), Cyper-
methrin and Tau-Fluvalinate.

(277) According to the parties, neonicotinoids are not very
successful in cereal markets. The parties have said that
the pricing of neonicotinoids such as Imidacloprid is
based on [...], therefore, these products are economi-
cally unattractive to cereal farmers who are tradition-
ally looking for a cheap knockdown (16) product for
aphids. This, according to the parties, is particularly
the case in the southern European cereal markets of
Greece, Italy and Portugal where cereal farming is
less economically viable than the northern European
countries, e.g. Germany and France. The parties have
submitted that [...]. The parties have argued that cereal
farmers wait for aphids to appear before spraying and
they are therefore keen to see a very quick knockdown
effect. According to the parties, the only reason why
neonicotinoids are of interest to a small proportion of
cereal farmers is because of their relative safety in
comparison to older products and/or because certain
areas have predictable aphid outbreaks which make
prophylactic spraying possible. The parties have con-
tended nevertheless that these consumers account only
for limited sales.

(278)

Third parties have generally agreed that the cereal foliar
market is essentially a pyrethroid market and that older
products are still used efficiently. It has been argued
that the main reason for this is that limited movement
of the active substance is required within the plant
following foliar spray as, because of the morphology
of the plant, an overspray will contact any homoptera
(aphids) present on the ear as they are in an exposed
situation. Pyrethroids are therefore said to be good for
controlling insects in cereals and they are cheap and
movement in the cereal plant is not essential.

(279)

Foliar treatments in cereals occur in the autumn and
spring for winter-planted cereals, or in the spring
and summer for spring-planted cereals. It has been
indicated that, for winter cereals, a seed treatment with
neonicotinoids ensures much greater protection than
any foliar application and will control aphid attacks in
the Autumn. The reason why it is important to control
aphids at this time is because they transmit viruses
which will damage the cereals over the winter period.
Foliar applications are then made in spring to kill

(16) Knockdown agents generally have effect in seconds.

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aphids which attack the ears as they are developing.
Third parties have indicated that most foliar sprays
today are either pyrethroids, organophosphates or
carbamates. The most popular are pyrethroids, or
mixtures of pyrethroids with an organophosphate or
carbamate. It has been indicated that neonicotinoids
are not the best products for foliar sprays because they
are more expensive, and pest resistance would result if
a foliar spray with a neonicotinoid followed a seed
treatment with a neonicotinoid.

20] % in 1998 to [0 to 10] % in 2000, ACS managed
to increase its market share from [10 to 20] % in 1998
to [40 to 50] % in 2000 (17). The parties have submitted
that Syngenta is the main competitor with a market
share of [20 to 30] %. The parties argue that generic
suppliers account for a combined market share of [20
to 30] %. The parties would have [50 to 60] % of the
sucking insects segment.

(280)

For spring cereals, the seed treatment is made more to
control wireworms and soil pests, and it has been said
that neonicotinoids are not the ideal products. As for
winter cereals, the foliar applications are predomi-
nantly pyrethroids, organophosphates or carbamates.
However, it has been argued that there would be less
likelihood of resistance being built-up using a foliar
neonicotinoid spray. For applications at the earing
stage,
it has been argued that neonicotinoids will
progressively gain market share because of their fast
action.

M a r k e t p o s i t i o n

(285)

[Confidential information concerning the market pos-
ition of the competitors].

(286) ACS derives its turnover almost exclusively from
pyrethroid Deltamethrin ([40 to 50] % of the market
share), sold under brand names Decis, Decis D, Decis
Quick and Best. Bayer’s organophosphate Oxydeme-
ton-Methyl (Metasystox-R EC) accounts currently for
[0 to 10] % of market share. Bayer is also selling
pyrethroid Cyfluthrin (Baythroid EC) and neonicotino-
id Imidacloprid. The sales of both Cyfluthrin and
Imidacloprid account for less than [0 to 10] % of the
market each.

(281) With a market value of EUR 59,9 million, the overall
insecticides is one of the largest
market for cereal
insecticides markets in the EEA. The foliar segment
accounts for EUR [...] million and the soil segment
only EUR [...] million.

(287)

(282)

The parties have overlapping activities predominantly
in the foliar insecticides segment. No affected markets
arise in the soil applications segment. At the EEA-
wide level, the parties’ combined position in foliar
applications is [30 to 40] % (Bayer: [10 to 20] %, ACS:
[10 to 20] %) and in soil applications [20 to 30] %
(with only [0 to 10] % increment of market share from
ACS). Syngenta is the market leader in soil applications
with [30 to 40] % of the market. In foliar insecticides,
Dow is the largest competitor with [10 to 20] % of the
market, followed by Syngenta ([10 to 20] %).

(283)

Following the operation, the parties would attain high
market shares in Italy ([50 to 60] %) and Portugal ([90
to 100] %).

The parties have argued that all of their products have
their main markets in other crops. Oxydemeton-
Methyl is mainly used on fruits and nuts, where the
parties combined market share is [30 to 40] %.
Only [10 to 20] % of the turnover generated with
Deltamethrin under the brand Decis can be allocated
to cereals as the product is also used on vegetables,
ornamentals, oil and protein crops and maize. Out of
this reason, the parties have argued that prices of
these products are not determined by the competitive
situation in the market for cereal insecticides but rather
in other markets. The parties have also argued that
since Deltamethrin is off-patent and subject to intense
competition from generic products and other pyrethro-
ids, the parties expect sales of Deltamethrin to decrease
rapidly after 2004. The parties have argued that there
are many generic forms of Deltamethrin on the market
and that competition from generic pyrethroids has
been intense with downward pressure on prices.

(284)

In Italy, the total market grew from EUR [...] million
(1998) to EUR [...] million in 2000. The parties expect
the market to grow somewhat in the near future. The
parties’ combined market share is [50 to 60] % (Bayer:
[0 to 10] %, ACS: [40 to 50] %) according to their own
estimation. While Bayer’s market share fell from [10 to

(17) The parties provided on 18 January 2002 corrected sales figures
for ACS. These figures show that ACS sales in this market in
1999 were EUR [...] instead of EUR [...], as indicated in the
market share information submitted in the notification. The
parties have not, however, adjusted their estimate of the total
market size, which would explain the very high ACS market
share in 1999.

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Official Journal of the European Union

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(288)

The Commission notes that as regards the sales of
Deltamethrin (Decis), following the merger, about [40
to 50] % of the sales of Deltamethrin will be generated
in [...] where the parties would become dominant
following the merger. After the operation, almost [50
to 60] % of the sales of Deltamethrin would be
generated in crops where the parties become dominant.
Therefore, the Commission considers that the oper-
ation leads to a structural change of the market and
the strong position achieved in the cereals market
could further influence the pricing decisions of Delta-
methrin in the future. Moreover, it has been indicated
that two good pyrethroids, Deltamethrin and Cyfluthr-
It
in, would be marketed by the same company.
therefore appears unlikely that Syngenta’s pyrethroid
Lambda-Cyhalothrin (Karate) would be able to offset
the market power of the new entity. Third parties have
also indicated that the new entity could enter the cereal
foliar market and especially in spring cereals with a
combination product of a neonicotinoid and Delta-
methrin. According to third parties, such a mixture
would be able to compete on cost grounds, and it
would be an opportunity to diversify the range away
from mixtures of pyrethroids in combination with
organophosphates or carbamates.

(289) As to the parties’ argument that Deltamethrin is off-
patent and subject to intense competition from generic
products and other pyrethroids, third parties have
indicated that the declining price levels in Europe
have not been caused in the first place by generic
competition. The Commission also notes that, despite
the parties’ argument of vigorous price competition
and generic Deltamethrin, ACS is the market leader
and has managed to maintain a very high profit margin
on Deltamethrin in Italy, [confidential information of
ACS]. ACS produces Deltamethrin in [...] and, accord-
ing to third parties, have a cost advantage on the
market. The Commission noted that the parties expect
their combined market share to increase to [50 to
60] % by 2004, with Deltamethrin expected to more
or less maintain its sales levels. The internal ACS
papers also show that [confidential
information of
ACS]. Given this and in view of the fact that re-
registration will wipe out a large number of products
that today compete with Deltamethrin,
it does not
appear feasible that the sales of this old but very strong
product will decrease as rapidly as the parties claim.

(291)

The Commission considers that, in light of the investi-
gation,
it is likely that the parties will be able to
maintain their high market share in the near future. The
parties have argued in their reply to the Commission’s
statement of objections that neonicotinoids do not
play any significant role in cereals because of their high
price and that the performance of Deltamethrin on
aphids would not be improved significantly by mixing
it with Imidacloprid. The Commission however con-
siders that, as has been indicated by third parties,
neonicotinoids could become more important on this
market in the future. Moreover, one of the reasons for
creating combination products according to ACS is
that they increase the cost of entry for competitors. In
addition, the two pyrethroids in combination with
Imidacloprid could also form an interesting package
for resistance management purposes. No other market
participant can offer a similar package. Therefore, as
the operation could lead to the
discussed above,
foreclosure of competitors from the market.

(292)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for cereals in Italy.

(293) With a market volume of EUR [...] million,

the
for foliar insecticides used on
Portuguese market
cereals is very small. It has grown slightly over the past
three years. On this market, the parties have jointly
[90 to 100] % of the market (Bayer: [50 to 60] %, ACS:
[30 to 40] %). Bayer’s market share has fallen from [90
to 100] % in 1998. ACS has increased its market share
from [0 to 10] % to the present [30 to 40] %. The
parties have indicated that Syngenta has [0 to 10] % of
the market. The parties would have [90 to 100] % in
the sucking insects segment.

(294)

[Confidential information concerning the market pos-
ition of the competitors].

(290)

[...]. [Confidential information concerning the product
launches of the competitors].

(295)

Bayer derives all of its turnover in this market from its
organophosphate Oxydemeton-Methyl (Metasystox-R
EC). ACS’s only product is an organophosphate Dime-
thoate (Dafenil), which is a third party product supplied
by [...].

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(296)

The parties have argued that competition concerns
would not arise on this market. The parties have
submitted that the products sold for the protection of
cereals have their main use on other crops and are thus
priced according to the competitive structure of these
other markets. The cereal market respectively accounts
for less than [0 to 10] % of ACS’s sales of Dimethoate
and of Bayer’s sales of Oxydemeton-Methyl in Portugal.
The parties have argued that both products are mainly
used in the fruits and nuts market, where the parties
have a combined market shares of [40 to 50] %.

(297) While the parties have argued that they do not have
any incentive to determine prices anti-competitively in
the market for cereal
insecticides, the Commission
considers, first, that the parties would become domi-
nant in the fruits and nuts market. Second, following
the merger, the parties would become dominant in all
the other markets, where the two product are used
([...]). Given this, the Commission considers that the
parties would be in a position to raise the price of their
products.

(298)

The parties have also argued that competition concerns
would not arise because Bayer’s market share has
substantially decreased for the last years. The Com-
mission notes, however, that the parties expect Bayer’s
market share to increase [90 to 100] % by 2004. The
parties have explained that this estimate is based on
the assumption that [...] will not continue supplying
the new entity with Dimethoate and, therefore, in the
smaller market Bayer’s market share would increase
even though its sales are not expected to increase to a
significant extent. However, as at present there is
no evidence that the supply of Dimethoate will be
discontinued, the Commission assumes that the over-
lap will persist after the operation.

(300)

[...]. [Confidential information concerning the product
launches of the competitors].

(301)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for cereals in Portugal.

(d) Citrus fruit insecticides

(302) Citrus fruit only grow in four countries within the EEA:
Greece, Italy, Portugal and Spain. The parties have
contended that main focus of the products which are
suitable for the protection of citrus fruit against insect
attacks is on foliar treatment. With a market value of
EUR [...] million, the segment for foliar insecticides
accounts for approximately [90 to 100] % of the total
market for citrus insecticides.

(303) At the EEA-wide level, the parties would account for
[30 to 40] % of the soil insecticides market for citrus
fruit (Bayer: [0 to 10] %, ACS: [20 to 30] %). The leader
in this segment is FMC with [40 to 50] % of the
market. In foliar treatment, the parties would account
for [10 to 20] % of the total market (Bayer: [10 to
20] %, ACS: [0 to 10] %). Syngenta accounts for [30
to 40] % of the market.

(304) At

level,

the national

the parties would attain a
relatively strong combined market position in Portugal
for foliar applications. The total market value for
Portugal was EUR [...] million in 2000. The market is
expected to grow in the near future. The parties’
combined market share is according to their own
estimate [40 to 50] % (Bayer: [30 to 40] %, ACS: [0 to
10] %). Due to the increased sales of Imidacloprid,
Bayer’s market share has been growing steadily. Syn-
genta is the only other R & D company on the market.
The parties have estimated that Syngenta’s market
share is [20 to 30] %. The parties have submitted that
generic suppliers account for a combined market share
of [30 to 40] % and they have provided information
which supports this argument.

(299)

therefore become subject

The parties have also argued that Bayer’s product
Oxydemeton-Methyl will be re-registered by United
Phosphorus and will
to
generic competition. The Commission considers, how-
ever, that in view of the very high market share of the
is not
parties on this market, a generic product
considered to be able to counter balance the parties’
ability to raise prices on this market, especially as
United Phosphorus will be a new entrant onto this
market.

(305)

[Confidential information concerning the market pos-
ition of the competitors] and the large number of
generic products, the parties’ estimate of their market
position would therefore appear to be largely correct.

(306)

If considering sucking insects separately, the parties
have submitted their market share as [30 to 40] %. In
chewing insects, the parties have estimated their market
position as [40 to 50] %.

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Official Journal of the European Union

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(307)

Bayer sells on this market most importantly Imidaclo-
prid, which is sold under the brand Confidor. The sales
of Imidacloprid have grown steadily and are expected
to grow by some [10 to 20] % by 2004. Imidacloprid
is the best selling product on the market, accounting
alone [10 to 20] % of market share.

(308)

The parties have argued that Syngenta’s Abamectin has
a broader pest spectrum than Imidacloprid and is thus
more successful on the market. However, the parties
have submitted that although Abamectin is an acaricide
and is registered only for leafminers in the Portuguese
market, farmers can induce from the label that Aba-
mectin can control also mites if used at apple appli-
cation rates. The Commission’s investigation shows,
however, that Abamectin controls mites on apple but
that these mites are not pests on citrus. In any event,
the off-label use of pesticides is illegal. As to Bayer’s
claim that Abamectin is more successful on the market,
[confidential sales data concerning Syngenta’s product
Abamectin]. Therefore, it is not correct to argue that
Abamectin has been more successful on this market.

(309)

Bayer sells also Omethoate (Folimat SL), Fenthion
(Lebaycid EC) and Flufenoxuron (Cascade EC, [...]). The
parties have submitted that Omethoate will not be re-
registered in Europe. ACS sells only third party prod-
ucts, the most important of which are Chlorpyrifos
(Lorvek, [...]) and Butocarboxim (Drawin, [...]).

(310)

The parties have submitted that they expect their
combined market share to fall to [20 to 30] % by
2004, because Omethoate will not be re-registered and
because the parties expect the supply of third party
products to ACS to be discontinued. The parties have
also argued that [...]. Finally, the parties have further
argued that they will face strong competition from two
new acaricides: Sumitomo’s Etoxazole and Sankyo’s
Milbemectin. The parties have argued that these two
products will provide strong competition against the
parties products and contribute to the increase of the
market share of other competitors from [30 to 40] %
to [40 to 50] % by 2004.

(311)

The Commission considers it unlikely that the parties’
market share will drop to [20 to 30] %. First, there is
no evidence that the third-party supply contracts to
ACS will be discontinued. Second, according to Bayer’s
conservative estimate, the sales of Imidacloprid are
expected to grow by [10-20] percentage points by
2004. [...].

(312) As regards Etoxazole and Milbemectin, the investi-
gation shows that, as acaricides, neither product will
be able to compete with Imidacloprid for the control
of sucking insects. Moreover, acaricides have a very
narrow spectrum of activity and control principally
mites. Given that the parties have argued that Bayer’s
Spirodiclofen will mainly be used for mite control and,
therefore, will not be able to gain substantial market
share, the Commission considers that the same assess-
ment must apply also to Etoxazole and Milbemectin,
which control mites.

(313)

The Commission further notes that the parties are
planning to launch [...].

(314)

(315)

information concerning the product
[Confidential
launches of the competitors]. As discussed above,
the market investigation has further suggested that
combining two neonicotinoids in the same portfolio
will strengthen the parties’ product offering consider-
ably as they would be able to offer spraying pro-
grammes for resistance management which none of
the competitors can match.

The Commission also considers that [...] will further
enhance the parties’ overall market position. [Confi-
dential information concerning the product launches
of the competitors]. As regards [...], the Commission
has taken into account in its assessment the relatively
short product
life of acaricides. The investigation
shows that there is generally a high resistance potential
within mite populations,
leading to a potentially
relatively short life cycle for acaricides. Therefore, no
competition concerns are likely to arise specifically in
acaricides.

(316)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for citrus fruit in Portugal.

(e) Cotton insecticides

(317) Cotton is cultivated in only two countries within the
EEA, Greece and Spain. The value of the European
market is EUR 32,1 million. The parties would account
for [20 to 30] % of the foliar applications segment at
the EEA-wide level (Bayer: [0 to 10] %, ACS: [20 to
30] %) and only [0 to 10] % of the soil applications
(Bayer: [0 to 10] %, ACS: [0 to 10] %). In the foliar
segment, the parties would become the market leader
while the largest competitor Syngenta has only [10 to
20] % of this market. In soil applications, BASF is the
largest player ([30 to 40] %), followed by FMC ([20 to
30] %).

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Official Journal of the European Union

L 107/37

(318)

(319)

The Commission considers that competition concerns
could arise on the Greek market for foliar applications,
where the parties’ combined market share amounts to
[40 to 50] % (ACS: [30 to 40] %, Bayer: [10 to 20] %)
according to their own estimate. BASF is the largest
competitor with [10 to 20] % market share. Syngenta
has [0 to 10] %, Dow [0 to 10] % and Du Pont [0 to
10] % of the market. The parties have submitted that
local and generic competitors account for [20 to 30] %
of the market. The parties have estimated that their
market position in the sucking insects segment would
be [60 to 70] %.

The Commission has verified the market position of
the main players on the basis of the confidential sales
figures obtained. [Confidential information concerning
the market position of the competitors]. On the basis
of a conservative estimate that generic producers
account for [10 to 20] % of the total market, the
parties’ combined market share would be [40 to 50] %.
On the assumption that generic supplies have [20 to
30] % of the market, the parties’ market share would
be [40 to 50] %. Under both these assumptions,
[Confidential information concerning the market pos-
ition of
the Com-
the competitors]. Furthermore,
mission notes that ACS has already launched Acetami-
prid on this market in 2001. Given the recent launch,
the Commission has no information about the sales of
Acetamiprid. In any event, these sales have not been
reflected in the parties’ estimate of their market pos-
ition, which could be higher than submitted.

(320) ACS sells Deltamethrin (Decis), Thiodicarb (Larvin),
Endosulfan (Thiodan), Triazophos (Hostathion) and
the third party product Propargite (Omite, supplied by
[...]). ACS has also submitted that it has launched
Acetamiprid in this market in 2001. Triazophos will
not be re-registered. Bayer sells 10 products, including
Imidacloprid (Confidor SL), on this market. Bayer’s
products Disulfoton (Disyston GR) and Omethoate
(Folimat SL) have not been re-registered. Mainly due to
the non-registration of some of the products, the
parties expect their market share to decrease to [20 to
30] % by 2004. The three products which will be
removed from the market account currently for [0 to
10] % of the parties combined sales.

(321)

The parties have argued that the transaction does not
raise competition concerns on this market. They have
argued that Imidacloprid does not have its main market
in cotton, and is used mainly in other crops, namely
[...]. Thus, pricing of this product is not determined in
the cotton market. The parties have further argued
that since prices for Imidacloprid are relatively high
compared to other products used for the production
of cotton, the product has not been able to gain more
than [0 to 10] % market share in 2000. [...]. Finally,
the parties have argued that their market position will

be challenged by pipeline products which will be
launched by their competitors. In particular, the parties
have argued that Indoxacarb and Spinosad are more
effective in combating lepidoptera and safer from an
environmental point of view than Deltamethrin and
that the sales of the latter will decline in the near
future.

(322)

The investigation shows, first of all, that Imidacloprid
is, overall, a leading product for sucking insects control
whose importance is likely to increase in the future.
Both the phasing out of older products and increasing
environmental safety requirements are expected to
boost the sales of insecticides representing new chemis-
tries in the future.

(323)

[...].

(324)

The investigation shows that a number of new products
will be launched on this market in the near future.
[Confidential
information concerning the product
launches of the competitors]. The Commission notes
that ACS has already launched Acetamiprid on this
market in the course of 2001, thus adding to the
parties’ already existing neonicotinoid Imidacloprid.
[...].

(325) As concerns chewing insects, the Commission con-
siders in light of the investigation that [confidential
information concerning a competing pipeline product]
will be able to provide competition in this pest segment
in the near future.

(326) As concerns sucking pests, the Commission considers
that, [confidential information concerning a competing
pipeline product], [...] will strengthen considerably the
parties’ position in this segment. Bayer has submitted
that [...]. The Commission considers, however, that
potential cannibalisation has no relevance in this case
as the sales would remain within the same company.
The Commission also considers that the launch of [...]
new neonicotinoids would give the parties a unique
position to offer spraying programmes for resistance
management. The Commission therefore considers
that, overall, it is very likely that the parties’ market
position would be further enhanced as a consequence
of their strong neonicotinoid portfolio.

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(327) As regards the parties’ contention that a large number
of generic suppliers is active on the Greek market, the
Commission notes on the basis of the information
submitted by the parties that there are registrations by
other companies only for six of the parties’ products.
The Commission has, however, no information wheth-
er all these products are sold actively on the market.
There are no registrations for generic Imidacloprid and
the Commission has no evidence that any third party
is in the process of developing generic Imidacloprid
either.

(328)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for cotton in Greece.

(f)

Fruits and nuts insecticides

(329) With a total market value of EUR 203 million, the
market for fruits and nuts insecticides is by far the
biggest market
insecticides in the
EEA. With an aggregate turnover of EUR [...], foliar
insecticides constitute the biggest segment of fruits and
nuts insecticides, accounting for [90 to 100] % of the
total market.

for agricultural

(330)

Bayer and ACS are each active in both foliar and soil
applications. In the EEA-wide foliar segment, their
combined position amounts to [30 to 40] % (Bayer:
[20 to 30] %, ACS: [10 to 20] %). Syngenta has [10 to
20] % of this market. In the EEA-wide soil applications,
the parties’ combined market share is [70 to 80] %
deriving mainly from Bayer’s activities ([70 to 80] %).
All competitors have market shares around [0 to 10] %
and below.

(331) At the national level, the parties activities overlap only
in foliar insecticides. The parties’ would command high
market shares in the following Member States: Belgium
([50 to 60] %), Denmark ([50 to 60] %), Germany ([70
to 80] %), Greece ([40 to 50] %) and Portugal ([40 to
50] %).

The most important competitors are Syngenta ([20 to
30] %), BASF ([0 to 10] %), and Dow ([0 to 10] %). The
parties have estimated that their combined market
share in the sucking insects segment is [...] % and in
the chewing insects segment [40 to 50] %.

(333)

The Commission has verified the market shares against
the confidential sales figures obtained from competi-
tors. [Confidential information concerning the market
position of the competitors]. Therefore, the parties’
estimate for their market share seems to be largely
correct.

(334)

(335)

Bayer’s most important products on this market are
Imidacloprid (Confidor), organotin Azocyclotin (Per-
opal, [...]) and Tebufenpyrad (Masai, [...]). Bayer also
sells pyrethroid Cyfluthrin (Baythroid). ACS’s leading
product is amidine Amitraz (Mitac) and the leading
third party products are [...] Diflubenzulor (Dimlin)
and Dow’s benzoylhydrazine Tebufenozide (Mimic,
[...]). ACS also sells pyrethroid Deltamethrin (Decis,
Decis Quick).

Both Bayer and ACS generate about third of their
respective turnovers in this market with third party
products. The parties expect that, following the trans-
action, their distribution of some of these third party
products will be discontinued, thereby leading to a
reduction of market share to [40 to 50] %. The parties
have also argued that Dow’s market share will increase
due to the introduction of Spinosad, since this product
will be used by farmers to control codling moth.
The parties have also argued that
the anticipated
registration of Sumitomo’s Etoxazole and Sankyo’s
product Milbemectin will lead to a further reduction of
their market share. Furthermore,
the parties have
argued that the demand side in Belgium is quite
concentrated, with the ten largest distributors account-
ing for about [60 to 70] % of the total sales in Belgium
and the biggest distributor accounts for [50 to 60] %
of total sales in this product segment. The parties have
argued that the customers have sufficient alternative
supply sources readily available. Thus, even upon
completion of the transaction, the parties have argued
that the Belgian market remains unconcentrated.

(332)

The Belgian market totalled EUR [...] million in 2000.
It is expected to fall slightly by 2004. According to
their own estimation, the parties’ combined market
share on this market amounts to [50 to 60] % (Bayer:
[20 to 30] %, ACS: [20 to 30] %). This market position
has been more or less stable for the past three years.

(336) As the parties have not provided any evidence that
supply contracts will be withdrawn, the Commission
assumes for the purpose of this assessment that the
supply contracts will continue.

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Official Journal of the European Union

L 107/39

(337)

The Commission’s investigations show that new prod-
ucts will be launched on this market in the near future.
[Confidential
information concerning a competing
pipeline product]. The Commission has no information
about Etoxazole and Milbemectin. However, in view of
the fact that [...], the Commission considers that it will
be able to defend its market position in this market
segment. Due to the relatively short life cycle of the
products in this pest segment, however, no compe-
tition concerns are likely to arise in acaricides.

(338)

The parties’ market position in sucking insects would
be significantly strengthened in the future. Bayer is
already on the market with Imidacloprid [...].

(339)

[...].

(340)

(341)

(342)

The Commission considers it unlikely that the parties’
market share would decrease in the near future to the
level estimated by the parties. In the sucking insects
segment, the parties’ existing sucking insects portfolio
will be reinforced [...]. [Confidential information con-
cerning a competing pipeline product]. The Com-
mission considers further that potential cannibalisation
will have no relevance for the assessment of the case
as the overall sales will remain within the same
company.

The Commission notes further that the operation could
lead to the strengthening of the parties’ position also
in the chewing insects segment. While the competing
new products will be targeting the chewing insects
segment,
the
combination of the parties’ existing product portfolios
[...] could lead to the creation of a dominant position
in chewing pests.

the Commission considers that

[...],

The Commission considers that the parties’ position
could be strengthened in both sucking and chewing
pest segments due to the resulting strong position in
resistance management. The parties have submitted
that, although it is true that insects attacking fruits and
nuts in particular tend to develop resistance against
products in relatively short time and the rotation of
chemistries with different modes of action is the
cornerstone of an integrated resistance management
programme, they have argued that it is not true that
they could provide for a better resistance management
than most of their competitors. According to the
parties, a successful
resistance management pro-
gramme must be composed of at least two or three
different products with different modes of action used

in rotation on a given crop. The parties have argued
that not only the combined entity but most of other
companies active in the agrochemical business offer a
sufficient range of effective products and modes of
action that can be used in rotation to guarantee an
integrated resistance management.

(343)

The investigation in this case shows that the operation
would create a particularly powerful entity as regards
the resistance management. The parties would be the
only company on the market with two neonicotinoids.
These would allow an efficient rotation of products
with different modes of action and thus combating
resistance development and also extending product life
cycle. [...] could be used for rotation both in sucking
and chewing insects segments. None of the competitors
have neonicotinoids in their portfolio and would
therefore not be able to match the parties’ product
range. The Commission further considers that, in view
of this, countervailing buying power does not have any
relevance for the assessment of
the case, as the
distributors would have to take the neonicotinoids
from the parties.

(344)

For all the above reasons, given the strong, present
market position of the combined company and in view
of the parties’ future product launches, the Commission
does not consider that competing product launches
are sufficient to restrain the market power of the new
entity. Therefore, the Commission has reached the
conclusion that the proposed transaction will create or
strengthen a dominant position on the market for
foliar insecticides for fruits and nuts in Belgium.

(345)

In Denmark, the total market value amounted to EUR
[...] million in 2000. The market decreased slightly
from EUR [...] million but is expected to remain at the
current
level. The parties’ combined market share
amounts to [50 to 60] % (Bayer: [40 to 50] %, ACS [0
to 10] %) according to their own estimation. Syngenta
is the largest competitor with [20 to 30] % of the
market.

(346)

[Confidential information concerning the market pos-
ition of the competitors].

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Official Journal of the European Union

15.4.2004

(347)

Bayer’s market share is entirely based on products
supplied by [...]. Bayer sells organophosphate Mala-
thion (Maladan) and thiazolidinone Hexythiazox (Nis-
sorun). ACS sells amidine Amitraz (Mitac), organopho-
tetrazine Clofentezine
sphate Phosalone (Zolone),
(Apollo) and benzoylurea Diflubenzuron (Dimlin). Due
to the fact that ACS divested its product Chlofentezine
to [...] earlier this year, ACS’s market share is expected
to decrease by about [0 to 10] % over the next years.
With the introduction of Syngenta’s Thiamethoxam,
the parties expect their market share to fall to [40 to
50] % in the near future. The parties have estimated
their combined market share as [50 to 60] % in the
sucking insects segment and [40 to 50] % in chewing
pests.

(348)

[...]. [Confidential information concerning the product
launches of the competitors].

that their combined market position is [70 to 80] % in
sucking pests.

(352)

[Confidential information concerning the market pos-
ition of the competitors].

(353)

Bayer derives more than half of its turnover with
organophosphate Oxydemeton-M (Metasystor-R and
Metasystor-R-Spezial). It also sells nine other products,
including Imidacloprid. ACS’s product portfolio is
comprised of the third party products benzoylhydrad-
zine Tebufenozide (Mimic), Fenpyroximate (Kiron) and
benzoylurea Diflubenzuron (Dimlin).

(354)

(349)

The parties have argued that Danish customers exercise
countervailing buying power, as the three Danish
distributors account for [90 to 100] % of the total sales
in Denmark. The Commission does not consider that
the argument has relevance, because it is unlikely that
the three distributors purchase insecticides together.
Also the other reasons given above concerning buying
power apply in this case. Moreover, with the largest
competitor far behind, the Commission assumes that
the parties could raise their prices, given that Bayer’s
products are only used in this crop and two out of
three of the remaining ACS’s products are either used
in this crop or sold on markets where ACS has [90 to
100] % market share.

(350)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for fruits and nuts in Denmark.

(351)

In Germany, the total market value of EUR [...] million
is expected to decrease by EUR [...] million by 2004.
The parties’ combined market share on this market is
[70 to 80] % (Bayer: [40 to 50] %, ACS: [30 to
40] %) according to their own estimation. Bayer has
traditionally been fairly strong on this market ([30 to
40] % of the market in 1998 and [30 to 40] % in
1999). According to the parties, Syngenta and BASF
are the largest competitors with [10 to 20] % and [0
to 10] % of the market each. The parties have estimated

The parties have submitted that, despite their high
market share, no competition concerns will arise. They
have argued that their market position will deteriorate
in the future due to the phasing-out of products and
discontinuance of third party products. They have
further submitted that the expected registration of
the new competing products Spinosad (Dow) and
Indoxacarb (Du Pont) will affect the German market in
the future. They have contended that Oxydemeton-
Methyl will also be produced as a generic product by
United Phosphorus and, thus, a second supplier of this
product will become available to the farmer. The
parties have also argued that because insecticides need
to be applied during the flowering period of trees, bee-
toxicity is thus a key factor for the success of a certain
product in this market. The parties have argued that
Indoxacarb is less detrimental
to bees and other
beneficial insects and they expect this product to gain
market shares to the disadvantage of Oxydemeton-
Methyl. The parties expect nevertheless their combined
market position to remain at the relatively high level
(at
the parties
have argued that German customers exercise strong
countervailing bargaining power; 10 largest distribu-
tors account for more than [90 to 100] % of the total
sales of agricultural products

[50 to 60] %) by 2004. Finally,

(355) As regards the parties’ submission that they will lose
market share due to losing third party products,
they have not provided evidence of any third party
agreements which will be terminated. Clofentezine has
been divested to [...] in 2001 but, in 2000, it con-
tributed only [0 to 10] % of ACS’s market share.

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(356) Concerning the fact

that Oxydemeton-Methyl will
also be produced as a generic product by United
Phosphorus, the Commission notes that it will take
some time before the sales of this product will take off.
Moreover, in light of the investigation, it is feasible that
the sales of Oxydemeton-Methyl as an organophospha-
te will decrease in the future due to its toxicity. On the
other hand,
the sales of
is feasible to expect
newer products, such as Imidacloprid, to increase
(also forecast by the parties) and replace those of
Oxydemeton-Methyl due to the better safety profile of
these products. The investigation shows that organ-
ophosphates are not expected to increase sales in the
future.

it

would therefore not be able to match the parties’
portfolio. Therefore, demand elasticity is low. More-
over, customers cannot start producing products in-
house nor can they easily induce a new entry on the
market. In view of this, the Commission considers
that countervailing buying power does not have any
relevance for the assessment of the case.

(362)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for fruits and nuts in Germany.

(357)

information concerning the product
[Confidential
launches of the competitors]. Apart from [confidential
information concerning a competing pipeline prod-
uct], all these products are effective in chewing insects
and have no appreciable effect in sucking insects.

(363)

The Greek market for fruits and nuts foliar application
is after Italy and France the largest in the EEA. The
total market amounted to EUR [...] million in 2000
and it is expected to fall to some EUR [...] million by
2004.

(358) At the same time, the Commission considers that the
parties will strengthen their combined position due to
[...]. [Confidential information concerning a pipeline
product].

(359)

The Commission considers that, for essentially the
same reasons as in the foliar insecticides market for
fruits and nuts in Belgium, the parties’ position will be
enhanced [...] both in the sucking and the chewing
insects segments. As regards [confidential information
concerning a competing pipeline product], the Com-
mission considers that [confidential information con-
cerning the market potential of a competing pipeline
product].

(360)

In addition, as concerns the parties’ argument that
Indoxacarb is less detrimental
to bees and other
beneficial insects, the Commission notes that Indox-
acarb will only be effective against chewing insects. In
sucking insects, [...].

(364) On this market, the parties’ combined market share
amounts to [40 to 50] % (Bayer: [30 to 40] %, ACS: [0
to 10] %), a position which has remained relatively
unchanged for the past three years. The largest com-
petitors are Syngenta ([10 to 20] %), BASF ([0 to
10] %), and Dow ([0 to 10] %). According to the
parties, [30 to 40] % of the market is supplied by local
and generic competitors. The parties have estimated
that their market position in chewing insects is [40 to
50] % and in sucking insects [30 to 40] %.

(365)

[Confidential information concerning the market pos-
ition of the competitors]. On the basis of these figures,
it would appear that the parties’ market share would
be around [40 to 50] %, although it must be noted that
the parties’ sales figures do not reflect the sales of
Acetamiprid, which was launched in peaches in 2001.
In the sucking insects segments, given this and that
[confidential
information concerning the sales of a
competitor], the parties’ position in sucking pests is
likely to be significantly higher than what they have
estimated.

(361) As regards the parties argument that German cus-
tomers exercise strong countervailing bargaining
power, the Commission is not aware of any customer
attaining alone significant sales in the German agricul-
tural market. Neither has the Commission any evidence
that these customers engage in joint purchase schemes
or other similar measures to enhance their negotiation
power vis-à-vis the parties. Finally, none of the com-
petitors have neonicotinoids in their portfolio and

(366)

The parties’ product portfolio on this market is exten-
sive: Bayer sells altogether [...] products and ACS
13 products. Bayer generates some half of its sales
with Fenthion-based products (sold under the brands
Lebaycid and Lebaycid-Minister). ACS’s main products
are Amitraz, Phosalone and Deltamethrin. The parties
have argued that these products are all off-patent and
subject to generic competition. The parties expect that

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Official Journal of the European Union

15.4.2004

sales of Fenthion will decline due to problems with re-
registration. Therefore, the parties submit that their
combined market share will most likely drop to [30 to
40] % in 2004. The parties have estimated that all the
other competitors would increase their market share.

(370)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the overall
market for foliar insecticides for fruits and nuts in
Greece.

(367)

The Commission notes that there are three other
registrations for Amitraz, two for Phosalone and one
for Deltamethrin on this market. The Commission has
however no information whether all these products
are sold actively on the market (18). Bayer sells its
neonicotinoid Imidacloprid on this market. However,
the parties have argued that Imidacloprid neither has
nor will have any importance on the Greek market for
fruits and nuts insecticides (Imidacloprid accounts
currently [0 to 10] % of the total sales on the market).
The parties have submitted that the product will not
play a key role in this market, since it is not registered
for olives, which represent [90 to 100] % of the Greek
fruits and nuts market. [...]. All the other products in
the parties’ portfolio have been registered for olives.

(368) As noted above, ACS launched the new neonicotinoid
Acetamiprid for peaches already in 2001. [...]. [Confi-
dential information concerning a pipeline product].
[...]. [Confidential information concerning the product
launches of the competitors].

(369)

The Commission considers that as regards olives,
provided that [...] will provide competition. As regards
the other segments of the fruits and nuts market, the
Commission notes that
the parties already strong
position will be further strengthened by [...]. The
Commission considers that, for essentially the same
reasons as in the foliar insecticides market for fruits
and nuts in Belgium, the parties’ position will be
enhanced [...] both in the sucking and the chewing
insects segments. In its assessment, the Commission
has taken note of the fact that [confidential information
concerning the product launches of the competitors].
However, as the parties will have [...] neonicotinoids in
their product portfolio, the Commission considers that
competitors could not offset the parties’ market power.

(18) In this respect, the Commission notes that [...].

(371)

In Portugal, a market of EUR [...] million market value,
the parties’ combined market share amounts to [40 to
50] % (Bayer: [10 to 20] %, ACS: [20 to 30] %)
according to their own estimate. Syngenta is the largest
competitor ([10 to 20] %) while local and generic
suppliers account for a combined market share of [40
to 50] %. The parties have estimated their market share
as [40 to 50] % in the sucking insects segment and [40
to 50] % in chewing insects.

(372)

[Confidential information concerning the market pos-
ition of the competitors].

(373) As in Greece, the parties sell a large number of products
on this market: Bayer 10 and ACS 14. Bayer’s most
important products on this market are Imidacloprid
(Confidor) and Fenthion (Lebacyd). ACS sells a large
number of products, including Amitraz (Mitac), Endo-
sulfan (Thiodan), Phosalone (Zolone) and Deltamethrin
third party
(Decis). Both parties distribute several
products. Half of the parties’ market share derives from
products which are used either largely or only in this
crop, thereby suggesting that pricing decisions are
mainly taken on this crop.

(374)

The parties have estimated that while Bayer would
increase its market share to [20 to 30] %, the combined
market position of the new entity would deteriorate to
only [30 to 40] %. The parties have argued that the
market share will decrease because ACS’s Clofentezine
has been divested to [...] and [...]. In 2000, these
products accounted for [0 to 10] % of ACS’s market
share. The parties have also argued that the market
share will decrease because of discontinuance of supply
of third party products. Finally, the parties have argued
that their market share will decrease as competitors
will launch new products on the market.

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L 107/43

(375)

(376)

The parties have not provided any evidence that any of
the third party products will be discontinued. At the
later stage of the proceedings, the parties have correct-
ed their statement on Endosulfan and submitted that
Endosulfan will, after all, be registered for all the fruits
and nuts it is registered for today. As regards new
product launches, the Commission notes that [confi-
dential information concerning the product launches
of the competitors]. As regards the parties’ submission
that new acaricides Etoxazole and Milbemectin will be
registered, the Commission has not been able to verify
this information.

[...], [confidential information of ACS], [...]. The Com-
mission considers that, for essentially the same reasons
as in the foliar insecticides market for fruits and nuts
in Belgium, the parties’ position will be enhanced by
[...] both in the sucking and the chewing insects
segments.
the
Commission has taken note of the fact that [confiden-
tial information concerning the product launches of
the competitors]. [...] [confidential information con-
cerning a competitor], the Commission considers that
competitors could not offset the parties’ market power
in the near future.

In its assessment of sucking pests,

(377)

For all the above reasons, the Commission has reached
the proposed transaction will
the conclusion that
create or strengthen a dominant position on the market
for foliar insecticides for fruits and nuts in Portugal.

(g) Grapes insecticides

(378)

The total EEA-wide market in grapes amounted to
EUR 116 million in 2000, comprising almost entirely
of foliar insecticides (only EUR [...] million is accounted
for by soil insecticides). In the EEA-wide foliar segment,
the parties’ combined market share is [20 to 30] %
(Bayer: [10 to 20] %, ACS: [10 to 20] %), followed by
BASF ([20 to 30] %) and Syngenta ([10 to 20] %) as
the largest competitors. As regards the EEA-wide soil
insecticides segment, the parties would be the clear
EEA-wide market leader with [50 to 60] % (Bayer: [30
to 40] %, ACS: [20 to 30] %).

(379)

In the foliar segment,
the parties would attain a
relatively high market share in Germany ([50 to 60] %).

fall to EUR [...] million by 2004. The parties’ combined
market share is according to their own estimate [50 to
60] % (Bayer: [40 to 50] %, ACS: [10 to 20] %). On
this market, Bayer has traditionally had a strong market
position with [40 to 50] % of the market in 1998, [30
to 40] % in 1999 and [40 to 50] % in 2000. ACS’s
market share has varied between [20 to 30] % and the
present [10 to 20] %. The largest competitors are BASF
([10 to 20] %) and Syngenta ([10 to 20] %).

(381)

[Confidential information concerning the market pos-
ition of the competitors].

(382)

The parties have estimated that their market share in
sucking insects is [50 to 60] % and that in chewing
insects [50 to 60] %. However, [confidential infor-
mation concerning the market position of the competi-
tors], these market shares are likely to be higher.

(383)

(384)

Bayer generates [90 to 100] % of its sales with third
party products Parathion-Ethyl and Parathion-Methyl,
neither of which will be re-registered. The parties argue
that this would result in a substantial decrease of
Bayer’s market share. The parties also argue that the
deterioration of Bayer’s market position will be further
enhanced by the introduction of new competing
products Spinosad (Dow) and Indoxacarb (DuPont).
The parties have submitted therefore that Bayer’s
market share will decrease to only [0 to 10] % and the
combined market position of the parties to [10 to
20] % by 2004.

The Commission notes that [confidential information
concerning the product launches of the competitors].
[...]. The Commission agrees with the parties that the
parties’ market share could go down in the near future
due to the fact that Bayer’s most important products
will not be re-registered. Given also the competing
product launches, the Commission considers it unlikely
that the parties would be able to maintain a dominant
market position in the near future. For the purposes of
this decision, however, the Commission notes that the
overlap and high market share will persist at least until
2003 but, due to the possibility of extending the sales
period by up to 18 months, might persist even longer.

(380) As regards Germany, the total market amounted to
EUR [...] million in 2000. The market is expected to

(385)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for grapes in Germany.

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(h) Ornamental plants insecticides

Italian market for ornamental insecticides. The parties
have therefore estimated Syngenta’s market share to
increase to [20 to 30] %.

(386)

The total market value for ornamental and flower
insecticides was EUR 24 million in 2000. On this EEA-
wide market, the parties would become the market
leader with [30 to 40] % market share (Bayer: [20 to
30] %, ACS: [10 to 20] %). The largest competitor is
Syngenta ([30 to 40] %), followed by BASF ([10 to
20] %) and Du Pont
([0 to 10] %). The foliar
applications is the larger of the two segments (EUR [...]
million). On this market, the parties would have [20 to
30] % (Bayer: [10 to 20] %, ACS: [10 to 20] %). The
parties would become the strongest competitor in
terms of market share in soil applications with [80 to
90] % (Bayer: [40 to 50] %, ACS: [30 to 40] %).

(387) No competition concerns would arise in foliar appli-
cations. As regards soil applications, the parties would
become the strongest player in Italy ([90 to 100] %).

(388)

In Italy, where the total market was EUR 0,5 million in
2000, the parties would have [90 to 100] % of the
market (Bayer: [10 to 20] %, ACS: [70 to 80] %)
according to their own estimation. The parties expect
to maintain this market position also in the near future.
Syngenta and Du Pont each have market shares around
[0 to 10] %.

(392)

The Commission notes that the total sales of Aldicarb
were EUR [...] in ornamental insecticides, while they
were EUR [...] in potatoes, [...] in vegetables and EUR
[...] in tobacco. As will be discussed below, the parties’
market share is considerably higher in vegetables
(almost [90 to 100] % of the reported sales) than what
they have estimated. Therefore, given that the sales
of Aldicarb in ornamentals and vegetables represent
almost [70 to 80] % of all sales, the strong market
position in ornamentals is likely to have an effect
on the pricing decisions. The Commission therefore
considers that the transaction will lead to an appreci-
able change of market structure.

(393)

[Confidential
information concerning the product
launches of the competitors]. The parties would still
retain their dominant position in chewing pests, which
are the main soil dwelling pests.

(394)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for ornamental plants in Italy.

(389)

[Confidential information concerning the market pos-
ition of the competitors]. The market position of the
parties therefore appears to be closer to [70 to
80] % [confidential information concerning the market
position of the competitors].

(i)

Potato insecticides

(390) On this market, ACS sells only Aldicarb, marketed
under the brand Temik. Bayer generates more than [70
to 80] % of its turnover with Fenamiphos, sold under
the brand name Nemacur GR.

(395)

EEA market

The
for potato insecticides was
EUR 55,4 million in 2000. Soil and foliar insecticides
each account for about half of the turnover.

(391)

The parties have argued that their combined market
share does not enable them to determine the prices of
its products according to the competitive situation in
the ornamental market. ACS generates all of its turn-
over in this market with Aldicarb, marketed under the
brand Temik. Only [30 to 40] % of the turnover
generated with this product in Italy can be allocated to
the market
insecticides while the
product is also used in potatoes, vegetables, tobacco
and other crops. Likewise, the parties have argued that
Bayer’s main product, Fenamiphos, has its main market
in vegetables rather than in flowers and ornamentals.
The parties have argued further that Syngenta has
recently launched its new product Fosthiazate onto the

for ornamental

(396)

The parties would become the market leader in the
overall EEA-wide market ([50 to 60] %), followed most
importantly by Syngenta ([10 to 20] %), Du Pont ([10
to 20] %) and BASF ([0 to 10] %). The parties
would be the strongest player also in soil and foliar
applications: in soil applications, they would account
for [60 to 70] % of the market (Bayer: [0 to 10] %,
ACS: [50 to 60] %). On this market, Du Pont is
the largest competitor with [20 to 30] %. In foliar
applications, the parties would account for [40 to
50] % of the market (Bayer: [20 to 30] %, ACS: [10 to
20] %), followed by Syngenta ([30 to 40] %) and BASF
([0 to 10] %).

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F o l i a r i n s e c t i c i d e s

(397)

In foliar applications, the parties would reach high
combined market shares in Portugal ([60 to 70] %) and
Spain ([40 to 50] %). The total market in Portugal was
about EUR [...] million. The parties’ combined market
share is according to their own estimate [60 to 70] %
(Bayer: [40 to 50] %, ACS: [20 to 30] %). At present,
leading competitors include Syngenta ([10 to 20] %),
BASF ([0 to 10] %) and a number of generic companies,
accounting for a combined market share of [20 to
30] %.

(398)

[Confidential information concerning the market pos-
ition of the competitors].

(399)

(400)

The parties have submitted that all their products on
this market are targeted against chewing insects. As
regards the chewing insects segment, the parties have
estimated their market position to be [60 to 70] %.
[Confidential information concerning the sales of a
competitor].

Bayer generates about [70 to 80] % of its turnover in
this market with Bacillus Thuringenses which is a third
party product supplied by [...] and marketed under the
brand name Biotrata. Bayer’s second main product in
the foliar segment is Azinphos-Methyl (Gusathion-M),
supplied to Bayer by [...]. Bayer also sells on this market
Imidacloprid (Confidor) and Beta-Cyfluthrin. ACS gen-
erates most of its sales with Deltamethrin sold in
mixtures with other active ingredients and as a straight
product. ACS also sells Lindane (supplied by [...]),
Chlorfenvinphos (supplied by [...]) and Chlorpyrifos
(supplied by Dow). Lindane and Chlorfenvinphon,
accounting for about [30-40 %] of ACS’s sales on this
market, will not be re-registered. The parties have
estimated that their market share will fall to [50 to
60] % by 2004.

(401)

The parties have argued that no competition concerns
would arise on this market. They claim that Delta-
methrin is subject to competition from generics and
from other pyrethroids, including Syngenta’s Lambda-
Cyhalothrin and BASF’s Alpha-Cypermethrin. They
have, however, not projected any notable market share
increase for these products and, as indicated above,
expect their own market position to remain strong
also in the near future.

(402)

The parties have contended that Bayer’s neonicotinoid
Imidacloprid will
face vigorous competition from
Nippon Soda’s Acetamiprid. ACS, who will distribute
infor-
Acetamiprid, has indicated that [confidential

mation of ACS]. The parties have submitted that
Du Pont will
launch its product Indoxacarb in the
Portuguese market by 2002. [Confidential information
concerning the product launches of the competitors].

(403) As concerns the sucking insects segment, [confidential
information concerning a competing pipeline prod-
uct]. As regards chewing insects, the Commission
considers that the parties position will remain strong
also in the near future. Most particularly, the operation
would bring together the parties’ pyrethroids: Delta-
methrin and Beta-Cyfluthrin. Third parties have sug-
gested that these could be used succesfully in rotation
programmes. In view that Imidacloprid controls also
some chewing insects, the combination of the three
products would strengthen the parties’ position in the
chewing insects segment.

(404)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for potatoes in the Portugal.

(405)

Finally, in Spain (total market value EUR [..] million),
the parties’ combined market share is [40 to 50] %
(Bayer: [20 to 30] %, ACS: [10 to 20] %) according to
their own estimation. Syngenta accounts for [20 to
30] % of the market and BASF [0 to 10] %. A number
of generic suppliers account for a combined market
share of [20 to 30] %. The parties have provided
information to support this.

(406)

[Confidential information concerning the market pos-
ition of the competitors]. Under this assumption, the
Commission considers that the parties’ market share is
likely to be slightly higher than what
they have
estimated, around [40 to 50] % [confidential infor-
mation concerning the market position of the competi-
tors].

(407)

The parties have estimated that their market position
in sucking insects would be [50 to 60] % and in
infor-
chewing insects [30 to 40] %. [Confidential
mation concerning the sales of a competitor]. On the
basis of the foregoing, the Commission considers that
the parties’ market position as estimated by them
appears to be correct.

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Official Journal of the European Union

15.4.2004

(408)

The parties are present in this market mainly with their
new generation insecticides: ACS generates its turnover
mainly with Fipronil (Regent), which corresponds to
[50-60 %] of ACS’s market share on this market, and
Bayer with Imidacloprid (Confidor), generating [20 to
30] % of Bayer’s market share of [20 to 30] %.

(412)

The investigation shows that there are no effective
substitutes for either Imidacloprid or Fipronil and,
therefore, the Commission does not consider that the
generic products which represent the older chemistry
classes, will provide effective competition against the
parties products either at present or in the near future.

(409)

The parties have argued that, even upon completion of
the transaction, the Spanish market remains competi-
tive, with a number of international and national
suppliers active on the market. The parties have argued
that a large number of local and generic suppliers sell
a range of products which are equally effective as the
products of Bayer and ACS. Therefore, the parties have
argued that in the case that the combined entity were
to attempt to increase prices compared to those of the
competing suppliers,
it would immediately lose its
market shares to the smaller suppliers.

(413)

The parties have argued that Imidacloprid will face
strong competition from the introduction of Nippon
Soda’s Acetamiprid. With regard to Acetamiprid, the
parties further expect competition not only from the
co-distributor of the product appointed by Nippon
Soda, but also from generic Acetamiprid which is
already on the market, and from Syngenta’s Thiame-
thoxam. According to the parties, both factors would
make any attempt of the new entity to raise prices for
Acetamiprid anti-competitively unsuccessful. Accord-
ing to the parties, Acetamiprid and generic forms of
the product will also compete with Fipronil and
infor-
Imidacloprid. Sales of Fipronil
mation of ACS].

[confidential

(410)

The Commission considers that, at present, the parties
have the most powerful insecticides on the market
which can be expected to increase sales in the near
future. As concerns Imidacloprid, the Commission
considers that Imidacloprid is already commanding
premium prices across the EEA and is, overall, the
leading insecticide in the EEA. The parties can therefore
price the product regardless of competition in all the
EEA markets. As regards Fipronil, the Commission
notes that Fipronil is used almost solely in this market
in Spain and, therefore, the pricing will be largely
determined on this market, where the parties will have
a commanding position.

(414)

[Confidential
launches of the competitors].

information concerning the product

(415)

The parties have provided information according to
which Chinese generic Acetamiprid is illegally smug-
gled from Morocco to Spain. In view of the illegal
status of these supplies and given the uncertainty
related to such supplies, the Commission does not
consider that such supplies will provide efficient com-
petition on the market [confidential information of
ACS].

(411) As noted above, third parties have indicated that by
combining Imidacloprid and Fipronil in the parties’
portfolio, the pest spectrum covered with new chemis-
tries is extended and completed. Both compounds
provide high effectivity and secure control of the key
pest (Colorado potato beetle) and offer a new mode of
action capable to break existing resistance against other
chemical classes. In this respect, the parties’ possibilities
for offering technically superior treatment programmes
would be unique and unmatched by any competitor.
In addition, because of the target pest overlap and the
different mode of action of Imidacloprid and Fipronil
there are powerful opportunities for resistance man-
agement by rotation between both products.

(416)

The transaction will combine two leading chemistries
on the market, Imidacloprid and Fipronil. In addition,
the operation will bring together strong pyrethroids
Cyfluthrin, Beta-Cyfluthrin and Deltamethrin. None of
the competitors can match this unique product offering
which will give the parties new possibilities for offering
competitive spraying programmes for resistance man-
agement.

(417)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for potatoes in Spain.

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L 107/47

S o i l i n s e c t i c i d e s

(424)

For the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for potatoes in Greece.

(418) As regards soil insecticides for potatoes, the parties
would attain very strong market shares in Greece ([60
to 70] %) and Portugal ([70 to 80] %).

(419)

The Greek total market was EUR [...] million in 2000.
The parties’ combined market share amounts to [60 to
70] % (Bayer: [10 to 20] %, ACS: [50 to 60] %)
according to their own estimation. Syngenta ([10 to
20] %), DuPont ([0 to 10] %) and BASF ([0 to 10] %)
are the largest competitors.

(420)

[Confidential information concerning the market pos-
ition of the competitors]. The Commission considers
on the basis of these figures that the market position
of the parties is between [60 to 70] % and [70 to
80] %.

(421) ACS generates its turnover predominantly with its
products Aldicarb and Ethoprophos. Bayer generates
most of its turnover in the potato segment in Greece
with Fenamiphos and Carbofuran (supplied to Bayer
by [...]).

(422)

The parties have argued that the proposed transaction
will not result in a dominant market position of the
newly merged entity. The parties have submitted that
due to the divestment of Chlormephos to [...], ACS’s
sales will decline. Another ACS product, [...]. As a
result, the parties have argued, the sales of this product
will decline by more than [50 to 60] % (from present
[20 to 30] % to [10 to 20] %). The parties have also
argued that Syngenta is launching Fosthiazate onto the
Greek market. The parties have estimated Syngenta’s
market share to reach [20 to 30] % at peak sales of
said product. Finally, competition is expected from
FMC’s Cadusaphos, which is said to be very effective
for the control of nematodes. For these reasons, the
parties expect their market share to decline to [40 to
50] %.

(423) As regards the parties’ submission that Syngenta and
launch new products onto the market,
FMC will
[confidential
information concerning a competing
product]. The Commission notes that Fosthiazate is an
organophosphate and the use of the products from
this chemical class is expected to decrease in the future.
In addition, [confidential
information of ACS] the
parties will be able to largely defend their market
position in the near future.

(425)

In Portugal, the market value was EUR [...] million in
the parties
2000. The combined market share of
amounts to [70 to 80] % (Bayer: [60 to 70] %, ACS:
[10 to 20] %) according to their own estimation. Local
suppliers account for the rest of the market, some [20
to 30] %.

(426)

[Confidential
launches of the competitors].

information concerning the product

(427) ACS’s market share is derived from Chlormephos
(marketed under the brand Dotan) and the third party
product Carbofuran. Bayer’s turnover is generated with
Fenamiphos (sold under the brand name Nemacur).

(428) ACS’s Chlormephos has been divested to [...]. The
parties have submitted that Carbofuran has been
supplied to ACS by [...]. The parties expect [...] to
discontinue the supply of Carbofuran. The parties have
argued further that Fenamiphos is expected to be
challenged by the introduction of Syngenta’s Fosthiaza-
te and FMC’s Cadusafos. The parties have forecast their
market share to decrease to [30 to 40] % by 2004.
Finally, the parties have argued that [60 to 70] %
of the turnover generated with Carbofuran in the
Portuguese market can be allocated to maize. In the
market for maize insecticides, the parties’ combined
market share only amounts to [0 to 10] %. For this
reason, the parties have argued that the price for
Carbofuran-based product Furadan is determined in a
market that is highly competitive and any discrimi-
nation or abusive pricing towards growers of potatoes
would not be successful.

(429)

The parties have not provided any evidence that
the supply of Carbofuran will be discontinued. The
Commission also notes that as regards the pricing of
Carbofuran, the parties’ current sales in maize are only
EUR [...] while they are EUR [...] in potatoes. Even
thought the conditions of competition differ on these
two markets,
the
almost equal sales in the potatoes market has an
effect on the pricing of the product. Following the
transaction, the parties could have an incentive to
increase the price on the basis of the strong position in
the potato market and generate higher sales revenues
there.

the Commission considers that

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(430) As regards competing product launches, [confidential
information concerning a competing product]. The
Commission considers that the parties will be able to
maintain their market share at a high level considering
that [confidential information of ACS]. In the absence
of strong competing products, the Commission has
reached the conclusion that the proposed transaction
will create or strengthen a dominant position on the
market for soil insecticides for potatoes in Portugal.

(j) Rice insecticides

(431) With an EEA-wide turnover of only EUR 4,1 million,
the market for rice insecticides is small. EUR [...]
million of the total market was generate by foliar
insecticides. On the total EEA-wide market, the parties
would have [30 to 40] % market share (Bayer: [0 to
10] %, ACS: [30 to 40] %). They would have [40 to
50] % in the foliar segment (Bayer: [0 to 10] %, ACS:
[30 to 40] %) but in the soil applications the parties’
market presence would be below [0 to 10] % All the
other multinational companies have market shares
below [0 to 10] % in all segments.

(432)

Sales of rice insecticides are generated only in four
Member States, namely Greece, Italy, Portugal and
Spain. The parties’ activities overlap only in Greece and
Portugal. Competition would be negatively affected in
Portugal.

(433) As in Greece, with a market value of only EUR [...]
million, the Portuguese market for foliar insecticides to
be used on rice is also extremely small. The parties’ are
the only producers of rice foliar insecticides on this
market (Bayer: [10 to 20] %, ACS: [80 to 90] %).

(434)

[Confidential information concerning the sales of the
competitors].

(435)

Bayer generates all
its sales with Metasystox-R, a
formulated product based on the active ingredient
Oxydemeton-Methyl. The parties have argued that
Oxydemeton-Methyl will be subject to generic compe-
tition by United Phosphorus. ACS sells only one
product, Chlorfenvinphos, which is supplied by BASF.
Chlorfenvinphos will not be re-registered. Out of this
reason, the parties expect the market share of the
combined entity to be less than [20 to 30] % in 2004.

(436)

The Commission concludes that while the market
share of the parties will most likely decrease drastically
due to the phasing out of Oxydemeton-Methyl, they
will retain their dominant market position at least
until 2003. [Confidential information concerning the
product launches of the competitors].

(437)

For the above reasons, the Commission has reached
the proposed transaction will
the conclusion that
create or strengthen a dominant position on the market
for foliar insecticides for rice in Portugal.

(k) Tobacco insecticides

(438)

The overall EEA-wide market for tobacco insecticides
amounted to EUR 13,7 million in 2000. On this
market, the parties would become the clear market
leader in both the overall market and also in the foliar
and soil segments. The parties market share in the total
market is [50 to 60] % (Bayer: [40 to 50] %, ACS: [0
to 10] %), followed by BASF ([10 to 20] %) and
Syngenta ([0 to 10] %). In the foliar segment, their
market share is [60 to 70] %, with a small overlap
from ACS ([0 to 10] %). All other competitors have
market shares below [10 to 20] %. In soil applications,
the market share of the parties is [30 to 40] % (Bayer:
[20 to 30] %, ACS: [10 to 20] %). BASF is the strongest
competitor with [20 to 30] %.

(439)

Bayer’s products are mainly based on the active
ingredients Imidacloprid, Methamidophos and Fenami-
phos. ACS’s main product is Deltamethrin.

F o l i a r i n s e c t i c i d e s

(440)

In the foliar applications, the parties would attain
relatively strong market positions in Greece ([50 to
60] %) and Italy ([60 to 70] %).

(441) Greece is the largest single market for tobacco foliar
insecticides (market value EUR [...] million in 2000).
On this market, the parties’ combined market share
amounts to [50 to 60] % (Bayer: [50 to 60] %, ACS: [0
to 10] %). Syngenta ([10 to 20] %) and BASF ([0 to
10] %) are the largest multinational competitors. Local
companies account for a combined market share of
more than [20 to 30] %.

(442)

[Confidential information concerning the market pos-
ition of the competitors]. The market position of the
parties as estimated by themselves appears to be
correct. [Confidential information concerning the mar-
ket position of the competitors].

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L 107/49

(443)

The parties have indicated that they have no sales in
the chewing insects segment and that their market
position in the sucking insects segment would be [40
to 50] %. [Confidential assessment of the sales of the
competitors] the Commission considers that it is likely
that the market position of the parties is not materially
different in the sucking and chewing insects segments
than what it is on the overall market.

(448)

the
The Commission agrees with the parties that
addition of ACS’s [0 to 10] % of the market share
generated by Methamidophos does not in all likelihood
have any appreciable effect on the present market
structure, where Bayer has been able to price Imidaclo-
prid so far independently from other market partici-
pants. The Commission considers, however, that com-
bining Imidacloprid and Acetamiprid would signifi-
cantly strengthen the parties’ existing market position.

(444)

Bayer’s main product on this market is Imidacloprid
(Confidor), which accounts for [40 to 50] % of the
market share on this market. Bayer also supplies most
importantly Methamidophos (Tamaron), [...] by [...].
ACS is supplying also Methamidophos ([...]) and laun-
ched in 2001 Acetamiprid on this market. These sales
are not reflected in the parties’ market share estimates.

(445)

The parties have argued that since ACS adds only a
very small percentage to Bayer’s market share, the
proposed concentration does not lead to any change
in the current market structure. In this respect, the
parties have contended that the supply agreement of
Methamidophos will most likely be terminated after
completion of the merger and that Methamidophos is
in the process of being withdrawn from the market.
The parties have also argued that Imidacloprid is only
covered by a process patent which is easy to circumvent
by applying a different production method, thereby
suggesting generic competition. Finally, the parties
have argued that the they will face strong competition
from the introduction of Nippon Soda’s Acetamiprid.
As a result, the parties have forecast their combined
market share to decrease to [40 to 50] % in 2004.

(446)

The Commission notes that Methamidophos has been
notified for re-registration. The parties have not pro-
vided any proof that the supply agreement of Methami-
dophos will be discontinued.

(447) As regards the parties’ assertion that it is easy to
circumvent a process patent, the investigation shows
that this is not the case and reduced patent protection
does not automatically result in new entry by a generic
producer. The Commission has no evidence that any
generic company is developing a generic form of
Imidacloprid to be launched on this market.

(449)

[Confidential
information concerning the product
launches of the competitors]. Moreover, in light of the
investigation, the combination of two neonicotinoids
and pyrethroids Cyfluthrin and Beta-Cyfluthrin would
create a unique product portfolio for resistance man-
agement purposes.

(450)

For the above reasons, the Commission has reached
the proposed transaction will
the conclusion that
create or strengthen a dominant position on the market
for foliar insecticides for tobacco in Greece.

(451)

The Italian market for foliar insecticides in tobacco
totalled EUR [...] million in 2000. The parties’ com-
bined market share is [60 to 70] % (Bayer: [60 to
70] %, ACS: [0 to 10] %) according to their own
estimations. The market share of Syngenta is [10 to
20] %, BASF [0 to 10] % and local suppliers [10 to
20] %.

(452)

[Confidential information concerning the market pos-
ition of the competitors]. Therefore, the parties’ esti-
mate of their high market share appears to be correct.
The parties have estimated that their market position
in sucking insects would be [70 to 80] %.

(453)

(454)

Bayer’s main product on this market is Imidacloprid
(Confidor SL), corresponding to [50 to 60] % of the
market share. ACS’s products are Deltamethrin (Decis,
Decis D, Decis Quick and Best) and Heptenophos
(Hostaquick) Heptenophos, which generates currently
less than [0 to 10] % of ACS’s market share, [...].

The parties have argued that their combined market
share does not give rise to concerns over market
dominance. The parties have argued that their com-
bined market share is expected to decrease to about
[40 to 50] % by 2004. They have further argued that
ACS’s market share will decline further to only [0 to
10] % and that the transaction will not result in any
substantial changes of the current market structure.

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Official Journal of the European Union

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(455)

The Commission considers that, despite the relatively
small increment of present market share, the trans-
actions would lead to a structural change of the market.
In particular, the Commission notes that [confidential
information of ACS [...] would put the parties in a
unique position vis-à-vis other competitors on the
market. Following the parties’ reply to the statement of
objections, the Commission has taken into consider-
ation that only [0 to 10] % of all Deltamethrin sold in
Italy is used on this market. The Commission has
further taken into account that also Imidacloprid is
used only to a very minor extent on this market ([0 to
10] % of all sales). Therefore, the Commission considers
that the prices of both of the products are determined
on other markets. As it is unlikely that the pricing
decisions of the products will be affected by the
transaction, the Commission considers that the struc-
tural change on the market will therefore derive from
[confidential information of ACS].

(461)

The parties have argued that all products sold by the
parties in the Spanish market for soil insecticides used
on tobacco have their main use in other crops. The
parties have contended that only [10 to 20] % of all
Fenamiphos sales are generated in the tobacco segment
and that the product is mainly applied on bananas and
vegetables. In both markets, the parties have submitted
that
they have significantly lower market shares.
Aldicarb is mainly used on citrus fruit, but other
applications include cotton, potatoes, fruits and nuts
and bananas. In all these markets, the parties have
submitted that they have much lower market shares.
Thus, the parties have argued that it would not be
possible for the combined entity to either price-
discriminate specifically towards growers of tobacco
or generally increase the prices of
their products
anti-competitively. The parties have also argued that
Syngenta will
launch Fosthiazate onto this market,
thereby increasing competition.

(456) None of the third parties have any neonicotinoids in
their portfolio and could not match this offer. This
could weaken the position of the competitors and
make potential new entry more difficult. [Confidential
information concerning the product launches of the
competitors].

(462)

(457)

For the above reasons, the Commission has reached
the conclusion that,
the [confidential
information of ACS], the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for tobacco in Italy.

in view of

S o i l i n s e c t i c i d e s

(458) As regards soil applications in Spain, the total market
amounted to EUR [...] million. The combined market
share of the parties is [70 to 80] % (Bayer: [20 to
30] %; ACS: [40 to 50] %) according to their own
estimate. FMC is the largest competitor with [10 to
20] % of the market, the remaining competitors have
market shares below [0 to 10] % each.

(459)

[Confidential information concerning the market pos-
ition of the competitors]. The parties’ high market
share therefore appears to be confirmed.

The Commission notes that Fenamiphos generates
higher sales in bananas (almost EUR [...] million) and
vegetables (EUR [...] million), as compared to tobacco
(EUR [...] million). However, given that the parties
would reach a dominant position in bananas following
the merger and considering that the largest part of the
sales are generated in this market, the Commission
considers it not unlikely that a strong position also in
tobacco could give incentives to increase the price of
the product.

(463) As regards Aldicarb, the Commission notes that the
sales of this product are the highest in citrus (EUR [...]
million) and in tobacco (EUR [...] million). In bananas,
cotton, potato, the sales are some EUR [...] in each
segment. As above, the Commission considers that,
following the strong market position in tobacco and
bananas, the parties could find incentives to increase
the price of Aldicarb for soil applications and generate
more income in the two segments, which account
for a large chunk of all sales of Aldicarb for soil
applications.

(464)

[Confidential
launches of the competitors].

information concerning the product

(460)

Bayer’s main product on this market is Fenamiphos
(Nemacur). ACS sells Aldicarb (Temik) and Ethopro-
phos (Mocap).

(465)

For the foregoing reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for tobacco in Spain.

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L 107/51

(l) Vegetable insecticides

(472)

(466)

(467)

(468)

(469)

(470)

(471)

Insecticides for vegetables constitute one the largest
insecticides markets in the EEA. In 2000, the total
EEA-wide market amounted to EUR 149,6 million.
Following the operation, the parties would become the
leading company in both the overall EEA-wide market
and also in the foliar and soil segments. In the overall
market, the parties would have [40 to 50] % market
share (Bayer: [20 to 30] %, ACS: [20 to 30] %),
followed by the largest competitor Syngenta ([20 to
30] %).

The foliar segment accounted for the bulk of the
turnover in the overall market: EUR [...] million. On
this market, the parties would have [40 to 50] %
market share (Bayer: [20 to 30] %, ACS: [20 to 30] %).
Syngenta is the largest competitor with [20 to 30] %
of the market. As regards soil applications, the parties
would have [40 to 50] % of the market (Bayer: [20 to
30] %, ACS: [20 to 30] %). The largest competitor in
this segment is Du Pont ([10 to 20] %), followed by
Syngenta ([10 to 20] %).

F o l i a r i n s e c t i c i d e s

The parties would attain very high market shares at the
national level in the foliar segment in France ([70 to
80] %), Portugal ([80 to 90] %), Spain ([40 to 50] %)
and Italy ([30 to 40] %). As concerns the market
situation in France, the Commission found in Case
M.1806 — AstraZeneca/Novartis that Syngenta would
attain dominant position of the French market for
vegetable insecticides for foliar application. Conse-
quently, Syngenta agreed to grant an exclusive licence
for Pirimicarb. [Confidential
information about the
licensee].

The French market for foliar applications amounted to
EUR [...] million in 2000. The parties’ combined
market share on this market is [70 to 80] % (Bayer:
[10 to 20] %, ACS: [60 to 70] %) according to
their own estimation in the Notification. The largest
competitor is Syngenta ([10 to 20] %) and generic
companies have a combined market share of [0 to
10] %.

[Confidential information concerning the market pos-
ition of the competitors]. The parties have indicated
that their market position in sucking insects would be
[60 to 70] %.

Both parties sell several products on this market. Bayer
generates most of its sales with Imidacloprid (sold
under the brand Confidor), which accounts for [10 to
20] % of the market. The main products sold by ACS
for combating foliar insects are Deltamethrin (Decis),
Phosalone (Zolone) and the third party product Para-
thion-Ethyl (Pacol), [...].

The parties have submitted that a number of new
products will be launched on the market: Syngenta’s
Thiamethoxam and Pymetrozine, Dow’s Spinosad and
Du Pont’s Indoxacarb. The parties have submitted that,
given the new competing products and the loss of
several of their products in the re-registration process,
their combined market share will decrease to [40 to
50] % by 2004.

(473)

[Confidential
information concerning the product
launches of the competitors], none of the new products
will be able to compete with neonicotinoids in the
sucking insects segment.

(474)

[...]. [confidential information of ACS]. Imidacloprid is
registered in lettuce, melons and cauliflower.

(475)

[...].

(476)

The Commission considers, however, that with the
sales of Imidacloprid which have been forecast to
increase, the parties will significantly strengthen their
position in this market by adding [...] neonicotinoids
into their portfolio. The parties would be the only ones
with such a strong portfolio. [...], the sales will remain
within the same group. Moreover, the parties would,
unlike the others, be able to offer an extensive portfolio
of the leading chemistries for IPM programmes for
rotation. Therefore, the sales of the parties’ all neonico-
tinoids are likely to increase Moreover, they could
combine this portfolio with their older chemistries for
the same purpose. The parties’ portfolio consists of a
leading pyrethroid (Deltamethrin) and a number of
other products from different chemical classes. None
of the third parties would be able to match the parties’
product offer [confidential assessment concerning a
competing pipeline product].

(477)

For the foregoing reasons, the Commission has reached
the proposed transaction will
the conclusion that
create or strengthen a dominant position on the market
for foliar insecticides for vegetables in France.

(478)

Portugal (market value EUR [...]) is one of the smallest
markets for vegetable insecticides. The parties’ com-
bined market share in that market amounts to [80 to
90] % (Bayer: [20 to 30] %, ACS: [60 to 70] %)
according to their own estimate. Syngenta is the only
multinational competitor on the market with [0 to
10] % market share. Generic suppliers account for a
combined market share of [10 to 20] %.

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Official Journal of the European Union

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(479)

[Confidential information concerning the market pos-
ition of the competitors]. On this market, the parties’
market share is some [60 to 70] %. [Confidential
information concerning the market position of the
competitors].

(486)

information concerning a competing
[Confidential
pipeline product] the Commission notes that [...] where
[confidential
information concerning a competing
pipeline product] has been submitted for registration
in Portugal is more limited than that of [...]. As the
parties themselves have pointed out, in all European
countries vegetable farmers usually grow a range of
vegetable types. The farmers therefore need to protect
several kinds of vegetables. To serve best the needs of
the ultimate customer and the be successful on the
market, it is in the crop protection companies’ own
interest to market products that can be used on several
vegetable crops.
the Commission
considers that with already one strong neonicotinoid
in the portfolio, the addition of [...] with a broader
crop spectrum will strengthen the parties’ market
position in the sucking pests segment considerably.

In view of

this,

(487)

For largely the same reasons as concern the French
market, the Commission concerns that the high market
share of the parties can be maintained also in the
future. More particularly, the parties would be the only
ones with [...] neonicotinoids, allowing the marketing
of IPM programmes unmatched by competitors. Also,
the combination of neonicotinoids with Deltamethrin,
Beta-Cyfluthrin and products form other chemistry
classes will allow the parties to offer unique IPM
programmes for rotation and resistance management.
The possibility to offer these products in an attractive
packages will affect negatively the market position of
competitors, who cannot match the parties’ offer.
Market entry will also become more difficult.

(488) As regards the parties’ submission that in the Portugue-
se vegetable markets, [...], the Commission notes that
the effect will be limited and, in any event, the overall
sales will remain within the same company.

(489)

For the foregoing reasons, the Commission has reached
the proposed transaction will
the conclusion that
create or strengthen a dominant position on the market
for foliar insecticides for vegetables in Portugal.

(480)

The parties have estimated that their market share in
sucking pests would be [80 to 90] % and in chewing
pests [70 to 80] %. [Confidential information concern-
ing the market position of the competitors].

(481)

(482)

Bayer’s main product on the market is Imidacloprid
(Confidor). Bayer sells also pyrethroid Beta-Cyfluthrin
(Bulldock SC) and three other products. ACS sells
most importantly Deltamethrin (Decis) and Endosulfan
(Thiodan). It has also nine other products on the
market.

The parties have argued that, despite the high market
share of the combined entity, the proposed transaction
will not lead to a dominant market position. They have
argued that due to the introduction of Du Pont’s
Indoxacarb and Dow’s Spinosad, the parties’ combined
market share is expected to decline. The parties have
also argued that most of the supply agreements with
third parties will be discontinued upon completion of
the notified transaction. The parties have further
contended that ACS’s Formetanate, accounting for [0
to 10] % market share in 2000, has been divested to
[...], and re-registration of [...]. As a result, the parties
have submitted that their combined sales will decrease
by more than [10 to 20] % in the immediate future.
Finally, the parties have submitted [...].

(483)

The Commission has no evidence that any of the
parties’ supply agreements will be discontinued in
the future. As regards Endosulfan, the parties have
corrected their statement on Endosulfan at a later stage
of the proceedings and submitted that Endosulfan will
be registered for [...].

(484) As regards competing pipeline products, the Com-
mission has verified that [confidential
information
concerning the product launches of the competitors]
[...] and in the light of the investigation, the Com-
mission considers that the new, competing product
launches are likely to maintain competition in the
chewing insecticides segment.

(485) As regards the sucking insects segments, the Com-
mission notes that [...]. [Confidential information of
ACS] (19).

(490)

(19) [...].

The Spanish market amounted to EUR [...] million in
2000. The combined market share of the parties is [40
to 50] % (Bayer: [10 to 20] %, ACS: [20 to 30] %)
according to their own estimation. The leading com-
petitor is Syngenta with a market share of [30 to 40] %.
Generic suppliers account for a combined market share
of [20 to 30] %.

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L 107/53

(491)

[Confidential information concerning the market pos-
ition of the competitors]. The parties’ market share
could thus be somewhat higher than what they have
estimated.

(497) As regards new product launches, the Commission has
verified that [confidential information concerning the
product launches of the competitors] will target also
the sucking pests. [Confidential information concern-
ing a competing pipeline product].

(492)

The parties have estimated that their market position
in sucking insects is [50 to 60] %. However, as
[confidential
information concerning the sales of a
competitor] and the parties generate [80 to 90] % of
their market share in sucking pests, the Commission
considers that the parties’ market position in sucking
insects could be higher.

(493)

Bayer generates most of its turnover in Spain with
Imidacloprid ([10 to 20] % of Bayer’s market share of
[10 to 20] %), marketed under the brand Confidor.
Bayer also sells pyrethroids Cyfluthrin (Baythroid SL)
and Beta-Cyfluthrin (Bulldog SD), and a large number
of other products ([...]).

(494) Also ACS sells a large number of products on this
market: [...]. ACS’s products include pyrethroids Delta-
methrin, Acrinathrin and Cypermethrin. ACS also sells
Fipronil on this market, which has a relatively small
market share. ACS generated in 2000 about [20 to
30] % of its turnover with Formetanate (Dicarzol),
which has been divested to [...], thus resulting in a
decrease of ACS’s market share (in 2000, the product
accounted for [0 to 10] % of ACS’s 2000 market
share).

(495)

The parties have argued that their combined market
share will fall drastically in the near future due to
phasing out of several products, discontinuance of
third party products and due to the divestment of
Formetanate. The parties have also submitted that [...].
For these reasons and because the parties expect Dow
and Du Pont to enter the Spanish market with their
new products Spinosad and Indoxacarb, the parties
expect their combined market share to decline to [20
to 30] % in 2004.

(496)

The Commission notes first that the parties have not
supplied evidence that the distribution of any of the
third party products will be discontinued. As to the
argument regarding phasing out products from the
parties’ portfolio, the Commission notes that the re-
registration will affect also all the competitors. Finally,
[...].

(498)

[...] (20). [Confidential information of ACS]. Imidaclo-
prid is registered in [...]. [Confidential information of
ACS].

(499) As Bayer will have [...] neonicotinoids in its portfolio,
the market position of the parties will be significantly
strengthened for the same reasons as in the French and
Portuguese markets.

(500)

(501)

For the foregoing reasons, not withstanding the fact
that [confidential information concerning the market
position of a competitor], the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for vegetables in Spain.

The confidential sales data obtained during the investi-
gation show that a dominant position would also be
created in Italy. The Italian market amounted to EUR
[...] million in 2000. On this market, the parties have
submitted that they have [30 to 40] % market share
(Bayer: [20 to 30] %, ACS: [10 to 20] %). The parties
have estimated that Syngenta is the largest competitor
with [20 to 30] % of the market and BASF has [0 to
10] %. The parties have contended that a large number
of generic suppliers, accounting for a combined market
share of [20 to 30] %. The parties have estimated that
their market position in sucking pests is somewhat
higher, [40 to 50] %.

(502)

[Confidential information concerning the market pos-
ition of the competitors].

(503)

Bayer sells altogether [...] products. Bayer generates
most of its turnover with Imidacloprid sold under the
brand name Confidor. Bayer’s second best product is
pyrethroid Cyfluthrin (Baythroid EW). ACS’s main
product on this market is Deltamethrin. ACS also sells
pyrethroid Acrinathrin and amidine Amitraz and some
other products.

(20) [...].

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15.4.2004

(504)

The Commission considers that the transaction will
lead to a creation of a dominant position in Italy for
the same reasons as in France, Portugal and Spain. [...]
[confidential information of ACS]. Imidacloprid has
already a strong position and, in combination with
[...], it will strengthen the parties position both on the
overall market and in the sucking insects segment.
Combinations of neonicotinoids and other chemical
classes, most notably pyrethroids, will give the parties
a unique position in resistance management. None of
the new competing product launches will be able to
offset the market power of the new company.

(505)

For the foregoing reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for foliar insecticides for vegetables in Italy.

S o i l i n s e c t i c i d e s

(511)

The Commission notes first that it has no evidence that
[...]. The Commission further notes that [confidential
information concerning the product launches of the
competitors].

(512)

Finally, the Commission considers that the operation
will strengthen the incentives to raise the price of the
parties’ products. Namely, Fenamiphos accounts for
the large majority of Bayer’s sales on this market (EUR
[...] million) and also in the potato market (EUR [...]
million). Ethoprophos is ACS’s only product on this
market. In the potato market where it is mostly used,
it accounts for about [40 to 50] % of ACS’s sales on
that market ([...] million). Following the operation, the
Commission considers that parties’ combined high
sales in both the vegetables and the potato markets
and the high market share attained on these markets
as a result of this operation could lead to an increase
of the price of the two products.

(506)

The parties would achieve high market shares in the
soil applications in Greece ([40 to 50] %), and Portugal
([70 to 80] %).

(513)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for vegetables in Greece.

(507)

In Greece (total market value EUR [...] million), the
parties’ combined market share amounts to [40 to
50] % (Bayer: [30 to 40] %, ACS: [0 to 10] %). Leading
competitors are DuPont ([20 to 30] %), Syngenta ([10
to 20] %) and BASF ([10 to 20] %).

(514)

Finally, in Portugal (market value EUR [...] million), the
parties’ market share is [70 to 80] % (Bayer: [30 to
40] %, ACS: [40 to 50] %) according to their own
estimation. Generic suppliers account for the remain-
ing part of the market ([20 to 30] %).

(508)

[Confidential information concerning the market pos-
ition of a competitor]. On the basis of the total
registered sales on this market, the parties’ market
position would be [70 to 80] % [confidential infor-
mation concerning the market position of a com-
petitor].

(515)

[Confidential information concerning the market pos-
ition of competitors]. Even if assuming strong generic
competition ([20 to 30] %), the parties’ market position
would be at least around [60 to 70] %.

(509)

Bayer generates most of its turnover with Fenamiphos
(Nemacur). Imidacloprid, which is only used in this
crop, generates on this market only de minimis sales.
ACS is active on this market with its product Ethopro-
phos (Mocap).

(516)

Bayer generates all of its turnover with Fenamiphos
(Nemacur). ACS is active on this market with Ethopro-
phos (Mocap).

(510)

The parties have submitted that, [...]. Finally,
the
parties have argued that their position will further be
weakened by the introduction of Syngenta’s Fosthiazate
on the market. As a result, the parties have argued that
their combined market share will decrease to [30 to
40] % in 2004 and that the Greek market for vegetable
soil insecticides remains unconcentrated.

(517)

The parties have argued that the sales of Ethoprophos
are likely to decrease in the next years. Bayer’s sales of
Fenamiphos will also decline due to competition from
less toxic products. The parties have also submitted
that Syngenta will enter the market with Fosthiazate.
Finally, the parties have argued that generic competi-
tors are expected to strengthen their presence in the
future and increasing their market share.

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Official Journal of the European Union

L 107/55

(518)

The Commission notes that all products on the market
represent older chemistries, including Syngenta’s Fos-
thiazate [confidential information concerning a com-
peting product]. Therefore, the Commission does not
believe that especially generic producers would take
the sales from the parties.

(524) — in foliar insecticides for beets (France and Greece),
cereals (Italy and Portugal), citrus fruit (Portugal),
cotton (Greece), fruits and nuts (Belgium, Den-
mark, Germany, Greece and Portugal), grapes
(Germany), potatoes (Portugal and Spain), rice
(Portugal), tobacco (Greece and Italy) and veg-
etables (France, Portugal, Spain and Italy), and

(519)

For all the above reasons, the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the market
for soil insecticides for vegetables in Portugal.

(525) — in soil

insecticides for bananas (Spain), beets
(Belgium, France, the United Kingdom and Italy),
ornamental plants (Italy), potatoes (Greece and
Portugal), tobacco (Spain) and vegetables (Greece
and Portugal).

Future launches of Acetamiprid

B. MOLLUSCICIDES

(520)

The Commission notes that
concerning Acetamiprid [...].

the registration plans

B.1. Relevant product markets

General conclusion on insecticides

(521)

The investigation shows that a dominant position
would be created in a number of markets through a
horizontal overlap, both in the foliar and the soil
markets. Following the operation, the parties would
have a wide range of products representing older
chemistries. In addition, the transaction would add
to the Bayer’s product offering ACS’s neonicotinoid
Acetamiprid and pyrazole Fipronil
(and Ethiprole).
Both products would strengthen and extend Bayer’s
existing portfolio of new chemistries. The parties
would have by far the widest range of neonicotinoids
and they would be the only ones with the pyrazole
chemistry. They would have by far the strongest
product range in the latest chemistries to treat insecti-
cides from seed treatment to soil and foliar application.

(522)

The parties could leverage their market power via
resistance management programmes and discount
structures to distributors, who would have to stock the
parties’ neonicotinoids and Fipronil. No competitor
could match this product offer. The transaction could
therefore lead to price increases and foreclosing the
market from competitors, especially generic competi-
tors.

(523)

Therefore, the Commission considers that the oper-
ation as notified would create or strengthen a dominant
position:

(526)

Both Bayer and ACS are active in the production and
sale of molluscicides (slug pellets), which are products
designed to combat snails and other types of molluscs.
Molluscicides generally consist of chemically treated
baits which are spread onto the soil.

(527) Molluscicides cannot be substituted by other insecti-
cides and, therefore, form a separate product market.
The market investigation has confirmed that a break-
down of molluscicides by type of crop is not appropri-
ate since the formulation of molluscicides does not
vary according to the plants affected.

(528) Currently there are three main active ingredients
registered in the EEA for the control of molluscs:
Metaldehyde, Methiocarb, and Thiodicarb. A fourth
type of molluscicide based on the active ingredient
Fe(3)Phoospaat, which is under patent protection, has
been launched in the Netherlands, Denmark, and
Germany, and is under registration in Sweden, Italy,
Belgium and France.

(529) Metaldehyde, which is the older active ingredient, has
a paralysing mode of action on molluscs and is
produced by the Swiss-based company Lonza.
Fe(3)Phoospaat, which is produced by the German firm
Neudorff GMBH, acts in a way similar to Metaldehyde.
Methiocarb and Thiodicarb, by contrast, act as stomach
poisons and are produced by Bayer and ACS, respect-
ively. All these active ingredients, except Fe(3)Phoos-
paat, have been off-patent for a number of years. It
should be noted that, unlike Bayer and ACS, Lonza
does not manufacture molluscicides, but it simply sells
the active ingredient Metaldehyde in various Member
States to a number of formulators who manufacture
the final product under their own brands.

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(530) Molluscicides based on all the above active ingredients
appear to belong to the same product market. How-
ever, the investigation has shown that Bayer’s and
ACS’s products appear much more efficacious in areas
with particularly wet conditions, and that their price is
often much higher than the price of Metaldehyde-
based molluscicides.

(534)

ACS is not active and Bayer’s market share in 2000
was of only [10 to 20] %.

The investigation has shown that besides Bayer’s
Methiocarb-based molluscicide (sold under the brand
Mesorul) and ACS’s Thiodicarb-based molluscicide
(sold under the brand Skipper), the remaining market
shares in the various EEA member States, except for
France, are divided among a fragmented number of
national independent manufacturers that, based on the
active ingredient supplied by Lonza, produce more
economic, and often less efficacious, local brands of
Metaldehyde-based molluscicides. Only in the Nether-
lands, Germany, and Denmark, are some market shares
achieved by local formulators of Fe(3)Phoospaat-based
molluscicides.

(535) Historically, Metaldehyde based molluscicides have not
had the same rain fastness as Bayer’s and ACS’s
Methiocarb- and Thiodicarb-based products. Although
in certain national markets some local formulators
have optimised the degree of rain fastness of Metal-
dehyde-based molluscicides, each formulator uses his/
her own recipe and therefore rain fastness may vary
from country to country depending on the type
of
In
formulation and the manufacturing process.
countries with particularly wet conditions but very
small market size in terms of molluscicide usage,
Metaldehyde-based molluscicides did not have any
significant penetration.

(536) Market entry by means of molluscicides based on new
active ingredients is extremely difficult and resource-
intensive. The costs of R & D and EU registration can
exceed EUR 100 million and the take up to 10 years.
A new type of molluscicide based on the active
ingredient Fe(3)Phoospaat has been recently launched
in the Netherlands, Germany and Denmark. Regis-
tration is underway in Sweden, Italy, Belgium, and
France. No molluscicides based on new active ingredi-
ents are expected to be launched on the market for the
next four years.

(537) Contrary to the parties’ submissions, the investigation
has shown that neither Bayer nor ACS are concretely
faced with generic competition as regards Methiocarb
or Thiodicarb molluscicides. Although Methiocarb and
Thiodicarb have been off-patent since a number of
years ago, in fact, there are only two Asian generic
producers worldwide of such active ingredients: Ning-
bo Agro-Star Industrial, a Chinese generic producer of
Methiocarb, and Ceryung (formerly Jin Heung Fine
Chemical), a Korean generic producer of Thiodicarb.
None of these companies, however, currently supply
these active ingredients in Europe.

B.2. Competitive assessment

(a) Market conditions

(531)

(532)

(533)

The parties have high combined market shares in the
following countries: Belgium (Bayer: [10 to 20] %,
ACS: [80 to 90] %), France (Bayer: [20 to 30] %, ACS:
[10 to 20] %), Portugal (Bayer: [70 to 80] %, ACS: [0
to 10] %), the United Kingdom (Bayer: [30 to 40] %,
ACS: [0 to 10] %), Ireland (Bayer: [90 to 100] %, ACS:
[10 to 20] %) and the Netherlands (Bayer: [60 to 70] %,
ACS: [20 to 30] %). In the Netherlands, however, Bayer
has no longer a registration for the use of Methiocarb
in molluscicides, and it will therefore discontinue sales
of its molluscicides by [...] at the latest. Thus, in the
Netherlands no competition concerns arise as there
would be no horizontal overlap resulting from the
proposed transaction. Similarly, in France, no compe-
tition concerns arise from the proposed transaction as
the company De Sangosse is the market leader, with a
market share of about [...] % mostly achieved with its
Metaldehyde-based product Metarex RG.

Bayer is the only firm active in Sweden, Finland,
Iceland, with a market share of 100 %, while ACS is
the only firm active in Norway. In Norway, however,
no competition concerns arise from the proposed
transaction, as ACS’s monopolistic position is due to
that fact that national legislation has banned mollusci-
cides based on both Methiocarb and Metaldehyde since
a number of years ago.

In the remaining EEA countries no competition con-
cerns arise for the following reasons. In Austria, Bayer
achieved only a [0 to 10] % market share in 2000,
while ACS started to sell molluscicides only in 2001 in
very limited quantities. In Denmark, although Bayer
achieved a [50 to 60] % market share in the year 2000,
ACS is not active. In Germany the parties have a low
combined market share, as Bayer achieved in 2000 a
market share of [20 to 30] % while ACS achieved a
market share of only [0 to 10] %. In Greece Bayer is
not active and ACS’s sales of molluscicides have been
discontinued in 2000. In Italy the parties have a low
combined market share, as Bayer achieved in 2000 a
market share of [20 to 30] % while ACS achieved a
market share of only [0 to 10] %. Finally, in Spain,

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L 107/57

(538) Moreover, during the investigation, the parties admit-
ted that the European market for molluscicides is not
attractive for Asian generic producers because such
market is subject to extreme variations, it is unlikely to
grow significantly in the future and it is a commodity
market on which margins are too low. The parties
explained that, as the summer weather pattern is the
critical factor, it is impossible to reliably forecast the
size of the market more than about two months in
advance and that, since any producer of molluscicides
has to be prepared to carry large stock levels possibly
for several years, this is not the type of market that
appeals to generic producers.

(b) National markets raising competition con-

cerns

(539)

In the light of the above and for the reasons set out
below, the proposed transaction would lead to the
creation or strengthening of a dominant position in
the following national markets for molluscicides: the
United Kingdom, Belgium, Ireland, Portugal, Sweden,
Finland and Iceland.

(540)

In the United Kingdom, the parties’ combined market
share in 2000 amounted to [40 to 50] % (Bayer [30 to
40] %, ACS [0 to 10] %). Bayer would become the
market leader in the British market for molluscicides
upon completion of the transaction. The parties argue
that Lonza would remain the market leader with a
market share of about [50 to 60] %. As explained
above, however, Lonza is not a producer of mollusci-
cides, but only a producer of Metaldehyde, which it
supplies to national
independent manufacturers of
Metaldehyde-based molluscicides such as: De Sangosse,
Luxan, Chiltern Farm Chemicals, Doff Poortland, and
Clartex, with estimated markets shares of [10 to 20] %,
[0 to 10] %, [0 to 10] %, [0 to 10] %, and [0 to 10] %,
respectively. After the transaction, therefore, Bayer will
be confronted only with a fragmented number of small
British formulators often of lower quality molluscicid-
es, rather than with a strong competitor as the parties
have submitted.

(541) Moreover, it must be noted that Bayer’s and ACS’s
products are the top quality molluscicides sold in the
British market. According to the parties’ estimates, in
fact, the price of Bayer’s and ACS’s molluscicides in the
United Kingdom is of about [...]/ha and [Confidential
information of ACS], respectively, i.e. more than [60
to 70] % higher than the price of the low quality
Metaldehyde-based molluscicides sold in the United
Kingdom ([...]/ha). The only top quality Metaldehyde-

based molluscicide appears to be De Sangosse’s Me-
tarex.

(542)

The high price difference between Bayer’s and ACS’s
molluscicides and Metaldehyde-based molluscicides is
explained by the fact that in areas or periods of the
year characterised by wet weather conditions, the use
rate of Metaldehyde-based molluscicides is on average
more than double than the use rate of Bayer’s or ACS’s
products. A consistent number of farmers, therefore,
are inclined to purchase Bayer’s and ACS’s products at
a higher price rather than products that, although
being cheaper at first sight, result in practice more
expansive because of their higher use rate.

(543) Currently, a certain degree of competition in the
top quality segment of molluscicides in the United
Kingdom is guaranteed by the competition between
the products of Bayer, ACS, and De Sangosse. After the
implementation of the proposed transaction, however,
most of this competition would be eliminated. The
only alternative to the merged entity in the top quality
segment of molluscicides would remain De Sangosse,
with an estimated market share of only [10 to 20] %
compared to the estimated [40 to 50] % of the merged
entity. Thus, if after the transaction Bayer decided to
increase the price of two of the three top quality
molluscicides and most established brands in the
United Kingdom (Mesurol and Skipper), not enough
competitive pressure from the remaining top quality
brand (Metarex) or from the lower quality Metaldehyde
molluscicides would prevent it from doing so.

(544)

This concern is further confirmed by the parties’
admission that ACS’s and Bayer’s products have
properties differentiating them from those of their
competitors, and that price is only one aspect taken
into consideration by the end-user when deciding
which product to use.

(545)

The parties also argue that the concentration of the
demand-side in the United Kingdom guarantees that
the proposed transaction will not result in the creation
of a dominant market position for the newly merged
entity because the 10 largest distributors in the United
Kingdom account for about [90 to 100] % of the total
sales in the British market and exercise substantial
countervailing bargaining power. The fact remains,
however, that a considerable number of British end-
users of molluscicides are ready to pay for Bayer and
ACS’s products a price [60 to 70] % higher than for
the lower quality of Metaldehyde-based molluscicides,
and that they would very likely continue to buy these
products even if their price increased further as a result
of the proposed merger.

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(546)

In the light of the above, therefore, the Commission
has come to the conclusion that transaction would
lead to the creation or strengthening of a dominant
position in the British market for molluscicides.

explained above, however, Lonza is not a producer of
molluscicides, but only a producer of Metaldehyde,
which it supplies to national independent manufac-
turers of Metaldehyde-based molluscicides.

(547)

(548)

(549)

the parties’ combined market

In Belgium,
share
amounted in 2000 to about [90 to 100] % (Bayer: [10
to 20] %, ACS: [80 to 90] %) and the parties expect to
maintain their market position at this level during
the next three years. Metaldehyde-based molluscicides
account for less than [0 to 10] % of the Belgian market.
A new type of active ingredient with molluscicide
properties, Fe(3)Phoospaat, is currently under regis-
tration in Belgium. However, it is uncertain when the
registration procedure will be completed and whether
it will be successful.

The parties submit that the transaction does not restrict
competition on the Belgian market since the products
sold by Bayer and ACS are already off-patent and new
companies could easily enter the Belgian market with
generic products if the combined entity attempted to
increase prices anti-competitively. As explained above,
however, there are only two Asian producers of generic
Methiocarb and Thiodicarb, which are not active in
Europe and which would very likely not enter this
market after the proposed transaction. Their entry in
the Belgium market would be even more unlikely,
given the relatively small size of this market and the
significant market position of the parties.

The parties further submit that the fact that Neudorff
is entering the Belgian market clearly shows that it can
be attractive to launch a competing product even on
small markets such as Belgium, and that therefore
potential competition from Asian producers must
therefore not be disregarded as unlikely. The Com-
mission notes, however, that Neudorff is attempting to
enter the market with a product based on a new
type of active ingredient (Fe(3)Phoospaat), which if
successful would differentiate itself from those already
established on the market. Asian producers, on the
contrary, could not count on the same product differ-
entiation to launch their products on the European
market.

(551)

In Belgium the rain fastness of molluscicides is of
essential importance. Bayer and ASC’s molluscicides
have a particularly high degree of rain fastness. Formu-
lators of Metaldehyde-based molluscicides in Belgium
did not manage to reach the same level of rain fastness.

(552)

(553)

The parties estimate that
in Belgium the average
gross/net price to trade of top quality Metaldehyde
molluscicides is of about EUR [...]/ha while that of
Bayer’s and ACS’s molluscicides is of about [...]/ha
and [confidential information of ACS], respectively.
However, due to the weather conditions, the use rate
of Metaldehyde-based molluscicides is on average more
than double than the use rate of Bayer’s or ACS’s
products. End-users, therefore, are rather inclined to
pay more for Bayer’s and ACS’s products rather than
for a product that, although being cheaper at first sight,
results in practice more expansive because of its higher
use rate.

This has been confirmed by a Belgian wholesaler of
molluscicides, who clearly stated that Bayer’s and ACS’s
molluscicides are not substitutable with Metaldehyde-
based molluscicides, and that in case of a permanent
price increase between 5 to 10 % of Bayer’s and ACS’s
products, the number of end-users that would switch to
Metaldehyde-based molluscicides would be marginal.
Two wholesalers stated that the three products are
substitutable, but one explained that customers’ choice
depends on the resistance of the product to rain, and
that customers would still purchase Bayer’s and ACS’s
products even in case of a price increase because they
have a higher resistance to rain.

(554)

In the light of the above, the Commission has come to
the conclusion that the proposed transaction would
eliminate, at least in the short term, the only real
competitor of Bayer in the Belgian market for mol-
luscicides, leading to the creation or strengthening of a
dominant position in such a market.

(550)

The parties also submit that Lonza is already active in
the Belgian market and that, as the leading supplier of
molluscicides
in the EEA, would be capable of
expanding its activities in Belgium to respond to any
anti-competitive behaviour of the combined entity. As

(555)

In Ireland, the parties’ combined market share in the
year 2000 was of about [90 to 100] % (Bayer [80 to
90] %, ACS [10 to 20] %) and the parties expect to
maintain their market position at this level during
the next three years. Metaldehyde-based molluscicides
account for [0 to 10] % of the Irish market.

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Official Journal of the European Union

L 107/59

(556)

The parties submit that third companies could easily
enter the market. In this respect, the parties have
explained that ACS did not have any activity in the
Irish market in 1998 and 1999 and achieved a [10 to
20] % market share in 2000. However, no third
companies are expected to enter the Irish market with
molluscicides based on Metaldehyde molluscicides or
on other active ingredients.

next three years. The remaining market share is divided
between two main local formulators of Metaldehyde-
based molluscicides (Agroquisa, with about [0 to 10] %
market share, and Permutadora, with about [20 to
30] %) and other small local formulators.

(557) As in Belgium, also in Ireland the rain-fastness of
molluscicides is of essential importance. The resistance
of Bayer’s and ACS’s molluscicides to weather con-
ditions has not been equalled by local formulators of
Metaldehyde-based molluscicides. All the four whole-
salers who submitted comments during the investi-
gation confirmed that Metaldehyde-based molluscicid-
es are not as efficacious as Bayer’s Methiocarb-based
molluscicides, and that they would continue to pur-
chase Bayer’s and ACS’s products also in case of a price
increase of 5-10 %. A wholesaler stated that Bayer’s
Methiocarb-based molluscicide is not substitutable by
Metaldehyde-based molluscicides for use on crops such
as sugar beet where Bayer’s product is used to control
slugs and leather jackets larvae. Only one wholesaler
stated that, in case of such a price increase, it would
consider to use alternative insecticides in conjunction
with Metaldehyde. Two wholesalers expressed con-
cerns that the proposed transaction might lead to a
price increase of Bayer’s and ACS’s molluscicides.

(558)

The parties also submit that they could face compe-
tition from generic suppliers in the future. As explained
above, however, there are only two Asian producers of
generic Methiocarb and Thiodicarb, which are not
active in Europe and which would very likely not enter
this market after the proposed transaction. Their entry
in the Irish market would be even more unlikely,
given the relatively small size of this market and the
significant market position of the parties.

(559)

In the light of the above, the Commission has come to
the conclusion that the proposed transaction would
remove from the Irish market for molluscicides the
only effective competitor of Bayer,
leading to the
creation or strengthening of a dominant position in
such a market.

(561)

The parties submit that the proposed transaction will
not affect competition in the Portuguese market for
molluscicides because ACS adds only a small percent-
age to Bayer’s market share. However, the market
investigation has shown that only ACS’s Thiodicarb-
based molluscicide is considered as efficacious as
Bayer’s Methiocarb-based molluscicide in the Portugue-
se market. Three out of four wholesalers stated that in
case of a permanent price increase of 5-10 % of these
two products most end-users would not switch to
Metaldheyde-based molluscicides. One of these whole-
salers explained that the price of Bayer’s molluscicide
is already higher than the price of Metaldehyde-based
molluscicides. Two wholesalers expressed concerns
that the proposed transaction might lead to a price
increase of Bayer’s and ACS’s molluscicides.

(562)

The parties further submit that Lonza or other generic
suppliers might enter the market in case of an anticom-
petitive price increase of the merged entity’s products.
As explained above, however, Lonza is not a producer
of molluscicides, as it simply supplies Metaldehyde to
local formulators of molluscicides. With regard generic
it has already been explained above
competition,
that there are only two Asian producers of generic
Methiocarb and Thiodicarb, which are not active in
Europe and which would very likely not enter this
market after the proposed transaction. Their entry in
the Portuguese market would be even more unlikely,
given the relatively small size of this market.

(563)

In the light of the above, the Commission has come to
the conclusion that the proposed transaction would
remove from the Portuguese market for molluscicides
the only effective competitor of Bayer, leading to the
creation or strengthening of a dominant position in
such a market.

(560)

In Portugal, the parties’ combined market share in the
year 2000 was of about [70 to 80] % (Bayer [70 to
80] %, ACS [0 to 10] %) and the parties expect to
maintain their market position at this level during the

(564)

In Sweden, Finland and Iceland, Bayer is the [...] with a
market share of [90 to 100] %. The proposed trans-
action would remove a strong potential competitor
that, given the climatic conditions of these countries,
would be able to enter these markets with a product as
efficacious as Bayer’s product.

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Official Journal of the European Union

15.4.2004

(565) With regard to Finland, the parties submit that Lonza
or generic suppliers could enter the market easily.
Lonza, however, is not a molluscicide producer, and in
any event it could not supply Metaldehyde to local
formulators in Finland because in such a country
Metaldehyde-based molluscicides have been banned
since a number of years. With regard to generic
suppliers, as it has been explained above, Asian pro-
ducers would not have any incentive to enter these
markets given their relative small size.

C. HERBICIDES

(571)

Both Bayer and ACS are active in the development
and production of herbicides. Herbicides are crop
protection products, which prevent or reduce weed
competition in a crop and are thus capable of replacing
or reducing manual and mechanical weeding.

(566) A new type of active ingredient with molluscicide
properties produced by Neudorff, Fe(3)Phoospaat, is
currently under registration in Sweden. However, it is
uncertain when the registration procedure will be
completed and whether it will be successful.

(572)

Bayer estimates that the value of the herbicides market
in the EEA amounted to EUR 2 070 million in 2000.

(567)

The parties further submit that ACS [...], the Com-
mission holds the view that the proposed transaction
would remove a realistic potential competitor from the
national markets for molluscicides of Sweden, Finland
and Iceland.

(568)

The parties submit that if it is uncertain that the new
Fe(3)Phoospaat-based molluscicide will successfully
enter the Swedish market, it is inconsistent to argue
that ACS would be a potential competitor, since ACS’s
product is not even under registration in Sweden,
Norway and Iceland. The Commission notes, however,
not only that ACS’s product is already registered in
most national markets, but that it has also shown to
be able to penetrate rapidly into new national markets,
as the parties claim to have happened in Ireland.

(569)

In the light of the above the Commission has come to
the conclusion that the proposed transaction would
lead to the strengthening of Bayer’s dominant position
also in the following national markets for molluscicid-
es: Sweden, Finland and Iceland.

C.1. Relevant product markets

(573)

The parties in principle follow the approach to product
market definition taken by the Commission in Case
M.1806 — AstraZeneca/ Novartis.

(574) A first distinction is drawn between selective herbicides
and non-selective herbicides. Non-selective herbicides
are crop protection agents designed to clear fields of
weeds after the harvest of one crop and prior to the
sowing of the next. They are effective against many
types of plants, including cultivated crops, which they
would kill if applied to them. In contrast, selective
herbicides are designed to kill only the weeds and to
leave intact the crop to which they are applied. From
the point of view of the farmer, the type of crop on
which a selective herbicide is used is the most
important factor in determining product substituta-
bility. The parties therefore submit that selective herbi-
cides, which protect different types of crops constitute
for most crops separate relevant product markets.

General conclusion on molluscicides

(570)

In the light of the above, the Commission has come to
the conclusion that the proposed transaction would
lead to the creation or strengthening of a dominant
position in the following national markets for mol-
luscicides: the United Kingdom, Belgium, Ireland, Por-
tugal, Sweden, Finland and Iceland.

(575) With respect to the perennial crops fruits and nuts,
citrus fruits and grapes, however, non-selective herbi-
cides and ‘semi-total’ herbicides are also used to control
weeds without damaging the crops. Thus, with regard
to the said crop segments selective herbicides and non-
selective herbicides are competing with each other.
The parties therefore submit that with regard to these
crops, a further distinction between selective and non-
selective herbicides is inappropriate. Whether citrus
fruit constitutes a separate product market from fruits
and nuts can be left open in this case because the
competitive assessment would not change.

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(576)

(577)

In previous merger decisions, the Commission held
that for some crops the active substances contained in
the herbicide product formulations are mainly effective
against weeds within one of the two principle categori-
es of weeds: broadleaf weeds and grasses. As specific
types of crops are mostly affected by ‘mixed weed
populations’ comprising both grasses and broadleaf
weeds, there is a need for treatments that kill both
types of weeds. Two options are available to the
farmer: either he/she purchases a number of herbicides
with specific selectivity and mixes them in accordance
with the types of weeds that appear, or he/she can buy
a ready-made product that contains the desired mixture
of active substances for grass control and broadleaf
weed control. Some products are active against both
types of weed and are referred to as ‘broad-spectrum’
herbicides.

Broadleaf weed herbicides are not direct substitutes for
herbicides used for control of grasses (graminicides),
and vice versa. The farmer who is faced with harmful
grass weeds in his/her crop fields needs to use herbi-
cides, which are capable of controlling these particular
weeds and vice versa. The same arguments apply,
mutatis mutandis, for the control of broadleaf weeds.
However, the Commission noted in previous decisions
that the two complementary market segments are
linked through the presence of broad-spectrum herbi-
cides. For a number of herbicides, the market investi-
gation conducted by the Commission in Case M.1806
— AstraZeneca/Novartis indicated that broad spec-
trum herbicides effectively derive a substantial part of
their sales values both from their capacity to control
grass weeds and from the capacity to control broadleaf
weeds. As a result of the ‘chain of substitution’ effect,
an effective competitive pressure exists in markets
where broad-spectrum herbicides can be used to
replace graminicides and broad leaf herbicides. This is
due to the fact that neither the supplier of broad
spectrum herbicides nor manufacturers offering grami-
nicides or broadleaf herbicides as part of their product
portfolio can increase prices without facing the risk
that their customers will switch to other products.

(579)

(580)

In Case M.1806 — AstraZeneca/Novartis, the Com-
mission furthermore considered a distinction between
early application products (pre-sowing or pre-emerg-
ence herbicides) and late application products (post-
emergence herbicides). As these types of herbicides are
used to treat the same types of weeds and display the
same degree of effectiveness, the farmer has, before
sowing at
flexibility in
least, a certain degree of
choosing the time of application. As time goes by and
weed problems occur in the crop fields, pre-sowing
herbicides or even pre-emergence herbicides are no
longer substitutes for post-emergence herbicides. How-
ever,
in most cases, at least in the early stage of
application of herbicides, pre-emergence herbicides
and post-emergence herbicides are substitutable for
each other.

In light of the role of broad-spectrum products and the
sufficient degree of substitutability between pre- and
post-emergence applications, the Commission in Case
M.1806 — AstraZeneca/Novartis considered the mar-
kets for cereal, maize and rice herbicides as the relevant
product markets. With respect to the herbicide markets
for potatoes, vegetables, sugar beets, soybean and oil
seeds the Commission, however, distinguished further
between pre- emergence herbicides and post-emerg-
ence graminicides and identified a separate product
market for post-emergence graminicides. Following
the market
this
approach seems to be still correct, although with
respect to cereal herbicides the importance of the grass
control segment is growing in light of
increasing
resistance problems of ‘problem’ grasses (in particular
black grass, rye grass and wild oat).

investigation in the present case,

(581)

Several market participants are of the opinion that
barley forms a separate product market
in cereal
herbicides, since many cereal herbicides cannot be used
on this crop. However,
it can be left open in the
present case whether barley herbicides form a separate
product market since the assessment would not
change.

(578)

For these reasons, the parties submit that, with regard
to cereals, maize, rice, and potatoes, a distinction
between broad leaf herbicides and graminicides is
inappropriate. In all these segments, broad-spectrum
herbicides derive a substantial part of their sales values
both from their capacity to control grass weeds and
from their capacity to control broadleaf weeds. This
the Commission’s
approach differs from that of
approach in Case M.1806 — AstraZeneca/Novartis,
where a distinction between broad leaf herbicides and
graminicides was made also with respect to potatoes,
as well as for vegetables, beets, oil seeds and soybeans.

C.2. Assessment

(582) At the national level, the parties’ activities overlap in a
large number of crops and Member States. According
to the information in form CO, there are 44 affected
markets in herbicides where the combined market
share of the parties is 35 % or more. Of these markets,
the parties have a market share exceeding 40 % in
39 markets and more than 50 % in 26 markets.

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15.4.2004

(583)

Following the investigation, the Commission considers
that competition is unlikely to be negatively affected
on 53 affected markets out of 80 in total, for one or
more of the following reasons.

Member State

Bayer

ACS

Combined

(%)

Finland

[30-40]

[20-30]

[50-60]

(584)

The combined market share of the parties is low; there
is no overlap between the parties’ activities either
because of misallocation of market share or because
in the meantime
the overlap has ceased to exist
(e.g. distribution agreement for third party products
cancelled); the market share increment is very small
and the structure of the market is unlikely to be
affected by the operation; the structure of the market
is unlikely to be affected by the operation as the pricing
incentives of
the parties’ products would not be
affected (product mainly priced to other crops); the
parties have largely overestimated their market pos-
ition; there are strong competitors who are likely to be
able to provide effective competition on the market;
new product introductions by competitors are likely to
provide strong competition to the parties’ products in
the near future.

(585)

For the reasons set out below the Commission has
reached the conclusion that the proposed transaction
will create or strengthen a dominant position in the
herbicide markets for six crops: beets, cereals, maize,
potatoes, vegetables and cotton harvest aids.

Beets herbicides markets

(587)

(586)

In 2000, the EEA-wide market in beet herbicides was
approximately EUR 225,4 million. The most important
national beet herbicide markets are Germany ([...]),
France ([...]) and Italy ([...]). The parties estimate that
they would have [50 to 60] % (Bayer [20 to 30] %,
ACS [20 to 30] %) of an overall EEA beet herbicides
markets, ahead of BASF ([0 to 10] %) and DuPont ([0
to 10] %). On a national basis the combined market
share of the parties would be as follows (21):

Member State

Bayer

ACS

Combined

(%)

Austria

[30-40]

[0-10]

[40-50]

Belgium

[10-20]

[20-30]

[40-50]

Denmark

[30-40]

[10-20]

[50-60]

(21) Source: Parties’ estimation.

France

[10-20]

[30-40]

[40-50]

Germany

[20-30]

[30-40]

[60-70]

Greece

Ireland

Italy

[20-30]

[20-30]

[40-50]

[20-30]

[10-20]

[40-50]

[10-20]

[20-30]

[40-50]

Netherlands

[30-40]

[30-40]

[60-70]

Spain

[10-20]

[20-30]

[40-50]

Sweden

[50-60]

[10-20]

[70-80]

United Kingdom

[10-20]

[10-20]

[30-40]

In Case M.1806 — AstraZeneca/Novartis the Com-
mission had identified a separate market for post-
emergence graminicides. However, there are no com-
petition concerns in this market in the present case. In
the remaining three segments of the market for beets
i.e. broad leaf pre- and post-emergence
herbicides,
as well as pre-emergence herbicides, which together
constitute the residual beets herbicides market, the
parties would have a combined market share in the
EEA of [50 to 60] %. On a national level, market shares
would vary between [40 to 50] % in Belgium and [70
to 80] % in Sweden. The high market shares in the
overall market are derived from the parties strength in
the segment of post-emergence broadleaf herbicides.
The market for post-emergence broad leaf herbicides
is by far the biggest segment of the overall EEA beet
herbicides market, accounting for EUR 163,9 million
or 73 %. The parties estimate that they would have [50
to 60] % of this segment on an EEA-level. On a national
basis, the market share of the parties varies between
[40 to 50] % in the United Kingdom and [70 to 80] %
in Portugal. The merged entity would become by
far the leading supplier in all Member States but
Luxembourg for which no data exists. Based on the
sales projections of the parties, the situation in 2004
essentially remains the same. In only four countries the
parties forecast a combined market share of less than
[40 to 50] %, which will, however, still be between [30
to 40] % and [40 to 50] %.

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Official Journal of the European Union

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(591)

(588)

The parties put forward a number of reasons why,
despite these high market shares, no concerns of
dominance should arise as a result of the proposed
transaction. Their main argument
four
active substances used in these markets are off-patent,
resulting in strong competition from generic suppliers.
However, as will be shown, control of this market is
less driven by the active ingredient side but rather
by the control of different
formulation types via
formulation patents.

is that all

(589)

In all Member States, except Spain and Sweden, where
Bayer also sells third party products, Bayer generates
[...] sales in this market with Metamitron sold under
the brand name Goltix. Metamitron is a pre- and post-
emergence cross-spectrum herbicide with a better
profile in broadleaf weeds. Metamitron was first intro-
duced 1975 and is off-patent since 1993. It belongs to
the chemical class of Triazines. This chemical class is a
rather old class, first introduced in 1956, and has
commodity status since the vast majority of its prod-
ucts are off-patent. Sales of products of this class have
been in decline since 1996 (22). However, the decline
of Goltix has been less than [...]. Its sales trend is
reported as being globally stable (23). Bayer aims to
stabilize Goltix with new formulations such as Goltix
WG 90, which it started selling in the main European
countries in 2001 and which enjoys registration data
protection, and new mixtures such as Metamitron and
Triflusulfuron.

(590) ACS’s active ingredients used for the formulation of
post-emergence broad leaf herbicides are Desmedi-
pham, Ethofumesate and Phenmedipham. Phenmedi-
pham and closely related Desmedipham were intro-
duced in 1968. Both active ingredients belong to the
chemical class of carbamates and are the bestselling
products in this class. Although sales of this class are
expected to decline by 3 % each year until 2005,
Phenmedipham is expected to maintain its market
share (24). These active ingredients are sold as mixtures
and as straight formulations mostly under the brand
Betanal. As with Bayer, all of ACS’s active ingredients
are off patent. Consequently, the parties argue, generic
suppliers would increasingly gain market shares at the
expense of Bayer and ACS.

The development of pre-mixtures with existing com-
pounds remains an important feature in this market.
For instance, ACS has launched mixtures such as
Betanal Progress OF with all its three active ingredients
in 1997. ACS has a formulation patent for Betanal
Progress. ACS is going to launch several new premixes
of its three products, all as extensions of the Betanal
family (i.e. Betanal expert),
in almost every single
Member State. In addition there will be new mixtures
with Bayer’s Metamitron, including a fourway mixture
(Betanal Quattro). This strategy allows the parties to
extend patent protection by formulation and trade-
mark protection. It is a successful defence strategy
against generic competition. A similar effect of
extended protection after the expiry of the patent for
the active ingredient is caused by the protection of data
under the copyright
laws. ACS is the only data
holder for Desmedipham and has a task force for
Phenmedipham with [...] and for Ethofumesate with
[...]. Bayer enjoys data protection for the whole Goltix
family worth several million euro until [...].

(592) Moreover, many of the generic competitors do not
produce the product
themselves. ACS supplies its
products to, among others, FCS, United Phosphorus,
Griffin and Sipcam. This creates a dependency of these
generic suppliers and allows ACS to realise economies
of scale unmatched by any other producer. [...].

(593)

Furthermore, maintaining a registration is costly, the
distribution of the herbicides needs a sales network
and the financial resources of most generic suppliers
are rather limited. Moreover, some of the generic
suppliers depend for their products on the parties for
formulation patents. [...] (25).

(594)

The parties have submitted projections for their mar-
kets shares in 2004 which are substantially lower than
the figures for 2000. ACS forecasts a [...] trend until
2003, and a [...] in 2004. Bayer forecasts a rather
substantial decline in the EEA until 2004, although, on
a worldwide basis, sales are forecast to be stable.
However, the combined market share in the EEA
remains still very high. This will be the case despite, as
the parties mention, recommendations by official and
non-governmental advisors,
including governmental
organisations, to use generic products having more or
less the same properties as the branded original
product.

(22) Phillips McDougall — AgriService, Products section 2000, p. 53.
(23) Wood Mackenzie, Agrochemical service, Market studies: Crops,

2001, p. 156.

(24) Phillips McDougall — AgriService, Products section 2000, p. 83.

(25) [...].

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Official Journal of the European Union

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(595) Another argument by the parties concerns the develop-
ment of the price. The parties claim that their products
have suffered an essential price decrease (a decrease of
up to [...] of the end-user price of Bayer products and
a decrease of up to [...] % of the end-user price of
ACS products). However, a price reduction does not
necessarily mean that also the margins have suffered,
due to,
for instance, a more efficient production.
[...] (26).

(596) With regard to the French market the parties argue
that most of the sales of ACS stem from the sale of
third party products, including [...] Metamitron and
BASF’s Chloridazon. However, even if ACS gets its
products from third parties, ACS has a margin of
manœuvre in terms of the price/cost margin of the
final product which in fact does allow it to compete
against Bayer. Moreover, the fact that the new entity
would sell a product containing an active ingredient
owned by [...], the [...] competitor in this market,
creates a structural
link which could give raise to
additional competition concerns.

(597)

Lastly, the parties claim that in Denmark and Sweden
the demand side is highly concentrated. In Denmark,
three customers account for [90 to 100] % of the
parties’ sales. In Sweden the top four customers have
[90 to 100] % of the parties’ sales. However, with a
market share of [50 to 60] % in Denmark and [70 to
80] % in Sweden, there is a certain imbalance in
bargaining power. Moreover, both Denmark and Swed-
en are relatively small markets which are of lesser
interest to Bayer and ACS than to the customers.

(598) Respondents to the Commission’s market investigation
voiced concern about the control of the parties over
the four most important molecules and the best-
known brands in this market in one hand and especially
the possibility to freely combine all four broad leaf
herbicides. According to these market participants, for
a sufficient weed control in sugar beets, all four active
ingredients need to be combined in a sequence of
treatments. Bayer and ACS recommend mixtures of at
least three of the four active substances. Thus, mixtures
of Ethofumesate, Phenmedipham, Desmedipham and
Metamitron in various combinations have become the
standard across the EU.

(26) [...].

(599)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position for herbicides
in sugar beets (other than post-emergence graminicid-
es) in all Member States.

Cereal herbicides

(600)

(601)

(602)

The market for cereal herbicides is (in terms of value)
the largest market for selective herbicides. In 2000, the
EEA-wide turnover in cereal herbicides was approxi-
mately EUR 826 million. The parties estimate that they
would have [30 to 40] % (Bayer [0 to 10] %, ACS [30
to 40] %) of an overall EEA cereal herbicides markets,
ahead of Syngenta with [10 to 20] %. The parties
forecast for their market share in 2004 is [30 to 40] %
(Bayer [0 to 10] %, ACS [30 to 40] %), ahead of
Syngenta with [10 to 20] %.

The parties’ combined market share in Belgium is [40
to 50] % (Bayer [0 to 10] %, ACS [30 to 40] %).
Leading competitors include Dow ([10 to 20] %),
DuPont ([0 to 10] %), Syngenta ([10 to 20] %) and
BASF ([0 to 10] %). Bayer’s sales in 2000 were derived
exclusively from distributing products from third par-
ties, including ACS. However, Bayer will replace sales
of third party products completely until 2004 and
introduce its new own products accounting for [0 to
10] % of the market. The parties expect to increase
their market share to [40 to 50] % in 2004.

In Germany the parties’ combined market share is [50
to 60] % (Bayer [0 to 10] %, ACS [50 to 60] %). The
main competitors are BASF ([10 to 20] %), DuPont
([10 to 20] %), Dow ([0 to 10] %) and Syngenta ([0 to
10] %). Bayer generated about [60 to 70] % of its
turnover in the German market with its own product
Herold, which is a mixture of Flufenacet and ACS´
active ingredient Diflufenican. The remaining [40 to
50] % of Bayer’s turnover in this market are to be
attributed to third party products, one of which
supplied by DOW will be discontinued as a conse-
quence of the proposed merger. However, Bayer plans
to replace all third party products with own products
and to keep its [0 to 10] % share of the market in
2004.

(603)

the parties’ combined market

In Sweden,
share
accounts for [60 to 70] % (Bayer: [30 to 40] %, ACS:
[20 to 30] %). Other multinational R & D companies
include BASF ([10 to 20] %), Monsanto ([0 to 10] %),
Dow ([0 to 10] %), Syngenta ([0 to 10] %) and DuPont
([0 to 10] %). Bayer does not sell own cereal herbicides

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Official Journal of the European Union

L 107/65

in Sweden, but generates all of its turnover with third
party products distributed by its subsidiary Gullviks,
a wholesaler. Gullviks is one of the three leading
wholesalers in Sweden, accounting jointly for [90 to
100] % of the demand. The parties claim, that, since
Bayer owns Gullviks, the other leading distributors
would have the incentive to concentrate on the product
portfolio of the parties’ competitors in order to com-
pete more efficiently on the distribution level. However,
the parties forecast to have a market share of [70 to
80] % in 2004, an increase of [0-10] percentage points.
The increase is in part due to Bayer introducing its
own new product Propoxycarbazone which is expected
to account for [10 to 20] % of the market. As a result,
[40 to 50] % of the market would be controlled by
products owned by the parties. In their reply to the
statement of objections and a further submission,
Bayer showed some evidence that [...]. Therefore, the
market share of Propoxycarbazone will be significantly
less than [...] originally projected (based on a marketing
already in 2002). However the combined market share
would be still beyond 60 %, even if Propoxycarbazone
will not [...].

(604)

The high market shares in these countries can be
explained by the parties’ particular strength in the
segment for grass control (graminicides plus broad
spectrum). There are only a few pure graminicides in
the market. However, after the proposed concentration
Bayer would control two, Fenoxaprop, which is still
patent protected, and Flufenacet. The third major
is owned by Syngenta. In
graminicide, Clodinafop,
combination with their strong portfolio of broad
spectrum herbicides which also control grass weeds
the parties would have the following market shares in
this segment in 2000: Belgium [50 to 60] % (Bayer [0
to 10] %, ACS [50 to 60] %), France [40 to 50] %
(Bayer [0 to 10] %, ACS [30 to 40] %), Germany [60
to 70] % (Bayer [0 to 10] %, ACS [60 to 70] %), the
Netherlands [60 to 70] % (no overlap) and Sweden [70
to 80] % (Bayer [20 to 30] %, ACS [40 to 50] %).

2004 would, with the exception of Germany, where
the market share remains stable at [60 to 70] %,
increase to [60 to 70] % (Bayer [10 to 20] %, ACS [50
to 60] %) in Belgium, [40 to 50] % in France (Bayer [0
to 10] %, ACS [40 to 50] %) and [70 to 80] % in the
Netherlands (Bayer [0 to 10] %, ACS [60 to 70] %).

(606)

The increase of the market share of the parties in both
the grass control segment and the overall market can
be attributed to the new products both parties have
recently launched or are in the process of launching.
Bayer’s success is based on two new products, which
are both excellent in grass control. Flufenacet mixed
with Diflufenican (brand name Herold) is the older of
the two, but has still growth potential and patent
protection until 2009. Bayer plans to increase its sales
of Flufencacet in cereals by [...] until 2004. Bayer’s
latest molecule Propoxycarbazone (MKH 6561, brand
name Attribut) has patent protection [...]. Propoxycar-
bazone is an ALS-inhibitor which offers an alternative
mode of action for winter wheat, rye and triticale, but
not barley. [...]. By way of example, Bayer forecasts a
market share of [0 to 10] % for both products in
Belgium in 2004 (both had [0 to 10] % in 2000). A
third new product developed by Bayer and sold in
Northern America, Flucarbazone, however, will not be
marketed in the EEA.

(607) ACS has two new active ingredients. Iodosulfuron has
already been launched in some Member States. It is
sold straight, [...], patent protection [...]), [...], patent
protection [...]) and the latest new active ingredient
Mesosulfuron, patent protected [...]. Both Iodosulfuron
and Mesosulfuron are broad spectrum herbicides with
grass control activity. Mesosulfuron (04 H) is advertised
by ACS as representing a new standard of blackgrass
control,
the grass weed with probably the most
troublesome resistance in Europe. The parties forecast
a market share within two to three years after launch
of between [10 to 20] % in Sweden and [10 to 20] %
in Belgium.

(605)

The combined market shares of the parties in the
segment for grass control are forecast by the parties to
further increase. With the introduction of the new
graminicide Propoxycarbazone by Bayer and the new
active
ingredient Mesosulfuron by ACS, which,
although not a pure graminicide, will be extremely
efficient against the problem grass black grass, the
merged entity will have the broadest and most modern
grass control portfolio,
including also Flufenacet,
Fenoxaprop, Diclofop and Isoproturon in various
mixtures. As a result the projected market shares in

(608)

In addition ACS will launch new mixtures of [...]. In
Germany ACS will premix [...] with [...] and Bromoxyn-
il [...] [...]. Although a rather old compound, Bromoxy-
nil still has some interesting characteristics such as no
weed resistance. It is off-patent since the mid-1980s.
However, ACS owns a patent on this mix. Since the
market share of the parties in Belgium, Germany and
Sweden increases until 2004, these new mix products
do not only replace older chemistry, as the parties
claim, but help to strengthen their position.

(609)

(610)

(611)

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Official Journal of the European Union

15.4.2004

The parties would have not only the largest portfolio
of active ingredients in the market for cereal herbicides,
but also the best molecules for the control of grass, in
particular pure graminicides, but also broad spectrum.
The merged entity would not only have Flufenacet
which is cell division inhibitor, but also all three
leading modes of action against grass weeds in its
portfolio, and in each group a or the leading molecule:
the PS-II inhibitors (Isoproturon), the ‘ACC-ase’ mode
of action (Fenoxaprop) and the ‘ALS’ mode of action
(Iodosulfuron, Mesosulfuron and Propoxycarbazone).
This has been confirmed by several market participants
which have pointed out that the three new products,
which are all active against grass weeds, would
strengthen the dominant position the parties enjoy
already today.

(612)

The parties claim that with regard to grass weed
control DuPont’s Flupyrsulfuron (brand name Lexus)
has enormous potential. However, Flupyrsulfuron is
only active against one grass, black grass (alopecurus
myosuroides). The key advantage of Lexus is that it has
activity in resistant black grass situations. However, the
timing of Lexus’ application on black grass is narrower
than competing products because it needs to be applied
when the black grass is small (two to three leaves)
while fops can be applied during a much broader time
window. Moreover, the new Mesosulfuron by ACS is
expected to have equally good efficacy on black grass
as Flupyrsulfuron. There are other products such as the
fops (Topik from Syngenta and Puma from ACS) which
have both a higher level of efficacy and broader grass
control. Lexus is further limited since it cannot be
applied on barley.

In their reply to the statement of objections the parties
claim that in particular with regard to Iodosulfuron,
Mesosulfuron and Propoxycarbazone there will be
internal cannibalisation, since all
these three new
products have the same mode of action (ALS). How-
ever, the effect of any such internal competition has
not been quantified by the parties. Moreover,
for
resistance management not only the mode of action
but also the chemical class is important. Bayer’s
Propoxycarbazone belongs to another chemical class
than Iodosulfuron and Mesosulfuron.

The only other company with a new product in the
pipeline is BASF. However, its new active ingredient
Tritosulfuron is a broadleaf herbicide. Moreover, it will
be introduced as from 2003 onwards only, and,
according to BASF’s business plan, achieve its highest
market share in Germany in 2004 with [...%]; [...].
BASF has recently introduced a new active ingredient
Picolinafen. Picolinafen is a post-emergence broadleaf
herbicide with the same mode of action as Diflufenican.
However, Diflufenican can also be applied pre-emerg-
ence. Diflufenican is, therefore, more versatile which is
also reflected in the fact that there are already more
than 30 mixtures of Diflufenican. [...] (27). It is, there-
fore, unlikely that the new Picolinafen will be able to
make significant inroads into the market for cereal
herbicides. BASF estimates to get [... %] [...] the German
market in 2004 with Picolinafen and premixes of
Picolinafen based on its own portfolio. The parties
themselves forecast a stable or even lower market share
of BASF in Belgium, France, Germany or Sweden in
2004.

(27) Flufenacet in cereals in Europe, chart 7 submission by Bayer dated
10 January 2002 in response to the Commission questionnaire of
14 December 2001.

(613) Monsanto introduced a new sulfonylurea in 1998.
Sulfusulfuron is sold under the brand name Monitor
and is a compound owned by Takeda which has patent
protection until at least 2007. Monitor is a foliar
and residual herbicide, formulated as water-dispersible
granule containing 80 % (w/w) of Sulfosulfuron.
Monitor is recommended for use as a spring post
emergence treatment in all varieties of wheat. It is
mostly a graminicide even if it does control some
broadleaf weeds. Since it is confined to wheat its
market share will at peak, according to Monsanto’s
business plans, not be more than [... %] on an EEA
level.

(614)

The parties claim that the proposed transaction will
not lead to competitive concerns in any of the above
markets. Bayer’s position is relatively weak, reflected in
market shares of below [0 to 10] % and often below [0
to 10] %. However, total market shares are high in
Belgium, Germany and Sweden. ACS’s Diflufenican
has been the best-selling active ingredient in cereal
herbicides over the last years, accounting for a turnover
of approximately EUR [...] million in Europe. Although
patent protection for Diflufenican expired in 2001, its
market position is unlikely to erode quickly, since it is
not sold straight but always in mixtures in the EU.
Therefore, even if Makhteshim Agan and other generic
competitors will be able to register and market Diflu-
fenican in 2004, like any other generic producer it
would have to find mixing partners. Some of the more
recent Diflufenican mixtures, however, are patent
protected until 2004 (Flurtamone, ACS) or even 2009
(Flufenacet, Bayer).

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Official Journal of the European Union

L 107/67

(615)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create or strengthen a dominant position on the
markets for cereal herbicides in Belgium, Germany and
Sweden.

Maize herbicides

(616)

(617)

the European maize
The overall market value of
herbicide market is EUR 361,3 million. Within the
EEA, three countries account for roughly [80 to 90] %
of the sales of maize herbicides: France (EUR [...]),
Germany (EUR [...]) and Italy (EUR [...]). The parties
estimate that they would have [20 to 30] % (Bayer [10
to 20] %, ACS [...] %) of the overall EEA maize
herbicides markets, ahead of Syngenta with [20 to
30] %, BASF ([10 to 20] %), Monsanto ([0 to 10] %),
Du Pont ([0 to 10] %) and Dow ([0 to 10] %). The
parties estimate their market share will increase to [20
to 30] % in 2004. In a later submission this figure was
corrected to [20 to 30] % due to lower sales of its new
product MaisTer (see below).

The proposed transaction would lead to two affected
markets in which the parties would have high market
shares in 2000.
In Belgium the parties’ combined
market share amounts to [50 to 60] % (Bayer: [40 to
50] %, ACS: [0 to 10] %). Main competitor is BASF
with a market share of [20 to 30] %. Belchim, the
exclusive distributor of the Japanese companies MC
and ISK in Belgium, accounts for approximately [0 to
10] %. The high market share is derived to a large
extend from the sale of Bayer’s Sulcotrione, which
accounts for [30 to 40] % of the total market. ACS
its market share ([0 to 10] %)
derived most of
by distributing Bropyr, a Syngenta product. In the
meantime this distribution contract has been termin-
ated. The only other product by ACS is Isoxaflutole
(brand name Merlin). The parties estimated to account
for [60 to 70] % of the Belgian market in 2004. In a
later submission this figure was corrected to [30 to
40] %. This dramatic decrease in market share as
opposed to 2000 is, according to the parties, due to a
loss of sales of [...] and less favourable sales of [...].

is subject

decrease from [50 to 60] % in 2000 to only [30 to
40] % in 2004 is that the market share of [...] will go
down from [40 to 50] % to only [10 to 20] %. As in
Belgium the main reason for the loss of sales of Bayer’s
Sulcotrione is the introduction of a similar, but,
according to Bayer, superior product by Syngenta,
called Mesotrione. Moreover, Bayer claims that its
product, Sulcotrione,
to two regulatory
restrictions in the Netherlands which puts in at a
disadvantage vis-à-vis Mesotrione. The Dutch auth-
orities limit the use of active substances to 1 000 g per
ha. Since Sulcotrione needs a higher dose rate in the
Netherlands than Mesotrione (300 g versus 100 g),
Sulcotrione cannot be used as often as Mesotrione.
Secondly, Sulcotrione must not be used on soil which
has a pH value in excess of 6. According to Bayer, this
excludes the use of Sulcotrione in 20-30 % of the
Dutch maize acreage.

(619) However, on the acreage where Sulcotrione cannot be
used the two products are not in competition. There-
fore, sales of Mesotrione in that area cannot affect the
position of Sulcotrione. In their reply to the SO Bayer
claims that in the Netherlands customer applicators
and not the farmers themselves apply herbicides to get
the maize field weed free. Since these servicemen treat
large areas they would use the product which is
applicable everywhere, i.e. Syngenta’s Callisto. How-
ever, no quantification of the effect of such a change
by these customer applicators has been provided.

(620)

The 1 000 g restriction would still allow for three
i.e. 300 g/
applications of Sulcotrione at full rate,
ha. However, as the parties acknowledge themselves,
farmers usually apply maize herbicides at one time,
and as a tank mixture of two to three products. If used
in mixtures the full rate of Mikado is normally reduced.
There is, therefore, no potential with either product to
reach the 1 000 g/ha in a normal season.

(618)

In the Netherlands, the parties’ combined market share
amounts to [50 to 60] % (Bayer: [40 to 50] %, ACS:
[10 to 20] %). Syngenta’s market share is [20 to 30] %.
Bayer sells only Sulcotrione, whereas ACS is left with
Isoxaflutole (brand name Merlin), after the termination
of the distribution contract with Syngenta for Bropyr.
Bropyr accounted for [10 to 20] % of the market in
2000. The parties estimated to account for [60 to
70] % in 2004. In a later submission this figure was
corrected to [30 to 40] %. The reason cited for this

(621)

The parties claim, that Bayer’s product Sulcotrione
(brand name Mikado), which has been acquired by
Bayer from Syngenta in 2000, could be fully substi-
tuted by Syngenta’s new product Mesotrione (brand
name Callisto). Thus, in the parties’ opinion, it can be
expected that Syngenta will be able to strengthen its
market position with the foreseen launch of Callisto in
is going to be
all those Member States where it
registered, notably in Belgium and the Netherlands.
They forecast that Syngenta will be able to achieve a
market share which is at least as high as the market
share of the combined entity in 2004.

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Official Journal of the European Union

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(622) Mesotrione and Sulcotrione belong both to the same
Triketone chemistry and are therefore competitors in
the same submarket. Owing to the fact that both
products have been developed from the same chemical
origin, the biological product profiles are very similar.
Bayer claims that Mesotrione has a better efficacy on
most weeds. Although, in general, Sulcotrione often
gives superior control of grass weeds and Mesotrione
gives better control of some broad leaf weeds, there
does not seem to be a real gap in performance between
the two. Moreover, as a consequence of the proposed
takeover, Bayer will have access to ACS’s herbicides
(Foramsulfuron, Iodosulfuron, Isoxaflutole and Bro-
moxynil) which will provide for ample possibilities of
mixtures with Sulcotrione to give it broad leaf weed
control at least equal to Callisto.

(623) Given that Syngenta’s product was launched only in
2001, mixtures are in an early stage of development
and will not be marketed before 2004. Therefore, it
seems unlikely that Callisto will be able to cause such
a dramatic decrease of the sales of Sulcotrione. The
parties themselves forecast for Syngenta an increase
from 8 % to 15 % in Belgium and from 27 % 34 % in
the Netherlands which would not be enough to
compensate for the enormous loss of Bayer’s Sulco-
trione. However, the introduction by Syngenta of a
very similar product with an almost identical activity
will have a constraining effect on Bayer in terms of
pricing.

(624)

Furthermore, the parties’ claim, that BASF is developing
a new product. However, BASF’s new product Tritosul-
furon will be launched in 2003 and will not achieve
major sales outside Germany. Its market share in 2004
in Belgium and the Netherlands will be below [...%].
The parties also claim, that BASF is re-registering s-
Dimethenamid which would further increase BASF’s
market share. However, according to BASF, s-Dime-
thenamid is only replacing the existing Dimethenamid,
a necessary step to improve its ecological profile. In
addition, BASF has distribution rights to Nicosulfuron,
another patent protected Sulfonyurea belonging to the
Japanese company ISK, but only for some Member
States. ACS had distribution rights for the three
Member States, France, Portugal and Spain, which have
been withdrawn by ISK with effect as of summer 2002.

combination of Foramsulfuron and Iodosulfuron
(brand name MaisTer). The new product is a broad
spectrum post-emergence maize herbicide which has
an impressive spectrum. According to ACS it will be
able to control 45 different weeds with an efficacy
grade of more than 90 % and 10 more with a degree
between 80 % and 90 % (28). A specific strength of the
new product is its safer technology based on Isoxadif-
en-ethyl, which allows the product to be used in [...]
maize varieties.

(626)

(627)

It should also be borne in mind that ACS has two
other own molecules which are patent protected.
Isoxaflutole is a broad spectrum maize herbicide,
which belongs to the new class of herbicides referred
to as Isoxazoles, and has patent protection until [...]. It
is sold either straight or in mixtures with, among
others, Aclonifen. ACS forecast an increase in sales for
Isoxaflutole in both Belgium and the Netherlands until
2004 [...]. Bromoxynil is a rather old compound but
has still some interesting characteristics such as no
weed resistance. It has been off-patent since the mid-
1980s. However, ACS owns a patent on a mix until up
to [...].

Besides Sulcotrione Bayer’s maize herbicide portfolio
is mainly based on Flufenacet. Flufenacet has still
growth potential. It is a pre- and early post-emergence
graminicide used as a basis for mixtures. Bayer’s
two main mixtures of Flufenacet are Flufenacet with
Metosulam (‘Terano’, patent protection until [...]) and
Atrazine (‘Aspect’, patent protection until [...]). Bayer
will introduce Aspect also in Belgium. Bayer claims
that a ban on Atrazine in Europe would reduce sales
of Aspect. However, Aspect is not marketed in the
Netherlands. Moreover, ACS (and other competitors
with good broadleaf maize herbicides) may benefit
from a ban on Atrazine in Europe. Any such gains by
ACS could at least compensate any loss in the sale of
Bayer’s Aspect. This is supported by [...].

(628)

For all the above reasons the Commission has reached
the proposed transaction will
the conclusion that
create a dominant position in the markets for maize
herbicides in Belgium and the Netherlands.

(625) As mentioned by several market participants, also
ACS will
launch
Foramsulfuron straight and mixtures of Foramsulfuron
from 2002 onwards. [...] to come to market is a

launch new products. ACS will

(28) MaisTer, Technisches Produktprofil, Aventis Crop Science

Deutschland, 2001, p. 15.

15.4.2004

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Official Journal of the European Union

L 107/69

Potato herbicides

(629)

The parties’ estimate of the overall market value of the
European potato herbicide market is EUR 77 million.
The four most important national potato herbicide
markets are Germany ([...]), France ([...]), the United
Kingdom ([...]), and the Netherlands ([...]).

(633)

(630)

(631)

(632)

The parties estimate that they would have [20 to 30] %
(Bayer [10 to 20] %, ACS [0 to 10] %) of an overall
EEA potato herbicides markets, behind Syngenta with
[30 to 40] % and ahead of BASF ([10 to 20] %) and Du
Pont ([0 to 10] %). In Greece the parties would have
[50 to 60] % (Bayer [30 to 40] %, ACS [20 to 30] %),
in Portugal [40 to 50] % (Bayer [30 to 40] %, ACS [10
to 20] %) and in Sweden [70 to 80] % (Bayer [60 to
70] %, ACS [0 to 10] %) of the market.

If split into pre- and post- emergence herbicides, an
overlap occurs only in pre-emergence herbicides since
ACS is not active in post-emergence potato herbicides.
The high market shares in the overall potato herbicide
market is mostly derived from the parties’ strong
position in pre-emergence herbicides. The parties
would become the market leader in this segment with
market shares of [50 to 60] % and more in the
following Member States: Finland ([50 to 60] %),
Greece ([50 to 60] %), Italy ([50 to 60] %), Portugal
([50 to 60] %) and Sweden ([80 to 90] %). In all of
these markets the overlap is more than [10 to 20] %.
Moreover,
the market shares in this segment are
forecast to remain above [50 to 60] % in the year 2004
in Finland ([50 to 60] %), in Greece ([50 to 60] %),
Italy ([50 to 60] %) and Sweden ([70 to 80] %) and to
reach [50 to 60] % in the Netherlands and [40 to 50] %
in Spain. Only in Portugal the forecast is a decrease to
[30 to 40] %.

Bayer has two main own products in the market
for potato herbicides. Flufenacet
is a graminicide,
Metribuzin a broad spectrum herbicide which can be
used both pre- and post emergence. Metribuzin, sold
under the brand name Sencor, is off-patent and faces
generic competition, among others by FCS in Germany.
However, Bayer has recently introduced a mixture of
Metribuzin with Flufenacet under the brand names
Artist, Bastille and Cadou, which enjoys patent protec-
tion until 2009. This product [...]. For Germany, for
instance, Bayer forecasts a market share of [10 to 20] %
in 2004, only three years after its introduction. [...] the
combined market share of the parties in the overall
market for potato herbicides up in Italy and Spain. In
Italy the parties’ forecast for their combined market

share of [40 to 50] % (Bayer [30 to 40] %, ACS [10 to
20] %) in 2004, up from [30 to 40] % in 2000. In
Spain the figure will be [40 to 50] % (Bayer [30 to
40] %, ACS [0 to 10] %), up from [30 to 40] % in
2000.

In a later submission Bayer claimed that the new
mixture Flufenacet/Metribuzin is subject to variety and
use restrictions and has very limited efficacy in areas
of low humidity. As a consequence, the new patented
mixture would not provide the parties with a strong
extension of
the parties
their portfolio. However,
would have more than [40 to 50] % of the market in
2004 in Greece and Sweden even without the new
mixture. In Spain the reduced sales forecast would,
according to the parties, lead to [40 to 50] % in the
segment for pre-emergence herbicides and [30 to 40] %
in the overall market in 2004. Moreover, Bayer will
launch Metosulam in potatoes in 2004, which will
further increase the position of Bayer.

(634) ACS has two main own products, Linuron and Acloni-
fen. Both are pre-emergence broadleaf herbicides.
Like Bayer’s product Metribuzin both Linuron and
Aclonifen are off-patent. Both Bayer’s product Metribu-
zin and ACS’s product Linuron have lost considerably
in terms of sales and even more than the chemical class
as a whole during the period 1995-2000; Aclonifen,
on the other hand, was able to outperform its class (29).
Moreover, ACS is the sole notifier for re-registration of
Aclonifen in 2004, and has also [...] the base chemical
Trichlorobenzene. Therefore, despite being off-patent,
the merged entity would be in a position to control
two of the most important products in the market for
potato herbicides exclusively.

(635) All of these countries have in common that they are
very small markets with an overall market value of
below [...]. Thus, according to the parties, these markets
are only secondary markets and pricing of the products
supplied into these markets is done in other geographi-
cal markets and in other crop segments in which the
active substances could also be used, most notably in
vegetables. This is, according to the parties, true for
Bayer’s main product Metribuzin, sold under the brand
name Sencor, which is also used as a post emergence
herbicide and as a vegetable herbicide. A similar
reasoning applies, in the opinion of the parties, to the
products sold by ACS. Both Linuron sold under the
brand name Afalon and Aclonifen (Challenge) are
mainly used on vegetables and are thus priced accord-
ing to the competitive situation in the vegetable
market.

(29) Phillips McDougall — AgriService, Products section 2000, pp. 51,

75 and 103.

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Official Journal of the European Union

15.4.2004

(636)

This reasoning holds only true with regard to Italy,
Finland and the Netherlands. In Italy, Bayer sells more
than five times as much Metribuzin in vegetables than
in potatoes. The combined market share of the parties
in the Italian market for vegetable herbicides is only
[10 to 20] %. In Finland, ACS prices its two products
Linuron and Aclonifen towards vegetables where it
sells considerably more than in potatoes but has only
[20 to 30] % of the market. A similar situation arises
in the Netherlands, where ACS has only [20 to 30] %
of the vegetable herbicides market and Bayer is not
active.

(637)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create a dominant position in the markets for potato
herbicides in Greece, Portugal, Spain and Sweden.

Vegetable herbicides

(638)

(639)

vegetable

The parties’ estimate of the overall market value of the
European
is
EUR 105,8 million. The three most important national
vegetable herbicides markets are France ([...]),
the
United Kingdom ([...]) and Spain ([...]).

herbicide

market

The parties estimate that they would have [30 to 40] %
(Bayer [0 to 10] %, ACS [20 to 30] %) of an overall
EEA vegetable herbicides markets, ahead of BASF ([20
to 30] %), Syngenta ([10 to 20] %) and Dow ([0 to
10] %). On a national basis the combined market share
of the parties would be [40 to 50] % in Greece (Bayer
[10 to 20] %, ACS [30 to 40] %), [50 to 60] % in
Portugal (Bayer [20 to 30] %, ACS [30 to 40] %) and
[40 to 50] % in Sweden (Bayer [10 to 20] %, ACS [30
to 40] %). Those high market share are mirroring the
parties strength in the subsegment of pre-emergence
broadleaf herbicides.

(640) With a market value of [...], pre-emergence broad leaf
herbicides is the most important segment of the overall
market for vegetable herbicides. With a market value
of [...], the Greek market for pre-emergence broad leaf
herbicides is relatively small. The parties’ combined
market share amounts to [40 to 50] % (Bayer: [0 to
10] %, ACS: [30 to 40] %). In Portugal, the parties’
combined market share amounts to [70 to 80] %
(Bayer: [30 to 40] %, ACS: [40 to 50] %). BASF
accounts for [10 to 20] %, Dow for [0 to 10] % and
Syngenta for [0 to 10] % of the market. The Parties’
estimate their combined market share will decrease,
but still be as high as to [50 to 60] % in 2004. With a

(641)

(642)

(643)

market value of only [...], the Swedish market is one of
the smallest national markets. The parties’ combined
market share amounts to [60 to 70] % (Bayer: [20 to
30] %, ACS: [40 to 50] %). Bayer sells only one
product in this market, Propyzamide (Kerb) from Dow.
Competitors include BASF ([0 to 10] %), Dow ([0 to
10] %), Syngenta ([0 to 10] %), and a number of
national companies, accounting for a combined market
share of [10 to 20] %.

Bayer has only very limited activities in the market for
vegetable herbicides, accounting for a market share of
[0 to 10] % of the EEA-wide market. Bayer has only
one own product, Metribuzin, which is marketed under
the brand name Sencor. Metribuzin is off-patent. All
other products are third party products, Thus, the
parties claim, a large part of Bayer’s market share in
the market for vegetable herbicides is controlled by
third party suppliers. However, for some of these
third-party products Bayer has a long-term exclusive
contract, which means it is Bayer which controls the
product.

The parties claim that most of the active ingredients
used for the formulation of herbicides for vegetables
are off-patent, so that generic competition is prevalent
in almost all national markets. However, ACS’s main
product Aclonifen is off-patent and still a very success-
ful product. In France it has [10 to 20] %, in Germany,
one of the five most important markets in terms of
size even [20 to 30] % of the market. ACS is the
only company which has notified Aclonifen for re-
registration. Moreover, it has [...] the base chemical
Trichlorobenzene. Therefore, there will not be generic
competition for this product.

Furthermore, the parties claim that the market for
vegetable herbicides includes a large variety of products
which, with the exception of some old commodity-
type products, are predominantly used on other crops,
such as cereals and potatoes. The fact that the same
products are used on several crops could mean that it
would be difficult for Bayer and ACS to price-discrimi-
nate towards growers of vegetables. However, none of
the parties own products is used in cereals, and the use
of Aclonifen in sunflowers in Greece is less than its use
in vegetables. As concerns potatoes the parties would
for potato
become dominant also in the market
herbicides in exactly the same three countries Greece,
Portugal and Sweden. The only case in which this
argument holds is the product Dinitramine (Cobex),
which ACS distributes for Wacker Chemie in Greece.

15.4.2004

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Official Journal of the European Union

L 107/71

Dinitramine is predominantly used in cotton where
the parties would not become dominant. Moreover,
Dinitramine will lose registration for use in vegetables
after 2003. Therefore, the proposed transaction would
not lead to a dominant position in Greece.

the latest. ACS sells Dropp 50 WP which consists of
Thidiazuron and the Ethephon and Cylanilide based
product Finish. Dropp 50 WP is used both as a
regrowth inhibitor and as a defoliant. There is, there-
fore, an overlap for cotton defoliants, although most
likely not on a lasting basis.

Conclusion on vegetable herbicides

(644)

For all the above reasons the Commission has reached
the conclusion that
the proposed transaction will
create a dominant position in the overall markets for
vegetable herbicides in Portugal and Sweden.

Cotton harvest aids

(645) Cotton harvest aids comprise a group of products
which are designed to simplify harvesting. As to
their specific field of application and their chemical
properties, harvest aid products are to be divided into
three different product groups. The first group consists
of defoliants which make harvesting easier by killing
the leaves without negatively affecting the crop itself.
Secondly,
there are boll openers which serve the
purpose of opening the bolls of all cotton plants
simultaneously, and finally, the third group of harvest
aid products is made up of regrowth inhibitors which
prevent the regrowth of weeds after e.g. unexpected
rain. Since, in contrast to selective herbicides, cotton
harvest aids are not designed to prevent or reduce
weeds affecting plant growth and development but
rather to simplify harvesting, they constitute a product
market which is separate from herbicides.

(647) Respondents to the market investigation have con-
firmed that customers have practically no alternatives
to the parties’ products in cotton defoliants. There is
only one new product entering this market. FMC is
going to register its herbicide Carfentrazone as a cotton
defoliant. FMC’s product is a real herbicide that kills
the plant. Dropp and DEF, on the other hand, have a
hormonal mode of action (hormonal defoliant). The
important consequence is that cotton, a perennial crop,
starts growing again after treatment with a herbicide if
whether conditions are right (i.e. moisture), staining
the white fibres during harvest, something that a
hormonal killer does not do. FMC plans to launch its
product in Spain in 2002 and in Greece in 2003. It
expects to have a market share of [...%] in Spain and
[...%] in Greece in 2004. This would reduce the
position of the parties in 2002 and 2003, the two last
years where, according to Bayer, there will be an
overlap, to levels of still beyond [70 to 80] %.

(648) Consequently, the Commission has reached the con-
clusion that the proposed transaction will create a
dominant position on the markets for cotton defoliants
in Greece and Spain.

General conclusion on herbicides

(646) Greece and Spain are the only countries where both
parties are active. In Greece, the Parties’ combined
market share is [80 to 90] % (Bayer: [10 to 20] %,
ACS: [60 to 70] %). In Spain, the Parties’ combined
market share amounts to [90 to 100] % (Bayer: [10 to
20] %, ACS: [80 to 90] %). Bayer generates all of its
turnover with the Tribufos-based product DEF which
can be used only as a pure cotton defoliant. According
to the parties, the active ingredient Tribufos will not be
re-registered pursuant to Council Directive 91/414/
EEC so that the product will be phased out in 2003 at

In herbicides, the Commission has reached the con-
clusion that the proposed transaction will create or
strengthen a dominant position in the markets for beets
herbicides (other than post-emergence graminicides) in
the whole of the EU, for cereal herbicides in Belgium,
Germany and Sweden, for maize herbicides in Belgium
and the Netherlands, for potato herbicides in Greece,
Portugal, Spain and Sweden, in vegetable herbicides in
Portugal and Sweden and for cotton defoliants in
Greece and Spain.

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15.4.2004

D. AGRICULTURAL FUNGICIDES

(649)

Both Bayer and ACS are active in the development
and production of fungicides. Fungicides are used to
prevent deterioration of plants and plant products
through fungi and moulds prior to and after harvesting.
Fungicides are agents used to control plant diseases
caused in particular by fungi. The diseases attacking a
crop will vary according to the variety planted in that
year, the weather conditions and the husbandry of the
crop. The crop variety will determine the susceptibility
of the crop to attack by a range of diseases such as
powdery mildew, rust, septoria or eyespot. The weather
conditions will influence the type and the intensity of
the attack. Husbandry of a crop can diminish the risk
that certain diseases will develop. For instance, proper
crop rotation or ploughing of the field reduces the
risks of certain diseases.

(650) As a consequence of these complexities it is usual for a
farmer to use a programme of sprays which will be
adjusted in its intensity and in the types of active
ingredient used depending on local weather conditions
and disease susceptibility of the crop. This choice may
be influenced by distributors, technical experts and
Member State officials who have a detailed knowledge
of diseases and their epidemiology and of the best
fungicides to control
these diseases depending on
predicted outbreaks (protective control) or the presence
of disease in the crop (curative control).

(653) Many make a distinction between, on the one hand,
‘systemic’ fungicides and, on the other hand, ‘contact’
or ‘non-systemic’ fungicides. Although the definitions
of these concepts do not seem to be universally agreed
upon, the general sense of the concepts is reasonably
well accepted. Systemic fungicides ‘move’ within the
plant, while contact fungicides stay on the surface of
the plant, where it has been sprayed. Systemic fungi-
cides are thus able to reach pathogens dwelling within
the leaf tissue, where contact fungicides are unable
to act. Generally speaking, most systemic products
therefore exhibit curative activities, whereas contact
products are mainly used as protectants (preventive)
before infection occurs. Protectants are usually located
in the lower price segments, whereas systemic products
usually reach higher prices due to their more reliable
post-infection activity. Contact fungicides are mostly
older (often non-organic) off-patent chemistry being
sold by many competitors. Systemic fungicides are
more often the domain of the R & D-based companies.
The two types of fungicides are often used together for
purposes of resistance management. However,
the
analysis of the competitive effect of the proposed
transaction is particularly focused on the segment of
the newer, mostly systemic, fungicides.

(654)

The parties estimate that the value of the fungicides
market in the EEA amounted to EUR 2 246 million in
2000. The turnover generated by Bayer in the EU in
the fungicides market was in 2000 EUR [...]; the
respective turnover of ACS amounted to EUR [...].

(651)

(652)

If there is a range of diseases present and a single active
ingredient does not control this range, a farmer will
either tank-mix a number of single active products, or
use a pre-formulated product containing a mixture of
a number of active substances. As the disease spectrum
alters throughout the season in response to changing
weather conditions, the products will be altered to suit
the prevailing disease conditions.

(655)

The farmer, often based on advice from local experts
and recommendations from bodies such as the Fungi-
cide Resistance Action Committee (FRAC), will also try
to prevent the onset of resistance to particular active
ingredients by alternating between and/or combining
active substances of different chemical classes through-
out the season if the same disease is present for a long
period and multiple applications are required. In some
cases, resistance to some active classes will already be
present in the local disease population and the farmer
will need to use active substances which are still
effective against that particular disease population.

D.1. Relevant product markets

The parties follow the approach to product market
definition taken by the Commission in Case M.1806 —
AstraZeneca/Novartis, which was that an assessment of
the fungicide sector by crop is an appropriate starting
point, since the various plants display differing (albeit
partly overlapping) disease patterns. However,
the
market investigation in Case M.1806 — AstraZeneca/
Novartis showed that it could also be considered to
divide the markets by reference to a particular disease.
The market
investigation in the present case has
generally confirmed that an assessment crop-by-crop
is an appropriate starting point. Many respondents
also stress the importance of considering the various
diseases when analysing the competitive impact of the
transaction in the fungicides segment. However,
in
most markets it is, for the purpose of the present
Decision, not necessary to divide the markets further
by disease.

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(656)

(657)

The one exception from this conclusion is grapes
fungicides. In Case M.1806 — AstraZeneca/Novartis,
the Commission concluded that the market for grape
fungicides had to be assessed separately from other
fungicides applied to fruits and nuts, and split along
the lines of the major grape diseases. Fungicides for
downy mildew, powdery mildew and grey mould/
botrytis had to be considered as separate product
markets. In the present case the Parties follow this
market definition in the notification. Most respondents
to the Commission’s market investigation support the
approach of dividing grape fungicides into these three
different product markets. The Commission therefore
follows the market definition from Case M.1806
— AstraZeneca/Novartis and considers that separate
markets exist
for products for control of downy
mildew, powdery mildew and botrytis in grapes.

In Case M.1806 — AstraZeneca/Novartis, the Com-
mission also found strong indications that there was a
separate market for strobilurin-based cereal fungicides.
Strobilurins refer to formulated products containing
an active substance of the strobilurin chemical class.
Strobilurins were introduced in 1996 and can be used
on a wide range of crops worldwide.
In Europe,
strobilurins have been introduced primarily for the
protection of cereal crops and grapes. ACS is not active
in the production of strobilurin-based fungicides and
is not expected to launch strobilurin-based fungicides
within the next years. Bayer has recently acquired the
‘Flint’ strobilurin-line from Novartis (as a result of
the commitments in Case M.1806 — AstraZeneca/
Novartis). However, due to the fact that strobilurin-
based fungicides marketed by Bayer are still in the
process of registration in most EU Member States,
Bayer’s market position in this market segment is
still relatively weak compared to its most important
competitors, BASF and Syngenta. The parties therefore
submit that it can be left open whether strobilurins
form a separate product market.

(658)

Since the overlap in this case is entirely in the segment
of non-strobilurin fungicides, the question for the
purposes of market definition in this case is whether
non-strobilurin fungicides form a separate relevant
market or are part of an overall market for cereal
fungicides. However, the only national market in which
competition concerns are identified on any market
definition is Italy, where according to the parties, only
non-strobilurin based fungicides are sold. Therefore,
for the purposes of this Decision, it does not have
to be decided whether non-strobilurins constitute a
separate product market.

(659) Regarding fruits and nuts, a number of respondents to
the Commission’s market investigation have submitted
that a separate market for strawberry fungicides should
be considered in Sweden. These respondents argue that
the parties have the only fungicides registered for a
number of diseases on strawberries in Sweden. The
parties have not provided evidence that there indeed
are other products registered as strawberry fungicides
in Sweden. The Commission will
therefore assess
strawberry fungicides as a separate relevant product
market in Sweden.

D.2. Competitive assessment

General considerations

(660) At the national level, the parties’ activities overlap in a
large number of crops and Member States. According
there are
to the information in the notification,
69 affected fungicides markets. Following the investi-
gation, the Commission considers that the transaction
would create or strengthen a dominant position in
19 national markets. These markets will be analysed in
detail below.

(661)

In the other affected markets, the Commission con-
siders that no competition problems arise. The Com-
mission has in each of these markets reached this
conclusion for one or more of the following reasons:

(662)

The combined market share of the parties is low; there
is no overlap between the parties’ activities either
because of misallocation of market share or because
the overlap has ceased to exist for other reasons; the
market share increment is very small and the structure
of the market is unlikely to be affected by the operation;
the structure of the market is unlikely to be affected by
the operation as the pricing incentives of the parties’
products would not be affected; the parties have largely
overestimated their market position; there are strong
competitors who are likely to be able to provide
effective competition on the market; new product
introductions by competitors are likely to provide
strong competition to the parties’ products in the near
future.

(663)

The Commission’s analysis in the markets where
competition concerns are found is as follows:

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Official Journal of the European Union

15.4.2004

(a) Cereal fungicides

(664)

In Case M.1806 — AstraZeneca/Novartis the Com-
mission described the various diseases attacking cereals
and the active ingredients used to control them. Most
of this description is still relevant.

(665) Wheat and barley are the two most important cereal
crops. They account for about 87 % of the total area
cultivated with cereals in the EU and for about 95 % of
cereal fungicides consumption. The main diseases in
wheat are eyespot, powdery mildew, brown rust,
yellow rust, septoria leaf spot or blotch, septoria leaf
and glume blotch and fusuarium head blight. The main
diseases in barley are eyespot, powdery mildew, brown
rust, net blotch and leaf blotch or scald.

(666)

(667)

Each active substance has a typical activity vis-à-vis a
particular disease in a cereal crop, and this will
influence the farmer’s choice. The activity of a substan-
ce relates to the efficacy with which it can prevent and/
or cure the disease and the duration of the protection
(for curative substances this relates to the maximum
period during which the disease is already present in
the crop but can still be cured by the fungicide; for
protective substances this relates to the maximum
period of remaining protection). Other factors that are
taken into account are the potential of the product to
be mixed by the farmer with other products containing
other active substances in his spraying tank.

The active substances currently used as cereal fungi-
cides belong mainly to three different chemical classes.
The morpholines are the oldest of
these classes,
introduced in 1969, and mainly active against powdery
mildew and, for this reason, still part of modern
mixture products. They have some curative effect. In
1976 active substances of the triazole chemical class
were introduced. There are around 15 active substances
of this class currently on the market, with some being
introduced only in recent years. Their main strength is
with septoria, rusts and fusarium. The most recent
chemical class, the strobilurins, introduced in 1996,
combines a broad spectrum (powdery mildew, rusts,
septoria) with yield increase. In addition to these three
classes, there are some other active substances, the
most important being Cyprodinil to treat eyespot,
and Quinoxyfen, the most effective substance against
powdery mildew.

(668) Due to their superior activities, strobilurin-based fungi-
cides are increasingly replacing non-strobilurin based
fungicides. According to Bayer’s estimate, in 2000 the

overall sales in the EEA in the strobilurin segment
amounted to EUR 443,4 million; at the same time the
market value of the non-strobilurin fungicides market
was EUR 451,4 million. In 2004, according to the
parties’ estimates, the strobilurin segment will amount
to EUR 558,5 million, whereas sales in the non-
strobilurin segment are expected to decrease to
EUR 350,4 million. ACS is not active in the production
of strobilurin-based fungicides and is not expected to
launch strobilurin-based fungicides within the next
years. On a market for strobilurins market there would
therefore be no overlap between the activities of the
parties.

A n o v e r a l l c e r e a l f u n g i c i d e s m a r k e t

the

(669) On the overall cereal fungicide markets (strobilurin
transaction will,
and non-strobilurin-based),
according to the parties, only result in a combined
market share of more than 25 % in one national
market, Italy. Since the sales of the parties in this
country are purely non-strobilurin based, the competi-
tive impact of the transaction will be analysed on the
assumption of a market for non-strobilurin based
fungicides for cereals, and the overall cereal fungicides
market will not be further assessed.

A m a r k e t
c e r e a l f u n g i c i d e s

f o r n o n - s t r o b i l u r i n b a s e d

(670)

The parties submit that
their combined EEA-wide
market share would be [20 to 30] % (Bayer [10 to
20] %, ACS [10 to 20] %). Syngenta would have [30 to
40] %, BASF [20 to 30] %, DuPont [0 to 10] % and Dow
[0 to 10] %. The most important active ingredients sold
by the parties are Tebuconazole and Spiroxamine
(Bayer) and Fluquinconazole, Brumoconazole and
Prochloraz (ACS). These active ingredients are sold
either straight or in mixtures with other active ingredi-
ents. Tebuconazole, Fluquinconazole, Brumoconazole
and Prochloraz are all triazoles, while Spiroxamine is a
morpholine-like product with a good effect on pow-
dery mildew.

(671)

Several market participants have indicated that Bayer
has a new triazole under development, which is
claimed to have very good activity on a range of
diseases including eyespot and fusarium. According
to the Commission’s decision in Case M.1806 —
AstraZeneca/Novartis, ACS’s Prochloraz is the existing
triazole with the best activity on eyespot with ACS’s
Bromuconazole in joint second place.

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(672)

It should, however, be taken into account that there
seems to be consensus that the by far best-selling non-
strobilurin fungicides in cereals in BASF’s triazole
Epoxiconazole. According to one market participant
Epoxiconazole alone accounts for 48 % of total EU
sales of triazoles in cereals. According to this source,
Bayer’s Tebuconazole, which is the world’s best-selling
triazole overall (for all crops), is number two in the EU
cereals market with around 16 %. The same source
estimates the total sales of the triazoles of the parties
to account for around 27 % of the EU market. There
are no indications that the new triazole from Bayer
will be sufficiently successful that the new entity can in
a general way seriously challenge BASF’s leadership
within the triazole segment. Furthermore, it has to be
remember that the non-strobilurin market is constantly
under pressure from the strobilurins, which are partly
replacing them in most markets. As the market investi-
gation has confirmed that the parties in most Member
States do not have market shares (or market share
additions) at levels that would normally be considered
worrying, the remaining concerns are confined to one
Member State, Italy, which also happens to be one of
the Member States in which the parties consider that
there are no sales of strobilurins. A strong market
position in the non-strobilurin market
in Italy is
therefore more worrying than it would have been in
markets where strobilurins are advancing.

(673)

In Italy, the parties estimate that their combined market
share amounts to [30 to 40] % (Bayer [10 to 20] %,
ACS [10 to 20] %) with Syngenta ([30 to 40] %), BASF
([10 to 20] %) and DuPont ([0 to 10] %) the leading
competitors. The market investigation has not con-
firmed the parties’ market share estimates. The com-
bined market share of the parties is likely to be close
to [50 to 60] % (30). It has also showed that the parties’
market share would be considerably bigger than that
of any other market participant.

(674)

Bayer sells the active ingredients Triadimenol, under
the brand name Bayfidan, Triadimenol mixed with
Tebuconazole, under the brand name Matador, and
Tebuconazole under the brand name Folicur. ACS sells
mainly the product Stanza with the active ingredients
Prochloraz and Fenpropimorph.

(675)

Italy is peculiar in that fungicides for cereals are a
rather small market. There is not the same use of
fungicides on cereals as is the case in Northern Europe.

Cultivation is done on a more extensive basis than in
Northern Europe; as a result yields are significantly
less. The warmer climate results in less disease pressure;
hence the fungicide market is not so significant. This
means that there are fewer products available in Italy
than in, for instance, the much larger French market.
Because of the extensive nature of much of the area,
cost control is of paramount importance to Italian
cereal producers, hence high value new introductions
are not so readily accepted as in other West European
cereal markets. Most market participants agree that
Italy is a non-strobilurin market. It has been suggested
that the main cereal in Italy is durum wheat, in which
important disease is fusarium, and that
the most
neither strobilurins nor BASF best-selling triazole,
Epoxiconazole, have effect on this disease. This helps
explain why expensive products like strobilurins are
basically not used in Italy and why it seems that BASF
has not registered Epoxiconazole nor its strobilurin
Krexomim Methyl for cereals in Italy (31). There seems
to be no major product introductions planned for the
near future in this market. The picture of the parties
having the major products and a very large market
share is therefore likely to persist.

(676) Combining the fact that the parties combined are
considerably larger than their closest competitors and
the lack of new strong competition in the near future,
the Commission has reached the conclusion that the
proposed transaction would create or strengthen a
dominant position on the market for cereal fungicides
in Italy.

(b)

Fruits and nuts fungicides

(677)

The parties submit that the fruits and nuts market
encompasses a relatively broad range of products,
including in particular older commodity type products
such as copper products and dithiocarbamates (Manco-
zeb, Ziram and Thiram). They argue that there are a
high number of generic suppliers, especially in the
Italy and
major fruit producing countries (Spain,
France), that can easily substitute the parties’ products
and respond to any anticompetitive behaviour of the
leading suppliers. The parties argue that it cannot be
expected that those commodity type products can be
fully replaced by new strobilurin-based products or

(30) Business secrets: deleted confidential

information based on

competitors’ sales data.

(31) However, on the other hand,

it does seem that Syngenta’s
strobilurin product Amistar (Axozystrobin) is registered for use
on cereals, as well as for rice and sugar beet. [Business secrets:
Deleted confidential Syngenta information.]

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(680)

other innovative chemistry. For the purpose of reduc-
ing the risk of resistance development, the treatment
of fruits and nuts with strobilurin-based fungicides and
other specifically acting products will, according to the
parties, have to be limited. Hence, the parties argue
that even the introduction of new products like
strobilurin-based fungicides (Trifloxystrobin from Bay-
er or Pyraclostrobin from BASF) will have only limited
effects on the fruits and nuts market.

In their reply to the statement of objections, the parties
agree that Flint and Teldor still have the potential to
grow in the market for fruits and nuts fungicides. They
argue, however, that [...]. Likewise, they argue that [...].
They furthermore argue that ACS’s product Scala is
already facing strong competition from the introduc-
tion of Syngenta’s product Chorus (based on the active
ingredient Cyprodinil) and BASF’s Kresoxim-based
products sold under the brands Discus, Stroby, Alliage
and Candit. In addition, the parties do not expect Flint
and Teldor to compensate entirely for losses the
parties will suffer due to the introduction of generic
Tebuconazole by Makhteshim and generic Pyrimetha-
nil by Makhteshim and Chimac. The parties further
argue that Bayer’s Dichlofluanid-based product Eupar-
en will not be re-registered according to Council
Directive 91/414/EEC, and the replacement product
Euparen M (based on Tolylfluanid) is not expected to
compensate entirely for the decrease in sales, since it
can be expected that
the ‘gap’ will be filled by
other products during the interim period between the
phasing out of Euparen and the introduction of
Euparen M. In addition, BASF is expected to launch
a very competitive broad-spectrum mixture product
BAS 516 (BAS 510 + BAS 500). The parties finally
argue that BASF and Syngenta both have or will have
similar or even broader and more complementary
portfolios than the combined entity, including strobilu-
rins (both),
triazoles (Syngenta: Hexaco, Difenoco,
Penconazole), anilinopyrimidines (Syngenta: Cyprodi-
nil), specific protectants (BASF: Dithianon), Phenylpyr-
roles (Syngenta: Fludioxonil) and new,
innovative
modes of action such as SDIs (BASF: BAS 510).
Neither Bayer nor ACS are in the position to offer
Phenylpyrroles or SDIs. The parties therefore argue
that they are already facing vigorous competition on
the fruits and nuts markets, and that competition will
become even stronger due to the introduction of new
products by BASF and innovative new modes of action
by Syngenta and BASF. The parties argue that the
Commission has not taken into account ‘at all’ the
market situation in its assessment of the different
markets in the statement of objections.

(681)

The Commission cannot agree to these arguments. For
instance, it investigated in the statement of objections
claims made by the parties as to the effects of new
product introductions, whether by generic producers
or by research based competitors with new active
ingredients. On the basis of information from competi-
tors as to where and when they would introduce new
products and their expectations for the sales of such

‘easily substitute’

(678) With respect to the position of generic manufacturers,
respondents agree that
the older commodity type
products will not be fully replaced by newer products.
it is also argued that the older products
However,
cannot
the parties’ products. As
argued by one respondent, why would the parties
spend millions of dollars on research to discover new
products, if they are not substantially different from
the existing ones, and especially different from the old
commodities? It
there is a
widespread use of older commodity type products in
Southern Europe. In Northern Europe this is not true
to the same extent, and the parties in fact have a
very strong combined market position in several of
countries in Northern Europe.

is, however,

true that

(679)

Furthermore, respondents to the Commission’s market
investigation argue that the parties’ position will be
strengthened in the near future with the introduction
of Bayer’s Flint (Trifloxystrobin) product. Together
with the available products of the parties, Scala (Pyri-
methanil), Vision (Pyrimethanil and Fluquinconazole),
Folicur (Tebuconazole) and Euparen (Dicholfluanid),
the parties’ position will be strengthened. It is also
argued that Bayer’s newly developed botryticide Teldor
(Fenhexamid) is still in the process of market pen-
etration and supports the market presence of the
parties. A unique selling point of the Teldor is said to
be the extremely short pre-harvest interval of zero to
three days only in various fruit crops. This large
number of fungicides represents a broad portfolio
with different modes of action. Trifloxystrobin is a
strobilurine type fungicide, Pyrimethanil belongs to
the group of anilinopytimidines, Fluquinconazole and
Tebuconazole are triazoles and Dicholfluanid is an
isocyclic compound. Furthermore, Bayer’s Bayleton
(Triadimefon) as a specific product used against pow-
dery mildews in pome fruit complements the position
of the parties. It is argued that the parties would have
by far the strongest product portfolio and that these
products have a number of different modes of action,
which will enable the parties to implement very
effectively anti-resistance tools in the fruit fungicides
market.

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products, the Commission’s conclusion, for each of the
markets for which competitive concerns were raised in
the Statement of Objection, was that the effect of new
introductions was not sufficient to seriously challenge
the strong combined market position held by the
parties. [...], the Commission notes that Teldor has
already achieved significant success in some of the
markets in which it has been introduced. For instance,
according to the parties’ data, Teldor achieved a market
share of [20 to 30] % in Denmark in its first year of
sales in that country. [...], it should in this respect be
noted that the BASF product BAS 500, which the
parties claim will be an important new product in
fruits and nuts, is also a strobilurin. The parties have
provided material from BASF, which among other
topics discusses resistance management. BASF rec-
ommends alternating the use of BAS 500 with other
fungicides from other active ingredient classes. [...].

(685)

The parties argue that only [10 to 20] % of the sales of
Scala are generated in fruits and nuts, since Scala is
mainly used in vegetables and thus priced according to
the competitive situation in that market (33). Likewise
the parties argue that only [50 to 60] % of the sales of
Aliette in Denmark can be allocated to fruits and nuts.
The remaining [50 to 60] % of the sales are achieved
in vegetables. The parties therefore argue that
it
would be impossible for the combined entity to price
discriminate particularly towards growers of fruits and
nuts. However, the parties do not explain how this
argument can also be valid for Bayer’s products. Teldor
is sold [90 to 100] %, Baycor [90 to 100] % and
Euparen-M [90 to 100] % in fruits and nuts. Only
Folicur has the majority of its sales outside fruits and
nuts.

(682)

The transaction will lead to a considerable overlap,
even on an EEA-wide market, where the parties
estimate that they would have [30 to 40] % (Bayer [20
to 30] %, ACS [10 to 20] %) with leading competitors
being BASF ([10 to 20] %), Syngenta ([10 to 20] %),
DuPont ([0 to 10] %) and Dow ([0 to 10] %). At a
national level, the parties will have a strong position in
several countries, in particular in Denmark, France and
Germany.

(686)

The parties also argue that the market share of BASF is
likely to increase due to the launch of a very competi-
tive broad-spectrum mixture product (BAS 510 and
BAS 500). They have, however, not given concrete
indications for when this introduction will take place.
The Commission has asked actual and potential com-
petitors to comment on the claims made by the
parties and has come to the conclusion that this new
competition will not lead to significant changes to the
competitive situation in the near future (34).

(683)

In Denmark the parties in the notification estimated
that their combined market share amounted to [40 to
50] % (Bayer: [40 to 50] %, ACS: [0 to 10] %) with
leading competitors being Dow ([30 to 40] %) and
Syngenta ([10 to 20] %) (32). The parties have in their
reply to the statement of objections corrected some
misallocations of sales of the product Scala and now
argue that the parties have a combined market share
of [50 to 60] %. This also logically means that the
parties’ estimates of market shares of competitors must
be lower than those quoted above.

(684)

Bayer’s products are, in order of importance, Baycor
(Bitertanol), Teldor (Fenhexamid), Euparen-M (Tolyflu-
anid) and Folicur (Tebuconazole), while ACS sells
Aliette (Fosetyl) and Scala (Pyrimethanil).

(687)

It should also be noted that Teldor (Fenhexamid) was
only introduced in the Danish fruits and nuts market
in 2000 and in that year achieved a market share of
[...]. The parties’ position is therefore likely to be even
stronger in 2001 than it was in 2000.

(688) Combining this with the already strong position of the
parties, the fact that they combined are much larger
than their closest competitors, the growth potential in
the parties’ newer and future products and the lack
of new strong competition in the near future, the
Commission has reached the conclusion that
the
proposed transaction would create or strengthen a
dominant position on the market for fruits and nuts
fungicides in Denmark.

(32) Business secrets: deleted confidential

information based on

(34) [Business secrets: Deleted confidential information about com-

competitors’ sales data.

petitors’ product introductions.]

(33) This number was, however, given before the correction of Scala

sales referred to above.

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Official Journal of the European Union

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(689)

In France the parties in the notification estimated their
combined market share to be [50 to 60] % (Bayer: [20
to 30] %, ACS: [20 to 30] %) with main competitors
being BASF ([10 to 20] %), Syngenta ([10 to 20] %),
DuPont ([0 to 10] %) and a number of national
suppliers, selling mostly copper (approx. [10 to 20] %)
and sulphur compounds. The Parties have later correct-
ed their combined market share to [50 to 60] % (Bayer:
[30 to 40] %, ACS: [20 to 30] %). In their reply to the
statement of objections they have once again corrected
this number due to some misallocations of sales of the
product Scala and now argue that the Parties have a
combined market share of [50 to 60] %. This also
logically means that the parties’ estimates of market
shares of competitors must be slightly lower than those
quoted above. The market investigation has confirmed
that the position of the parties is above [50 to 60] %
and that their combined market share is considerably
larger than any of the competitors (35).

(690) ACS’s product portfolio encompasses [...] products.
The most important active ingredient is Iprodione,
which is sold in three different formulations (Kidan,
Rovran 500 WP and Rovran Aq 500 SC). Other main
active ingredients are Pyrimethanil sold under the
brand name Sari and Fluquinconazole (Vision) and
Myclobutanil (Systane). Bayer’s main products include
Horizon (Tebuconazole), Euparen (Tolylfluanid) and
Captan.

(691)

The parties argue that Horizon, which accounts for
more than [30-40 %] of Bayer’s sales in the market for
fruits and nuts fungicides, is mainly used on cereals,
and that the parties would therefore not be able to
raise the price of Horizon without losing sales in the
cereals market. However, both Euparen and Captan are
used [90 to 100] % in fruits and nuts. Among ACS’s
products, Kidan is used [70 to 80] % in fruits and nuts,
while Sari and Vision are both used [90 to 100] % as
are other ACS products such as Octave (Prochloraz),
Melprex (Donine), Aliette WG (Fosetyl), Indar (Fenbu-
conazole), Rhodiasan Flash (Thiram), Aaprotec and
Carbazinc (Ziram).

(692)

The parties furthermore argue that generic competi-
tors, particularly Makhteshim, will enter the market,
due to the fact that Tolylfluanid is already off patent
and that Tebuconazole will be off-patent in 2003. The
parties also submit that BASF is expected to launch
a very competitive broad-spectrum mixture product
(BAS 510 and BAS 500). As a result, the parties expect
that their combined market share will decrease over
the following years to [40 to 50] % in 2004. The

parties have not, however, explained when this new
competition will take effect. The Commission has
asked actual and potential competitors to comment on
the claims made by the parties and has come to the
conclusion that this new competition will not lead to
significant changes to the competitive situation in the
near future (36).

(693) On the other hand,

the Bayer’ product Flint was
introduced in 2001. The parties expect Flint to reach a
market share of [0 to 10] % in 2004. The parties’
position is therefore likely to be even stronger in 2001
than it was in 2000. It should also be noted that Teldor
(Fenhexamid) has only recently been introduced in
France. Given the success of Teldor in several other
countries in the fruits and nuts market, there seems
therefore to be reasons to give some weight to the
claims of third parties that Teldor is still in the process
of market penetration in this market.

(694) Combining this with the already strong position of the
parties, the fact that they combined are much larger
than their closest competitors, the growth potential in
the parties’ newer and future products, the lack of new
strong competition in the near future, the Commission
has reached the conclusion that the proposed trans-
action would create or strengthen a dominant position
on the market for fruits and nuts fungicides in France.

(695)

In Germany, the parties estimate that their combined
market share amounts to [50 to 60] % (Bayer [30 to
40] %, ACS [10 to 20] %) with leading competitors
being BASF ([20 to 30] %) and Syngenta ([0 to
10] %). The market investigation has confirmed that
the position of the parties is around [50 to 60] % (37).

(696) ACS sells three products, Vision (Fluquinconazole
and Pyrimethanil), Scala (Pyrimethanil) and Systhane
(Myclobutanil). Bayer’s main products include Euparen
(Dichlofluanid) and Folicur (Tebuconazole).

(697)

The parties argue that Dichlofluanid, which accounts
for [40 to 50] % of Bayer’s sales in this market under
the brand name Euparen, will not be re-registered
under Council Directive 91/414/EEC. The parties sub-
mit, however, that Bayer [...]. The Tebuconazole based

(35) Business secrets: deleted confidential

information based on

(37) Business secrets: deleted confidential

information based on

competitors’ sales data.

competitors’ sales data.

(36) [Business secrets: Deleted confidential information about com-

petitors’ product introductions.]

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product Folicur is Bayer’s second main product, but
has its main markets in cereals and in oil and protein
crops. The parties argue Tebuconazole will be off-
patent in 2003 and thus subject to generic competition;
the parties expect that this circumstance will result in
a decline of Bayer’s market shares. The Parties also
argue that the market share of BASF is likely to increase
due to the launch of its new product Pyraclostrobin
(BAS 500). Furthermore, they argue that BASF is
expected to launch a very competitive broad-spectrum
mixture product (BAS 510 and BAS 500). They have,
however, not given concrete indication for when this
introduction of new products by generic producers
and BASF will take place. The Commission has asked
actual and potential competitors to comment on the
claims made by the parties and has come to the
conclusion that this new competition will not lead to
significant changes to the competitive situation in the
near future (38).

(698) On the other hand, the Bayer’s product Flint was
introduced in 2001 and reached a market share of [0
to 10] %. The parties expect Flint to reach a market
share of [0 to 10] % in 2004. It should also be noted
that Teldor (Fenhexamid) was only introduced in the
fruits and nuts market in 2000 and in that year
achieved a market share of [0 to 10] %. The parties’
position is therefore likely to be even stronger in 2001
than it was in 2000.

(699) Combining this with the already strong position of the
Parties, the fact that they combined are much larger
than their closest competitors, the growth potential in
the parties’ newer and future products, the lack of new
strong competition in the near future, the Commission
has reached the conclusion that the proposed trans-
action would create or strengthen a dominant position
on the market
for fruits and nuts fungicides in
Germany.

(c)

Strawberry fungicides in Sweden

(700)

In Sweden, the parties submit in the notification that
Bayer has a market share of [40 to 50] % in the overall
fruits and nuts market, while ACS has [...]. Bayer sells
Baycor (Bitertanol), Bayleton (Triadimefon), Euparen-
M (Tolyfluanid) and Teldor (Fenhexamid).

(38) [Business secrets: Deleted confidential information about com-

petitors’ product introductions.]

(701) However, in their reply to the statement of objections
the Parties acknowledge that ACS’s products Scala,
Rovral 75 WG and Aliette 80 have erroneously been
omitted in the data for fruits and nuts due to the fact
the marketing and the distribution of ACS’s
that
products is done through a sales agent, Nordisk Alkali.

(702)

The Commission’s attention was led to this problem by
respondents to its market investigation who submitted
that ACS have products registered for use on straw-
berries, and that the parties would have a very strong
position in strawberry fungicides and indeed be the
only ones with products to treat certain diseases. Thus,
one respondent wrote:
‘According to the Swedish
registration handbook “Bekaempning i praktikken”,
there are only 4 products registered for control of
botrytis cinerea in strawberries in Sweden. These prod-
ucts are Euparen M 50 WG (dichlofluanid), Rovral Flo
(iprodione), Teldor (fenhexamid) and Scala (pyrimen-
thalil). All these products are either Bayer or Aventis
products. The only product recommended to treat
phytophterea on strawberries is Aliette 80 WG (fosetyl-
al) from Aventis. Therefore, we can assume that the
parties have a 100 % market share in the Swedish
strawberry market.’ Another respondent wrote:
‘The
following fungicides are registered for use in strawberr-
ies in Sweden: Bayleton Special (Bayer), Euparen M
50 WG (Bayer), Rovral 75 WG (Aventis), Scala (Aven-
tis), Teldor 50 WG (Bayer) and Topas (Syngenta, only
allowed for post-harvest use). Due to this product
portfolio the parties have a very strong market pos-
ition’. A third respondent writes that regarding certain
diseases in strawberries as e.g. botrytis and phytophto-
ra, the new entity would have almost 100 % domi-
nance. The respondent mentions Alliette, Bayleton
Special, Euparen, Rovral, Scala and Teldor as the
dominating products. This respondent actually men-
tions this as a general problem in fruit fungicides in
Sweden, mentioning the products Euparen, Topsin
(Aventis), Baycor (Bayer), Bayleton Special and Scala.

(703)

The parties in an answer to an Article 11 request wrote
‘all major companies do have or could well have
fungicides which are also used on strawberries for the
following diseases, such as’ (list follows). However, the
parties did not at that point specify which of the
competitors’ products on their list are actually regis-
tered in Sweden for use on strawberries.

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(704)

In their reply to the statement of objections the parties
gave a list of products, giving the Swedish Board of
Agriculture as source, which would be registered for
strawberry fungicide in Sweden in 2002. There are
12 products on the list and the parties submit that
there is no disease, which can only be treated by the
parties’ products. Six of the 12 products on the list
belong to the parties: Alliette 80 WG, Bayleton Special,
Euparen M 50 WG, Rovral 75 WG, Scala and Teldor
WG 50. They mention two products by Syngenta,
Topas 100 EC and Recop. However, the parties have
provided a label for Topas, according to which Bayer
(Gullviks) distributes this product in Sweden. Further-
more, according to the homepage of ‘Kemikalieinspek-
tionen’, the Swedish government agency responsible
for registration, the registration of Recop stopped on
31 December 2001. The same is true for another
product on the list, Funguran-OH 300 SC. Another
product mentioned by the parties is Zence 40 (Svenska
Predator). However, on the home page of Kemikaliein-
spektionen there is no trace of this product. The final
two products on the parties’ list is Kumulus DF, which
is based on sulphur and Binab TF WP, which is an not
an agrochemical but an agrobiological product, which
can be used for disease control in various crops.

(705) According to the list supplied by the parties, Binab TF
WP is the only product other than those of the
parties, which is active against botrytis. Thus, among
agrochemical product, the parties have the only prod-
ucts active against botrytis; as mentioned above, Eupar-
en, Rovral, Teldor and Scala. Aliette is the only product
registered for treating the diseases phytophthora fraga-
riae and phytophthora cactorum. Thus the information
from third parties that the parties for some diseases in
strawberry have all or nearly all products that can be
used has been largely confirmed. The Commission has
received no evidence that this situation will change
substantially in the near future.

(706)

The parties in their reply to the statement of objections
contest that there is a separate market for strawberry
fungicides; they argue that strawberries are part of the
overall fruits and nuts market. The market segment
‘strawberry fungicides’ would be too small (approxi-
mately EUR [...] million in 2000) to develop and
register a product only for strawberries. The parties
argue that the products used on strawberries are in
general broad range fungicides, which are registered
and used not only in strawberries in Sweden, but also
in other crops and other countries. Thus, the parties

they are not

in the position to price
argue that
discriminate especially against growers of strawberries
in Sweden.

(707)

The Commission accepts that in some markets it may
be a valid argument that market participants cannot
raise prices for broad range fungicides for a specific,
small market segment. However, this clearly depends
on the distribution of the sales of the products for the
various segments. This is also the way the parties have
used this argument in other product markets. They
have, however, not provided such data for their
products used in the fruits and nuts, and in particular
in strawberries, in Sweden. It should in this respect
show that the total fruits and nuts market in Sweden
according to parties was EUR [...] million in 2000. The
strawberries segment is therefore [40 to 50] % of the
overall fruits and nuts market. Furthermore, there is
often a difference between products working well on
‘soft fruits’ and fruit such as apples and pears, which
may very well make up a large part of the remainder
of
the fruits and nuts market. The parties have
therefore not provided convincing arguments why the
monopoly or near-monopoly on strawberries could
not be a basis for anti-competitive behaviour.

(708)

Based on this information the Commission considers
that it is likely that Aventis is indeed active on the
fruits and nuts market in Sweden and the Commission
has reached the conclusion that the proposed trans-
action would create or strengthen a dominant position
on the market for strawberry fungicides in Sweden.

(d) Grape fungicides for control of botrytis

(709) Of the three grape-disease markets, botrytis is (in value
terms) the smallest market. Bayer estimates sales within
the EEA of approximately EUR [...] million in 2000. At
the EEA level, the parties submit that Syngenta is the
market leader with [30 to 40] %, followed by ACS ([20
to 30] %), BASF ([10 to 20] %), Bayer ([0 to 10] %) and
DuPont ([0 to 10] %).

(710)

It is noteworthy that Dow is not active at all on this
market, while DuPont only has a marginal position in
a few national markets. For instance, DuPont has no
sales at all
in the by far largest market, France.
Furthermore, the parties seem to overestimate the
position of BASF. Thus, if the proposed transaction
went ahead as notified, the general picture would

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therefore be more that of two large players, Bayer/ACS
and Syngenta, together having around [70 to 80] % of
the total EEA market, with the third player BASF much
smaller than either of these two (39).

(711)

The Commission in its decision based on Article 6(1)(c)
of the Merger Regulation found that the parties in
several national markets have underestimated their
own position. The same finding is maintained in
this Decision, despite the parties’ objections. In their
observations on the decision based on Article 6(1)(c)
of the Merger Regulation, the parties restate their belief
in their estimates relating to their market shares. The
parties argue that their market share estimates are
based on panel data as well as expert judgments
concerning the total market volume and on actual sales
figures. The parties argue that discrepancies with
respect to market share estimations, wherever they
appear, could be due to the fact that third parties may
not have a correct picture of the split between grapes
and other crops in the use of certain products. Since
most of ACS’s and Bayer’s products are also used on
other crops, the parties consider it difficult for other
market participants to correctly allocate product sales
to the various crops.

(712)

The Commission recognises that there may be some
merit in these arguments. However,
just as other
market participants may have some difficulties in
correctly estimating the sales of Bayer and ACS, Bayer
and ACS may have difficulties correctly estimating the
sales of their competitors. The best view of the market
can therefore be found by compiling data from the
various market participants regarding their own sales
and then comparing these. The Commission’s view of
the market shares has been formed in this way.

expected in the near future. It should, however, also
be noted that grapes are treated with many sprays
(according to the Commission’s decision in Case
M.1806 — AstraZeneca/Novartis, up to 15 sprays in
one season). The resistance problems referred to by the
parties and the large number of sprays means that in
grape fungicides it can become very difficult to avoid
buying the products of a company who controls a
relatively small part of the market.

(714)

The main active ingredients of the parties in the
botrytis market are ACS’s Pyrimethanil and Iprodione
and Bayer’s Fenhexamid and Dichlofluanid. Respon-
dents to the Commission’s market investigation have
argued that ACS with Pyrimethanil and Iprodione have
a broad portfolio in the treatment of botrytis while
Bayer’s Fenhexamid has the advantage of a very short
pre harvest interval. This should help growers build
more flexibility into their spray program. The addition
of these four active ingredients would create a very
strong position in this market, particularly since it has
been argued that Pyrimethanil and Fenhexamid, which
were both introduced in the 90s, do not yet face any
resistance issue.

(715)

The parties in their observations on the 6(1)c decision
present arguments against the view that the combined
entity will enjoy a competitive advantage over other
manufacturers of fungicides.

(713) According to the parties, the botrytis market is reacting
very sensitively to resistance developments. To avoid
resistance of the disease against a given product, the
farmer has to switch products after a certain time. The
parties therefore submit that even a successful product
cannot maintain a high market share over a long
period of time; new product launches within short
intervals have occurred in the past and are also

(716)

(39) Business secrets: deleted confidential

information based on

competitors’ sales data.

They argue that ACS’s Iprodione and Bayer’s Dichloflu-
anid are rather ‘unattractive’ components due to their
lower efficacy compared to top-ranked products such
as Switch from Syngenta. They claim that [...] is
regarded as having the weakest efficacy out of all of
the Dicarboximides, when compared to BASF’s Ronilan
(based on Vinclozolin) and Sumitomo’s Sumislex
(based on Procymidone). Furthermore, they argue that
Syngenta’s Switch has the additional advantage of
incorporating two active ingredients with two different
modes of action, thus allowing a farmer in some
countries to apply this product twice as often as
specific products (e.g. the Parties’ products Scala or
Teldor) in a regular spray programme. They also argue
that [...].

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(717)

They do admit that the resistance situation described
for Fenhexamid and Pyrimethanil is, in general, correct,
although they argue that resistance to [...] has been
observed in development trials. The parties have not
provided any evidence that resistance problems are
likely to have any effects on the sales of Scala in the
EEA in the near future. They argue further that
both compounds are specifically labelled for limited
applications only. They claim that, in practice, [..] is
not applied more than [...] per season and is subject to
severe competition from other Anilinopyrimidines
(Syngenta’s Switch based on Cyprodinil and Sipcam’s
Frupica based on Mepanipyrim). They further argue
that other important alternative treatments include
Syngenta’s Geoxe (based on Fludioxonil), Sumitomo’s
Sumico based on Diethofencarb and Carbendazim and
Syngenta’s Sekoya (based on Fluazinam).

(718)

The parties furthermore argue that the short pre-
harvest interval of Bayer’s Teldor is not a significant
advantage for the Parties, since botryticides are hardly
ever used late in the season.

(719) Other market participants argue, however, that the
parties will have the broadest product portfolio in the
industry in terms of number of active ingredients and
number of modes of action. The only competitor,
which has anything like the portfolio of the parties, is
considered to be Syngenta.

(720)

The parties reiterate the above arguments in their reply
to the statement of objections. Third parties, however,
argue that the parties would be the only company with
botryticides based on active ingredients having four
different modes of action. One market respondent
argue that this would allow them to cover the whole
spray schedule during a season since normally three,
but in some botrytis areas four, applications against
botrytis are used. It is thus argued that the parties
would have a unique spray system using Pyrimethanil
for the first application, Iprodione for the second,
Dichlofluanid for the third and Fenhexamid at the end
of the season. Another respondent submits that in
theory four treatments are required, but in practice
two or three are normally applied, except in the
Champagne area where three or more treatments are
applied. In the context of these remarks, the fact that
Scala is not applied more than one time per season

would thus not seem to be a strong argument, when
the parties would have active ingredients from four
different modes of actions.

(721) Other market participants acknowledge that older
chemistries like Iprodione and Dichloflunid may be
technically less attractive but that this is reflected in
their price and that they are therefore used in sequence
with other active ingredients like Fenhexamid and
Pyrimethanil.

(722) As to the argument that the short pre-harvest interval
of Teldor is not a significant advantage, this is contra-
dicted by other market participants who were asked to
comment on this point. It is mentioned explicitly on
Teldor labels that they for grapes can be used up to
short periods before harvest. One market respondent
mentions that this advantage is especially important
for the table grape segment.

(723)

In addition,
[...], and that
the parties argue that
Iprodione already faces not only generic competition,
but also certain resistance problems. The parties did
not give the names of any companies selling products
in the EEA based on Iprodione and they have not
described in more detail what ‘certain resistance prob-
lems’ means. The Commission was therefore not able
to verify whether the statements above were important
for the assessment of the parties’ position (40).

(724)

The parties in their reply to the statement of objections
provide a list of companies, which according to the
parties supply generic Iprodione in Italy. However, Italy
is not one of the markets in which the Commission has
competition concerns. It should also be noted that
competitors state that they are not aware of generic
Iprodione in the EU.

(725) One market participant argues that in general generic
competition is likely to be less important on newer
products in the botrytis market than in some other
markets. The reason given is the widespread resistance
problems, since this means a shortening of product life
cycles.

(40) [Business secrets: Deleted confidential information about com-

petitors’ product introductions.]

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(726)

Finally, the parties argue that BASF is developing their
new product BAS 510 against botrytis, which will be
launched in 2002 or 2003. It is indeed true that most
market participants expect BASF’s BAS 510 to be a
successful product. However, market participants argue
that even if this one product becomes successful, it will
not change the overall situation in this market of
the parties having by far the best portfolio in the
market (41).

(727)

The parties submit that seven national markets are
affected by the transaction. Of these France is easily
the largest with a value of EUR 32 million, followed by
Italy with EUR 15 million. Competition problems are
found in France, Germany, Greece and Portugal.

(728)

In France, the parties in the notification estimated their
combined market share to be [40 to 50] % (Bayer [10
to 20] %, ACS [20 to 30] %) with leading competitors
being Syngenta ([30 to 40] %) and BASF ([0 to 10] %).
The parties have later corrected this to [40 to 50] %
(Bayer [10 to 20] %, ACS [20 to 30] %). The market
investigation has broadly confirmed the parties’ view
of the positions of the main competitors (42). The
situation would therefore be that of two large competi-
tors with a considerable gap down to the third player
BASF.

(729) ACS generates almost 90 % of its turnover through the
sale of Scala (Pyrimethanil) while Bayer’s only product
is Teldor (Fenhexamid). As mentioned above, both
Pyrimethanil and Fenhexamid are relatively new active
ingredients. Bayer has thus increased its sales in the
French botrytis market from EUR [...] in 1998 and
1999 to EUR [...] in 2000. According to the Parties,
Scala and Teldor together have a market share of [40
to 50] %.

(730)

This combination of
the parties’ successful active
ingredients, the growth potential of their newer prod-
ucts and the parties’ high market share has led the
Commission to reach the conclusion that the proposed
transaction would create or strengthen a dominant
position on the market for fungicides for treating
botrytis on grapes in France.

(731)

(732)

(733)

(734)

In Germany, the parties estimate that their combined
market share is [30 to 40] % (Bayer [10 to 20] %, ACS
[20 to 30] %) with leading competitors being Syngenta
([30 to 40] %) and BASF ([10 to 20] %). The market
investigation suggests that the position of the parties is
somewhat larger than [30 to 40] % and more likely in
the neighbourhood of [40 to 50] % and that their
combined market share is substantially bigger than
that of Syngenta (43).

Bayer’s main product sold in the German market for
the protection of grapes against botrytis is Teldor
(Fenhexamid) while ACS’s market share is based on
Scala (Pyrimethanil), Rovral (Iprodione) and Sumico
(Carbendazim and Diethofencarb).

The combination of
the parties’ successful active
ingredients, the growth potential of their newer prod-
ucts and the parties’ high market share has led the
Commission to reach the conclusion that the proposed
transaction would create or strengthen a dominant
position on the market for fungicides for treating
botrytis on grapes in Germany.

In Greece, the parties estimate that their combined
market share amounts to [20 to 30] % (Bayer: [10 to
20] %, ACS: [10 to 20] %) with leading competitors
being Syngenta ([30 to 40] %), BASF ([10 to 20] %)
and DuPont ([0 to 10] %). Other market participants
give considerably higher estimates (ranging from [50
to 60] % to [80 to 90] %) of the parties’ market share.
The market investigation has in fact shown that the
parties’ position is likely to be considerably higher than
what
the combined
market share of the parties is much larger than that of
any of their competitors (44).

the parties estimate and that

(735)

Bayer sells Teldor (Fenhexamid) while ACS sells Rovral
(Iprodione), Scala (Pyrimethanil) and Ronilan Flow
(Vinclozolin), which accounts for almost [50 to 60] %
of ACS sales in this market.

(736)

The combination of
the parties’ successful active
ingredients, the growth potential of their newer prod-
ucts and the parties’ high market share has led the
Commission to reach the conclusion that the proposed
transaction would create or strengthen a dominant
position on the market for fungicides for treating
botrytis on grapes in Greece.

(41) [Business secrets: Deleted confidential information about com-

(43) Business secrets: deleted confidential

information based on

petitors’ product introductions.]

competitors’ sales data.

(42) Business secrets: deleted confidential

information based on

(44) Business secrets: deleted confidential

information based on

competitors’ sales data.

competitors’ sales data.

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(737)

In Portugal, the parties estimate that their combined
market share amounts to [50 to 60] % (Bayer: [10 to
20] %, ACS: [30 to 40] %) with leading competitors
being DuPont ([10 to 20] %), Syngenta ([10 to 20] %)
and BASF ([0 to 10] %). The market investigation has
generally confirmed that the Parties would have a high
combined market share, which is likely to be over [50
to 60] % and considerably larger than that of any of its
competitors (45).

(738)

Bayer sells Euparen (Dichlofluanid) while ACS sells
Scala (Pyrimethanil) and Rovral (Iprodione). Bayer is
planning to introduce [...]. Both are expected to achieve
significant market shares by 2004.

(739)

the parties’ successful active
The combination of
ingredients, the growth potential of their newer prod-
ucts and the parties’ high market share has led the
Commission to reach the conclusion that the proposed
transaction would create or strengthen a dominant
position on the market for fungicides for treating
botrytis on grapes in Portugal.

for the protection of hops are multipurpose products,
primarily used for the protection of other crops. They
argue that the fact that the same end formulations and
the same active substances are used in several crops
makes it difficult for the parties to price-discriminate
towards growers of particular crop. Yet the parties also
indicate that in Germany Aliette WG is used 100 % for
hops. Hence, the most important product of the parties
in Germany is not a multipurpose crop, but is used
only in hops.

(742)

Third parties do, however, in general agree with the
parties’ argument that hops is a small market for
fungicides and that no company develop products
exclusively for use on this crop. Yet, an important
consequence of this is also that a strong position in a
hops market is quite likely to be a lasting one, since
entry is less likely than it may be for other crops, where
fungicides sales are larger.

(e) Hops fungicides

(743)

(740)

The parties submit that the only country in which an
affected market arises is Germany, where the parties
estimate their combined market share to be [30 to
40] % (Bayer: [0 to 10] %, ACS: [20 to 30] %) with
leading competitors being BASF ([40 to 50] %),
Syngenta ([0 to 10] %) and Dow ([0 to 10] %). The
market investigation has confirmed that there would
be two main players in this market, Bayer/ACS and
BASF, with Syngenta and Dow far behind (46). Further-
it should be noted that Bayer in late 2000
more,
bought the product Flint, based on the strobilurin
Trifloxystrobin. This product was introduced in Ger-
many in 2000 and had in 2001 already achieved a
market share of [0 to 10] % (47). The Parties foresee
that Flint will achieve a market share of [10 to 20] %
by 2004.

(741)

Bayer sells mainly Bayfidan (Triadimenol), which con-
trols powdery mildew. ACS sells only Aliette WG
(Fosetyl). The parties argue that this product is primar-
ily designed for the protection of grapes against downy
mildew. They also in general argue that products used

(45) Business secrets: deleted confidential

information based on

competitors’ sales data.

(46) Business secrets: deleted confidential

information based on

competitors’ sales data.

The parties argue that the parties’ market share is
expected to decrease whereas that of BASF will
increase, since they expect BASF to launch their new
product BAS 500, a strobilurin called Pyraclostrobin,
in 2003. They argue that BAS 500 will be a fierce
competitor to Bayer’s strobilurin Flint (Trifloxystrobin).
The parties also argue that Flint is expected to only
offset the decrease in sales of other Bayer products,
which are expected to be either discontinued ([...]) or
to decrease substantially in terms of sales ([...]). They
therefore argue that the expected launch of Flint will
not substantially change the present market situation.
The Commission notes that Flint is already present on
the market in a successful way. The Commission
cannot base its assessment of this market on claims by
the parties that they expect some of their products to
be discontinued. The parties have not explained why
the sales of [...] should be decreasing in the short term.
In their reply to the statement of objections, the parties
also argue that the parties’ products will have to face
competition from Syngenta due to the registration
of the product Ridomil Granular and the expected
registration for Amistar. The market
investigation,
including an assessment of new product introductions,
has not supported the claims of the parties that the
introduction of Flint will not strengthen their position
nor their claims about the importance of product
introductions by competitors (48).

(47) Business secrets: deleted confidential

information based on

(48) [Business secrets: Deleted confidential information about com-

competitors’ sales data.

petitors’ product introductions.]

15.4.2004

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Official Journal of the European Union

L 107/85

(744) Combining this with the already strong position of the
parties, the fact that they combined are much larger
than their closest competitors, the growth potential in
the parties’ newer and future products, the lack of new
strong competition in the near future, the Commission
has reached the conclusion that the proposed trans-
action would create or strengthen a dominant position
on the market for hops fungicides in Germany.

(749)

(f) Oil and protein crops fungicides

(745)

(746)

The parties estimate that the overall market value of
the EEA-wide market for oil crops amounted to EUR
[...] million in 2000, with the parties having [20 to
30] % (Bayer: [10 to 20] %, ACS: [10 to 20] %),
Syngenta and BASF each [10 to 20] % and DuPont [10
to 20] %. Since ACS is only active in a few countries
within the EEA, the parties submit that their activities
only overlap in three countries.

In Germany, the parties estimate that their combined
market share is [50 to 60] % (Bayer: [30 to 40] %,
ACS: [20 to 30] %) with BASF being the leading
competitor with [40 to 50] %. The market investigation
has broadly confirmed the parties’ view of the market
shares, that is, the parties have a very high combined
market share, and BASF is the only competitor with a
significant market share (49).

The parties expect their combined market share to
decrease substantially to only [30 to 40] % by 2004.
The parties argue that they face vigorous competition
from BASF, which they claim is able to expand its
market position in the German market based on its
fungicide Metconazole. According to the parties, the
market share of BASF has increased over the last years
particularly due to this product, whereas the parties’
share has been declining within the same period of
time. The parties argue that the expected launch by
BASF of Pyraclostrobin in 2002/2003 will result in
additional competitive pressure on the combined
entity. The parties also argue that Syngenta will launch
a Difenoconazole-based fungicide under the brand Eria
and is expected by the parties to acquire a market share
of more than [10 to 20] %. Furthermore, the parties
argue that Bayer’s Tebuconazole will be off-patent in
2003 and the entry of generics will further contribute
to strong competition on the German market for
fungicides to be used for the protection of oil and
protein plants. The parties argue that such generic
competition will primarily come from Makhteshim.
The claims of the parties about the importance of these
various product introductions in the near future have
not been confirmed by the market investigation (50).

(750) Combining this with the already strong position of the
parties, the fact that they combined are much larger
than their closest competitors, the growth potential in
the parties’ newer and future products, the lack of new
strong competition in the near future, the Commission
has reached the conclusion that the proposed trans-
action would create or strengthen a dominant position
on the market for fungicides for oil and protein crops
in Germany.

(747) ACS generates about [60 to 70] % of its turnover with
Folicur based on the active ingredient Tebuconazole
supplied by Bayer. Bayer sells only Folicur. ACS’s
products Derosal (Carbendazim) and Verisan (Ipro-
dione) account for the remaining [40 to 50] % of ACS’s
sales in this market.

(g) Vegetable fungicides

(748)

The parties make the argument that, since ACS already
today sells products supplied by Bayer, the transaction
does not lead to a substantial change of the current
market structure. To the contrary, the Commission is
of the opinion that the fact that the proposed trans-
action will eliminate direct competition on Tebucona-
zole based products, which according to third parties
account for about [50 to 60] % of the German market,
down from about [70 to 80] % in 1997.

(751) According to Bayer’s estimate, the EEA-wide market
for vegetable fungicides in 2000 amounted to about
EUR [...] million. At the EEA level, the parties would
be market leader with [30 to 40] %, followed by
Syngenta ([20 to 30] %), BASF ([10 to 20] %), DuPont
([0 to 10] %) and Dow ([0 to 10] %). According to the
Parties, the transaction leads to affected markets at a
national level in 12 countries.

(49) Business secrets: deleted confidential

information based on

(50) [Business secrets: Deleted confidential information about com-

competitors’ sales data.

petitors’ product introductions.]

L 107/86

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Official Journal of the European Union

15.4.2004

(752)

The Parties argue that the segment of vegetable crops
includes a high number of different plants with a large
variety of problems. They maintain that, on the one
hand, although there are some 30 vegetable crops, the
diseases affecting these and the products used to treat
these diseases are broadly similar. On the other hand,
due to the large variety of diseases affecting the
different plants,
the protection of vegetable crops
requires the use of products with broad-spectrum
efficacy, which can also be used in other crops.

own production plant in Brazil, the parties argue that
it will have the capacity to sell the active ingredient in
the EEA as soon as the patent protection expires.
for fruits and nuts
Finally, similar to the market
their
fungicides, Bayer and ACS generate part of
turnover through third party products, the supply of
some of which will
likely be discontinued by the
respective suppliers due to the interference of the third
party products in the combined product portfolio of
Bayer and ACS.

(753)

(754)

The products sold by Bayer are mainly formulations of
the active substances Tebuconazole, Propineb, Triadi-
menol and Dichlofluanid, while ACS sells fungicides
based on Iprodione and Fosetyl. Tebuconazole is a
systemic fungicidal active ingredient, which is used as
a spray under the brand names Folicur and Horizon,
and as a seed treatment. The parties argue that the
active ingredient is effective against several diseases in
cereals (Fusarium, Septoria and Puccinia), peanuts
(Mycosphaerella, Puccinia, Sclerotinia, Rhizoctonia),
grapes (Uncinula), oil seed rape (Pyrenopeziza, Alterna-
ria, Leptosphaeria), bananas, coffee, fruit, and veg-
etables. Likewise,
the parties argue that Propineb,
which is marketed under the trade mark Antracol, is
used for a number of crops including vegetables,
potatoes, tobacco, ornamentals, fruits and, in some
regions, also in rice, hops and coffee. Finally, Triadi-
menol, which is marketed as a spray under the brand
name Bayfidan and as a seed dressing under the brand
name Baytan,
is efficient against powdery mildew,
rusts, and various kinds of leaf spots, particularly in
cereals, coffee, grapes, fruit, and vegetables.

The parties argue that they face strong competition
from other international and national companies, some
of which (including Syngenta and BASF) have a strong
position in almost every national market. They argue
that BASF is expected to launch the strobilurin-based
fungicides Dimoxystrobin and Pyraclostrobin as well
as BAS 510 in 2003 and that its market share can
therefore be expected to rise. Moreover, the parties
argue that since most of the active ingredients used for
the formulation of vegetable fungicides are already off-
patent, generic competition is readily available on the
market. The parties give the example of Bayer’s product
Triadimenol, which according to the parties is pro-
duced by Makhteshim and various Chinese suppliers
(e.g. Seven Continents Agriculture) and sold within the
EU. They argue that the same is true of Propineb,
which is imported into the EEA from China. Patent
protection for Bayer’s active ingredient Tebuconazole
will expire in 2003. Since the generic company
Makhteshim already manufactures Tebuconazole in its

(755)

The Commission wrote in the statement of objections
that these arguments are mostly of such a general
nature that it is difficult for the Commission to give
them much weight in its assessment of these markets.
The parties did not give concrete examples of third
party products, which are likely to be discontinued.
Nor did they explain in which markets generic pro-
ducers are selling Triadimenol and Propineb or when
and in which markets they expect generic competition
in Tebuconazole (51). The Commission’s market investi-
gation has also shown that the importance given by
the Parties to BASF’s future products cannot be fully
confirmed (52).

(756)

In their reply to the statement of objections the parties
have for the first time given lists with the registration
status of generic Triadimenol from Makhteshim; they
refer again to Tebuconazole, mention that generic
Propineb is produced by Agrimont in Italy and SPRJ in
China and provide names of claimed generic competi-
tors for several products in Belgium. The parties do
not attempt to quantify the impact of this competition
or even to explain whether registered products are
actually sold (and how much is sold). The Commission
cannot on the basis on such scarce information given
at a very late stage in the procedure change its general
view that generic competition in these markets is not a
serious threat to the strong combined position of the
parties.

(51) [Business secrets: Deleted confidential information about com-

petitors’ product introductions.]

(52) [Business secrets: Deleted confidential information about com-

petitors’ product introductions.]

15.4.2004

EN

Official Journal of the European Union

L 107/87

(757)

it has been argued, similar as for
To the contrary,
fruit
the parties’ position will be
that
fungicides,
strengthened in the near future with the introduction
of Bayer’s Flint (Trifloxystrobin) product. Together
with the available products of the parties, Scala (Pyri-
methanil), Vision (Pyrimethanil and Fluquinconazole),
Folicur (Tebuconazole) and Euparen (Dicholfluanid),
the parties’ position will be strengthened. It is also
argued that Bayer’s newly developed botryticide Teldor
(Fenhexamid) is still in the process of market pen-
etration and supports the market presence of the
parties. It is also argued that the parties have other
products in their pipeline such as BAY 14120 (triazole
procide) and Dioaxastrobin (53). Furthermore, Bayer’s
Iprovalicarb and ACS’s Fenamidon are both said to be
in the process of market penetration.

(761)

In Austria, the parties estimate that their combined
market share amounts to [30 to 40] % (Bayer: [10 to
20] %, ACS: [20 to 30] %) with leading competitors
being Syngenta ([30 to 40] %), BASF ([0 to 10] %),
DuPont ([0 to 10] %) and Dow ([0 to 10] %). According
to the parties, Syngenta’s market share has increased
quite substantially over the last years whereas that of
the parties has been declining. The Commission’s
market investigation has shown that it is likely that the
parties’ market share is considerably higher than that
claimed by the parties.
the parties’
estimate of the total market size seems too high, which
would mean that the parties have a market share
significantly above [40 to 50] % (54).

In particular,

(758)

Furthermore, the parties recognise that ACS will intro-
duce a new fungicide for [...], mentioned as [...], which
is expected to achieve considerable market shares in
various countries, the highest being [...].

(762) ACS sells Rovral (Iprodione) and Previcur (Propamo-
carb), while Bayer’s only product is Bayfidan (Triadi-
menol). The new product [...] is expected to achieve [0
to 10] % and Flint (Trifloxystrobin) [0 to 10] % by
2004. It should be noted that Flint was introduced
already in 2001 and it should therefore already now
be in the process of achieving market share.

(759)

The parties in their reply to the statement of objections
argue that ACS’s new product, [...], serves only as a
replacement of the existing [...] product, [...]. The same
applies for [...], which will replace Rovral WP. The
Commission does not dispute that this to some extent
may be correct. However, in some countries this is not
the full story. For instance, the parties in Germany
expect [...] to achieve a market share of [10 to 20] %
in 2004, while Previcur only had a share of [0 to 10] %
in 2000. Furthermore, it should be noted that even
when a replacement product does not lead to higher
market share, it does mean that the parties are better
able to defend their market position with a newer
product.

(763)

(764)

(760)

This large number of fungicides represents a broad
portfolio with different modes of action. Trifloxystro-
bin is a strobilurine type fungicide, Pyrimethanil
belongs to the group of anilinopytimidines, Fluquin-
conazole and Tebuconazole are triazoles and Dichol-
fluanid is an isocyclic compound. It is argued that this
number of different modes of action will enable the
parties to implement very effectively anti-resistance
tools in the vegetable fungicides market.

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create a dominant position in the
Austrian market for vegetable fungicides.

In Belgium, the parties estimate that their combined
market share amounts to [30 to 40] % (Bayer: [10 to
20] %, ACS: [20 to 30] %) with leading competitors
being Syngenta ([20 to 30] %) and BASF ([20 to 30] %).
The market investigation has shown that it is likely
that the parties’ market share is considerably higher
than that claimed by the parties. In particular, the
parties’ estimate of the total market size seems too
high, which would mean that the parties have a market
share significantly above [40 to 50] %. Furthermore,
Bayer in 2001 had an additional [0 to 10] % market
share from the sale of Alto SL 100, a product based on
Cyproconazole from the ‘Flint package’ acquired by
Bayer as a result of the divestments in the Syngenta
merger.

(53) The parties argue that they have no triazole named BAY 14120
under development and that the statement probably refers to
JAU 6476.

(54) Business secrets: Deleted confidential

information based on

competitors’ sales data.

L 107/88

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Official Journal of the European Union

15.4.2004

(765) ACS’s product portfolio consists of 11 different prod-
ucts, while Bayer sells mostly Horizon (Tebuconazole),
and Baycor (Bitertanol). The new product
is
expected to achieve [0 to 10] %, Flint (Trifloxystrobin)
[0 to 10] % and a new formulation based on Iprodione
[0 to 10] % by 2004. It should be noted that Flint was
introduced already in 2000.

[...]

(770)

The parties in their reply to the statement of objections
argue that Flint will only be introduced in vegetables
in 2002 in France and that this was communicated to
the Commission in an annex to an earlier submission.
However, in another Annex to the same submission it
is indicated that the product was introduced in 2001.
Whether it was introduced in 2001 or will be in 2002
will, however, not significantly change the assessment
of the impact of this product. The main point is that
the product will be on the market immediately and not
some years from now.

(766)

(767)

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the Belgian market for vegetable fungicides.

In France the parties in the notification estimated their
combined market to be [30 to 40] % (Bayer: [0 to
10] %, ACS: [30 to 40] %) with leading competitors
being Syngenta ([30 to 40] %) and BASF ([20 to 30] %).
The parties have later corrected this to [30 to 40] %
(Bayer: [0 to 10] %, ACS: [30 to 40] %), but in the
Reply to the statement of objections correct it again to
[30 to 40] %. The market investigation has shown that
the parties most likely seriously overestimate the total
market size and that their combined market share is
more likely in the region of [50 to 60] % (55).

(768) ACS’s main products are based on Iprodione, sold in
different formulations under the brand name Rovral,
Fosetyl (marketed under the brands Aliette and Rho-
dax), Pyrimethanil (sold under the brand names Scala
and Walabi), Propamocarb (sold under the brand
Previcur) and Chlorotalonil. Bayer’s main product is
Horizon, based on Tebuconazole, and a mixture of
Tebuconazole and ACS’s Carbendazim sold under the
brand name Libero.

(769)

The new product [...] is expected to achieve [0 to 10] %
and Flint (Trifloxystrobin) [0 to 10] % by 2004. It
should be noted that Flint was introduced already in
2001 and it should therefore already now be in the
process of achieving market share. Furthermore, also
Teldor (Fenhexamid) has recently been introduced in
this market.

(771)

The parties submit that since Bayer adds only a very
small percentage to ACS’s market share, the market
structure will not change in France as the result of the
proposed merger. However, the addition of Flint and
Teldor increases the market presence of Bayer and the
combination of Flint with ACS’s product portfolio
strengthens the possibility of
the parties to offer
very effective anti-resistance tools in the vegetable
fungicides market.

(772)

The parties argue in their reply to the statement of
objections that [...]. The introduction of Flint therefore
strengthens the possibility of the parties to offer an
anti-resistance programme.

(773)

(774)

The already strong position of the parties, the fact that
combined they are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does mean that the
Commission has reached the conclusion that
the
proposed transaction would create or strengthen a
dominant position in the French market for vegetable
fungicides.

In Germany the parties estimated in the notification
that their combined market share amounts to [30 to
40] % (Bayer: [30 to 40] %, ACS: [0 to 10] %) with
leading competitors being BASF ([30 to 40] %) and
Syngenta ([20 to 30] %). In the reply to the statement
of objections, the parties correct their combined market
share to [30 to 40] %. The market
investigation
likely seriously
has shown that
overestimate the total market size and that
their
combined market share is more likely in the region of
[60 to 70] % (56). This conclusion is based on a

the parties most

(55) Business secrets: deleted confidential

information based on

(56) Business secrets: deleted confidential

information based on

competitors’ sales data.

competitors’ sales data.

15.4.2004

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Official Journal of the European Union

L 107/89

comparison of the actual sales figures reported by
competitors as well as these competitors’ estimates of
the total market size. In any event, the combined
market share of the parties is significantly higher than
that of any of their competitors.

have a combined market share several times higher
than the nearest competitor (57).

(775)

The parties’ market position is based on the sale
of Tebuconazole and Triadimenol (Bayer), Iprodione,
Propamocarb and Pyrimethanil (ACS).

(776)

The new product [...] is expected to achieve [10 to
20] % and Flint (Trifloxystrobin) [0 to 10] % by 2004.
It should be noted that Flint was introduced already in
2001 and it should therefore already now be in the
process of achieving market share.

(777)

(778)

(779)

The parties in their reply to the statement of objections
argue that Flint will only be introduced in vegetables
in 2002 in Germany and that this was communicated
to the Commission in an Annex to an earlier sub-
mission. However,
in another Annex to the same
submission it is indicated that the product was intro-
duced in 2001. It should in this respect be noted that
the parties have indicated that the same product (Flint
50 WG) achieved sales in hops in Germany in 2001.
Whether it was introduced in 2001 or will be in 2002
will, however, not significantly change the assessment
of the impact of this product. The main point is that
the product will be on the market immediately and not
some years from now.

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the German market for vegetable fungi-
cides.

In Greece, the parties estimate that their combined
market share is [30 to 40] % (Bayer: [10 to 20] %,
ACS: [20 to 30] %) with leading competitors being
Syngenta ([10 to 20] %), BASF ([10 to 20] %), DuPont
([0 to 10] %) and Dow ([0 to 10] %). The market
investigation has shown that the parties most likely
overestimate the total market size and that
their
combined market share is more likely in the region of
[50 to 60] %. The market investigation has also shown
that the parties have by far the strongest position and

(780) ACS’s most important products in 2000 were Afugan
(Pyrazophos), Previcur
(Propamocarb) and Rovral
(Iprodione). Bayer’s main products are Antracol (Propi-
(Triademefon and Propineb)
neb), Antracol-Kombi
Baycor (Bitertanol) and Teldor (Fenhexamid). The new
product [...] is expected to achieve [0 to 10] % and
other new products 8 % by 2004. On the other hand,
the parties argue that there have been no sales of
Afugan in Greece after 2000 and that there are no
stocks lefts in Greece, which could be sold.

(781)

(782)

(783)

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the Greek market for vegetable fungicides.

In the Netherlands, the parties estimate that their
combined market share is [40 to 50] % (Bayer [0 to
10] %, ACS [30 to 40] %) with leading competitors
being Syngenta ([30 to 40] %) and BASF ([10 to 20] %).
The market investigation has shown that the parties
most likely overestimate the total market size and that
their combined market share is more likely significantly
above 50 %. The market investigation has also shown
that the parties have by far the strongest position and
have a combined market share several times higher
than the nearest competitor (58).

The parties in the reply to the statement of objections
submit that they believe in their own data for the total
market size, which is based on independent panel data.
However, the competitors also base their estimates of
the total market size on independent panel data. In this
market all competitors have estimates of the total
market size considerably lower than that of the parties.
The Commission therefore considers that the total
market very likely is significantly lower than what the
parties submit.

(57) Business secrets: deleted confidential

information based on

competitors’ sales data.

(58) Business secrets: deleted confidential

information based on

competitors’ sales data.

L 107/90

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Official Journal of the European Union

15.4.2004

(784)

(785)

(786)

Bayer sells the Baycor (Bitertanol) and Euparen (Tolyl-
fluanid). ACS’s turnover is mainly generated through
the products Previcur (Propamocarb), Rovral
(Ipro-
dione) and Sporgon and Sportak (both Prochloraz).
The new product [...] is expected to achieve [10 to
20] %, Flint (Trifloxystrobin) [0 to 10] % and another
new Bayer product another [0 to 10] % by 2004.

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the Dutch market for vegetable fungicides.

In Portugal, the parties estimate that their combined
market share amounts to [30 to 40] % (Bayer: [0 to
10] %, ACS: [30 to 40] %) with leading competitors
being Syngenta ([20 to 30] %) and BASF ([0 to 10] %).
The market investigation has shown that the parties
most likely overestimate the total market size and that
their combined market share is more likely in the
region of [50 to 60] %. The market investigation has
also shown that the parties have by far the strongest
position and have a combined market share several
times higher than the nearest competitor (59).

(787) ACS’s most important products are Rubigan (Fenarim-
ol) and Baktane (Myclobutanil). The new product
[...] is expected to achieve [0 to 10] % and Flint
(Trifloxystrobin) [0 to 10] % by 2004.

(788)

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the Portuguese market for vegetable fungi-
cides.

(789)

In Sweden,
they have a
the parties estimate that
combined market share of [50 to 60] % (Bayer: [40 to
50] %, ACS: [10 to 20] %) with leading competitors
being Syngenta ([30 to 40] %) and BASF ([0 to 10] %).
The market investigation has confirmed that the parties
have a unique position in Sweden and distribute a very

large part of the total sales of the products research
based companies. The market investigation has also
shown that
the parties have by far the strongest
position and have a combined market share several
times higher than the nearest competitor (60).

(790) ACS sells mainly products based on Iprodione. The
parties argue that Bayer’s market share is almost
entirely due to the marketing of third party products
by its affiliate Gullviks and that Bayer only sells very
small amounts of its Fenhexamid based product Teldor.
Other products sold by Gullviks are Amistar and
Ridomil, based on Azoxystrobin and Metalaxyl respect-
ively, which are both supplied by Syngenta. The
these
Commission can, however, not accept
arguments are sufficient
to eliminate competition
concerns from the proposed transaction on the Swed-
ish market. The fact is that the transaction will lead to
considerably less competition on the Swedish market
and that there is no reason to believe that the strong
position of the combined entity would be challenged.

that

(791)

(792)

The parties reiterate that the Commission does not
correctly assess the impact of Gullviks in Sweden. In
particular, they argue that Gullviks portfolio, in con-
trast to that of its competitors’,
is limited to crop
protection products, which only constitute a limited
amount of farmers’ total needs. According to the
parties, farmers continue to be dependent on Gullviks’
competitors, farmers’ cooperatives, for other products
such as, for instance, agricultural machines, sale of
building material, fertiliser and seeds.

The Commission cannot accept that such arguments
would prevent
the possibility of anti-competitive
behaviour on a market, where the parties according to
their own figures would have a combined share of
almost [50 to 60] %. The fact that the parties through
Gullviks would have a unique portfolio of vegetable
fungicides, selling not only their own products but also
Syngenta products. There is no reason to believe that a
farmer would have much of an alternative to buying
from Gullviks, no matter how much machinery and
building material he may buy from cooperatives.

(59) Business secrets: deleted confidential

information based on

(60) Business secrets: deleted confidential

information based on

competitors’ sales data.

competitors’ sales data.

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(793)

Furthermore, the new product [...] is expected to
achieve [0 to 10] % and another new ACS product
based on Iprodione [0 to 10] % by 2004.

(798)

Bayer estimates that the total size of the seed treatment
market in the EEA amounted to EUR [...] million in
2000 and growing. In 2000, the turnover generated
by Bayer in the EEA in the segment of seed treatment
amounted to EUR [...] million and that of ACS to EUR
[...] million.

(794)

The already strong position of the parties, the fact that
they combined are much larger than their closest
competitors, the growth potential in the parties’ newer
and future products and the lack of new strong
competition in the near future does that the Com-
mission has reached the conclusion that the proposed
transaction would create or strengthen a dominant
position in the Swedish market for vegetable fungi-
cides.

General conclusion on fungicides

(795)

In fungicides, the Commission has reached the con-
clusion that the proposed transaction will create or
strengthen a dominant position in the markets for
cereal fungicides in Italy, fruits and nuts in Denmark,
France and Germany, strawberry fungicides in Sweden,
fungicides for botrytis on grapes in France, Germany,
Greece and Portugal, hops fungicides in Germany,
fungicides for oil and protein crops in Germany,
and vegetable fungicides in Austria, Belgium, France,
Germany, Greece, Netherlands, Portugal, and Sweden.

E.

SEED TREATMENT

(796)

(797)

Seeds are at risk from seed- and/or soil-borne diseases
or from soil-dwelling and/or early season insects. To
ensure good germination and avoid seedling losses and
damages due to fungi and insect attack, both fungicides
and insecticides are applied to the seed, in most cases
at the same time. The suppliers of seed treatment
products do not in most cases dress the seed grains
themselves but supply the products to other firms with
the appropriate dressing plants.

The market for seed treatment is seen as a market with
growing importance. Seed treatment is highly efficient
and environmentally very friendly. Many respondents
to the Commission’s market investigation expect the
importance of seed treatment to grow because there
will be more demand for the protection of higher value
seeds, especially genetically enhanced seeds, securing
strong emergence and effective protection of the seed
in the early growth periods.

(799)

In their observations on the Commission’s 6(1)c
decision, the parties argue that a further substantial
increase of the market value for seed treatment is not
expected due to a highly competitive environment, the
increasing presence of low value generic products,
especially in the fungicides segment, and the competi-
tive pressure resulting from the demand side, consisting
of nationally and internationally operating seed-com-
panies and seed treatment companies which exercise
strong countervailing bargaining power.

(800)

The majority of the respondents to the Commission’s
market investigation do not agree with this description
of the market development. Furthermore, it also seems
to be at odds with internal documents received from
the parties. For instance, in an internal ACS presen-
tation made at the end of 1999, (confidential infor-
mation of ACS).

(801)

Bayer is the global leader in seed treatment. At the
EEA-level, the parties would have [60 to 70] % of the
overall sales of seed treatment products (Bayer [40 to
50] %, ACS [20 to 30] %). There are only two other
significant participants in seed treatment in Europe,
the
Syngenta and the much smaller Uniroyal. Of
research based agrochemical companies, BASF, Dow
and DuPont have basically no sales at all
in seed
treatment, while Monsanto has one recently introduced
product against a particular but important disease in
cereals (the take-all disease).

(802) Market participants generally describe seed treatment
as a market, which has specific requirements for
companies that want to be active in this market.
Naturally, a company has to be in possession of an
active ingredient, which is particularly suited to seed
treatment. In insecticides, the parties’ active ingredients
Imidacloprid and Fipronil have been particularly suc-
cessful because of their long lasting efficacy. In fact, it
has been argued that these new chemistries represent a
step change in seed treatment. For fungicides, the
active ingredients have to be particularly active against
certain soil borne diseases, which may vary from crop
to crop.

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(803) However, besides the possession of adequate active
ingredients, other factors mentioned by several respon-
dents as important for success in seed treatment are
technical and marketing know-how, a joint offer of
seed treatment products and the special machinery
used for seed treatment, as well as a reputation in this
special area.

increase in the price of seed treatment agents would
lead to farmers switching to fungicides or insecticides
applied to the plant after sowing, instead of sowing
pre-treated seeds.

(804)

(805)

In their observations on the decision based on
Article 6(1)(c) of the Merger Regulation, the parties
argue that they are only suppliers of seed treatment
product
formulations but do not manufacture or
supply application technology (machines). The only
exception was supposed to be the United Kingdom,
where, e.g. Bayer and Uniroyal are also involved in
providing machines for seed treatment of cereals.
However,
in a later reply to an Article 11 letter,
(confidential information of ACS).

this is due to the fact

The parties argue that the existence of only a few
market players does not lead to the possibility of
manufacturers having sufficient market power to raise
prices and foreclose competition in these markets. The
parties contend that
that,
firstly, the purchasers of seed treatment agents are
sophisticated customers yielding substantial bargaining
power. Secondly, they argue that large competitors
each have the R & D capabilities and sufficient
economic strength to enter the European market and/
or to expand sales and market share if one of the
leading suppliers already active on those markets
attempts to raise prices. The parties argue that strong
competition can also be expected from generic com-
panies and that the parties will not retain their market
position.

(806) Most respondents to the Commission’s market investi-
gation disagree with these statements. They argue that
seed treatment is a difficult technical market with
special know-how. In an internal ACS presentation
from late 1999, it is stated that (confidential infor-
mation of ACS). This view seems to be more in line
with that of the respondents to the Commission’s
market investigation than the arguments put forward
by the parties in the context of this investigation.

(808)

The parties have, however, not argued that seed
treatment is not a separate market. Respondents to the
Commission’s market investigation have argued that
while it may be true that increased use of, for instance,
seed treatment insecticides products may reduce the
need for early ‘normal’ insecticide applications, this
should not be seen as these products being in the same
relevant product market.

(809) Moreover, the investigation shows that there is substi-
tution from foliar and soil applications into seed
treatment, whenever this is possible, but not the other
way around. The investigation does not lend support
to the parties’ argument that farmers would switch
back to fungicides or insecticides applied to the plant
after sowing, instead of sowing pre-treated seeds in
face of a price increase. As discussed above, seed
treatment will be further endorsed in the EEA because
of a better environmental fit compared to traditional
applications of insecticides and fungicides, its better
safety to the user and easier application.

E.1. Relevant product markets

(810)

In Case M.1806 — AstraZeneca/Novartis, the Com-
mission found that seed treatment constitutes a separ-
ate product market rather than a particular type
of application of
insecticides and fungicides. The
Commission found that the diseases and insects, which
are targeted by seed treatment products, differ from
those dealt with by spraying programmes; that prod-
ucts used for seed treatment must be registered separ-
ately; and that
the customers for seed treatment
products differ from those for insecticides and fungi-
cides, most seed treatment products being sold to seed
producers and propagators and not to farmers. The
Commission concluded that there is no supply-side
substitution between products registered as insecticides
or fungicides and those registered as seed treatment.

(807)

Finally, the parties contend that there is a certain degree
of substitutability between seed treatment products on
the one side and fungicides and insecticides on the
other. In this respect, the parties argue that a significant

(811)

The parties, in general, in the notification follow the
market definition suggested by the Commission in
Case M.1806 — AstraZeneca/Novartis and they submit
that seed treatment constitutes a separate product
that products sold for seed
market. They submit

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L 107/93

treatment have specific properties that distinguish
these products from insecticides and fungicides applied
to the soil or by spraying. Seed treatment products are
mostly based on the same active ingredients, which are
used for the formulation of insecticides and fungicides,
but contain specific additives in order to ensure that
the dressed seeds remain protected against infestations
of insects and fungi. The parties argue that as seed
treatment products are applied directly to the seed
prior to the emergence of infestations, they provide
better protection against some diseases than spraying
programmes. A number of soil and sea-borne diseases
particularly affecting cereals can only be combated via
seed treatment.

(816)

(812)

The parties submit, however, that in general, a distinc-
tion between high-value crops and low-value crops is
appropriate. According to the parties, high value crops
include sugar beet, oil seed rape and maize, while low-
value crops are, for instance, cereals.

(813)

The parties argue that seed treatment products for high
value crops are sold as insecticides or fungicides to
specialised professional seed-treaters, which dress the
seed grains with the respective products. Seeds are sold
either directly or via the normal distribution channel
(wholesalers, distributors). Seed treatment is primarily
carried out by a limited number of worldwide but
also locally-acting seed companies, including Pioneer
(DuPont), Monsanto Seeds, Syngenta Seeds and KWS.
Generally, these companies mix insecticides and fungi-
cides, which are specifically developed for seed treat-
ment, and apply them to the seed to provide full
protection against both insects and fungi.

(814)

In the notification the parties further submit that seed-
treatment agents for low-value seed are normally
ready-to-use mixtures of insecticides and fungicides.
They are supplied to the distribution channel, which is
also used for other crop protection agents, including
fungicides, insecticides and herbicides. For these low-
value seeds, the parties claim that the dressing of the
seeds is done by the distributors, or by the farmers
themselves who have the necessary equipment to apply
the respective product to a given crop.

(815)

In the notification, the parties supplied data on a crop-
by-crop basis, except for cereals and rice, which are

treated as one product market because the products
used for the treatment of these two crops are identical.
A number of third party respondents to the Com-
mission’s phase I market investigation argued, how-
ever, that a distinction between cereals and rice should
be made.

The parties in their reply to the Commission’s decision
based on Article 6(1)(c) of the Merger Regulation,
countered that cereals and rice belong to the same
‘family’ and that the product range for the dressing of
rice seeds is identical to the product range used for the
dressing of other cereal seeds. Hence, the parties in the
notification included the data for rice seed treatment
in the same table as cereal seed treatment. The parties
furthermore argued that the market
for rice seed
treatment is very small (approximately 100 000 hec-
tares and approximately EUR 250 000). Bayer is not
in this market and ACS has only
present at all
very limited sales of fungicides (EUR 0,05 million).
According to the parties, neither of the parties is
present in insecticides for seed treatment for rice and
about[90 to 100] % of the market
for rice seed
treatment is served by generics. Therefore, the parties
submit that those sales of seed treatment for rice do
not have any impact on the parties’ market shares in
the market for seed treatment for cereals, and the
question whether one has to define a separate market
for seed treatment products used on rice can be left
open.

(817) As concerns insecticides, the above question can be left
open as the operation as notified would lead to the
creation of a dominant position, if considering cereals
as a separate relevant product market of if considering
cereals and rice as constituting together a separate
relevant product market.

(818) As regards fungicides, a review of the parties’ product
portfolio seems to suggest that there is not one product
market for cereals and rice, in fact there is not one
for cereals since the parties have
product market
different products for the different types of cereals. A
useful distinction seems to be between, on the one
hand, barley, and, on the other hand, wheat, rye and
triticale (‘wheat’ for short). For instance, in Germany
Bayer’s product portfolio in fungicides for barley
consists of the following products: Raxil S FS 040
(Tebuconazole and Triazoxide), Baytan Universal
FS 094 (Triadimenol, Fuberidazol and Imazalil), Solitär
FS 060 (Fludioxonil, Ciprodinil and Tebuconazole). In

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wheat Bayer’s products are Landor CT (Fludioxonil,
Difenconazole and Tebuconazole) and Arena C FS 030
(Fludioxonil and Tebuconazole). Similarly, in France
Bayer has two different combination products based
on Imidacloprid, Gaucho orge (Imidacloprid, Tebucon-
azole and Triazoxide) and Gaucho blé (Imidacloprid,
Bitertanol and Anthraquinone). In fungicides Bayer
only sells the product Sibutol A FS 325 (Bitertanol and
Anthraquinone), which is used for wheat but not
barley. Since the products sold by Bayer in these two
segments are completely different, the transaction will
be assessed on the basis of two different product
markets, barley and wheat (including rye and triticale).

(819) As regards insecticides for seed treatment, the above
question can be left open as the assessment of the case
would not be affected.

(820)

The parties did not, in the notification, distinguish
between insecticides and fungicides for seed treatment.
Such a distinction was, however, suggested by several
respondents to the Commission’s phase I market
investigation. In this respect, third parties indicated
that, in the past, seed treatment product manufacturers
were selling broad solutions (fungicides, insecticides
and bird repellents) mostly based on generic chemistry.
However, with the development of more elaborated
and higher value products in both the insecticides
market (the parties’ products Imidacloprid and Fipronil
and Syngenta’s Tefluthrin) and to a lesser extent
fungicides (Syngenta’s Fludioxonil and ACS’s Triticona-
zole) belonging to different manufacturers, seed treat-
ment solutions are sold, and sometimes applied, separ-
ately. Therefore, it was argued that insecticides and
fungicides generate different segments.

(822) With regard to cereals the parties furthermore submit-
ted in the notification that a separate submarket must
be defined for products designed for protecting cereals
against Gaeumannomyces Gaminis, also known as
‘take-all-disease’. Cereal crops are one of the main host
crops for this disease. Currently, there are only two
products available for protection against this disease;
one is a Fluquinconazole-based product developed by
ACS and sold under the brand name Jockey, the
other is a comparable product recently launched by
Monsanto called Latitude. Since these products are
specific new products for control of ‘take-all-disease’,
they cannot be substituted by any other active ingredi-
ent. According to the parties, Jockey and Latitude do,
however, compete with the other fungicides seed
treatment products, since they can treat other diseases
than the ‘take-all-disease’. This is thus an example
of ‘one-way substitution’. Most respondents to the
Commission’s Phase II market investigation concur
that only Jockey and Latitude can protect against the
‘take-all-disease’. However, they also point out that
Latitude only treats the ‘take-all-disease’, while Jockey
has a broader spectrum. Thus the one-way substitution
in fact only applies to Jockey, but not to Latitude. The
question of the exact market definition with respect to
products treating the take-all disease can, however, be
left open.

(823)

The present operation will therefore be assessed on the
basis of separate markets for insecticides and fungicides
for seed treatment on a crop-by-crop basis. For fungi-
cides, two separate cereals markets are assessed: on the
one hand, barley, on the other hand, wheat, rye and
triticale.

E.2. Competitive assessment

General considerations

(821)

The parties in their reply to the Commission’s decision
based on Article 6(1)(c) of the Merger Regulation
argued that the large majority of products sold by the
parties and their competitors in the market for cereals
seed treatment are combinations of several fungicides
or fungicides and insecticides in order to combat a
broad range of fungi and pests. Only ACS offers to a
very limited extent a straight insecticide in France for
cereals seed treatment, which is being phased out as
little market exists. The parties have therefore submit-
ted data for cereals for both fungicides ‘solo’, insecti-
cides ‘solo’ and combination products insecticides/
fungicides.

(824)

In the notification the parties argued on the basis of
insecticides and fungicides for seed treatment being
part of one overall market for seed treatment. On this
basis the parties’ activities overlap in a large number of
crops and Member States. According to the infor-
mation in the notification, there would be 18 affected
national seed treatment markets. However, as men-
tioned above, the Commission’s market investigation
has shown that the product market definition proposed

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by the parties was too broad. As a result, the number
of affected markets is higher than that claimed by the
parties in the notification. Following the investigation,
the Commission considers that the transaction would
create or strengthen a dominant position in 27 national
markets, 14 insecticides markets and 13 fungicides
markets. These markets will be analysed in detail
below.

Fipronil-based seed treatment insecticides account for
about [confidential information of ACS] of all appli-
cations for foliar, soil and seed treatment applications
and some [confidential information of ACS] of the
overall turnover achieved by ACS through the sale of
straight Fipronil or Fipronil-based products in the EEA.

(825)

In the other affected markets, the Commission con-
siders that no competition problems arise. The Com-
mission has in each of these markets reached this
conclusion for one or more of the following reasons.

(829)

(826)

The combined market share of the parties is low; there
is no overlap between the parties’ activities either
because of misallocation of market share or because
the overlap has ceased to exist for other reasons; the
market share increment is very small and the structure
of the market is unlikely to be affected by the operation;
the structure of the market is unlikely to be affected by
the operation as the pricing incentives of the parties’
products would not be affected; the parties have largely
overestimated their market position; there are strong
competitors who are likely to be able to provide
effective competition on the market; new product
introductions by competitors are likely to provide
strong competition to the parties’ products in the near
future.

(827)

The Commission’s analysis in the markets where
competition concerns are found is as follows:

E.2.1. Seed treatment insecticides

Introduction

Bayer’s neonicotinoid Imidacloprid and ACS’s pyrazole
Fipronil are practically the only active ingredients
currently used in the EEA in seed treatment insecticides
for maize. As regards seed treatment insecticides for
cereals and rice, the only active ingredients currently
used in the EEA are ACS’s Fipronil and Syngenta’s
Tefluthrin, which is sold by Bayer in the United
Kingdom. [...]. The Commission also notes that ACS
has another pyrazole in its portfolio, Ethiprole. This
product is not currently marketed in the EEA. [...].
Likewise, ACS has submitted that (confidential infor-
mation of ACS). Furthermore, ACS has submitted that
(confidential information of ACS). The Commission
has therefore only taken into account [...] in the
assessment of the seed treatment markets.

(830)

Therefore, after the implementation of the proposed
transaction, the merged entity would control [...] active
ingredients for seed treatment, Imidacloprid, Fipronil
[...], while the only remaining competitor, Syngenta,
would control only two active ingredients for seed
treatment, Tefluthrin and Thiamethoxam. It is to be
noted, however, that as regards Tefluthrin, this product
represents a so-called old chemistry class, compared to
the new chemistries neonicotinoids and pyrazoles. In
seed treatment, Tefluthrin is only used for cereals and
rice, and is currently sold by Bayer in the United
Kingdom. On the basis of the investigation, the Com-
mission considers that Syngenta will effectively have
only one seed treatment product technically corre-
sponding to the parties’ products, the neonicotinoid
Thiamethoxam, although already marketed in the
United States is not yet launched In Europe.

(828)

Seed treatment insecticides constitute the most success-
ful application of ACS’s Fipronil and Bayer’s Imidaclop-
rid. Imidacloprid is the leading seed treatment product
in the EEA. The sales of Imidacloprid for this appli-
cation totalled some EUR [...] million in 2000. Accord-
ing to the parties, in fact, the sales of Imidacloprid-
based seed treatment insecticides account for approxi-
mately [70 to 80] % of the overall turnover achieved
by Bayer through its sale of Imidacloprid-based prod-
ucts in the EEA for foliar, soil and seed treatment
applications and [50 to 60] % of Imidacloprid based
products sold in the EEA for all applications (including
also home and garden, small animal ectoparasiticides,
professional pest control and environmental health).

(831)

The parties have argued that Syngenta’s Thiamethoxam
will be registered in a number of markets and will have
a substantial impact on the market share of the parties.
The parties have submitted that Thiamethoxam is
superior to Imidacloprid in that not only Thiamethox-
am is comparable to Imidacloprid as regards its mode
of action and spectrum of activity, but also in that it
can be applied with lower dosages than Imidacloprid.
The parties have also argued that Fipronil will not
significantly strengthen the market position of the
parties.

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(832) On the basis of the investigation, the Commission does
not consider that it is correct to say that Thiamethoxam
is superior to the parties’ products. First, the investi-
gation shows that [confidential comparison between
the product characteristics of [...] and Thiamethoxam
as regards maize and cereals]. The application rates
of Thiamethoxam and [...] [confidential comparison
between the product characteristics of [...] and Thiame-
thoxam].

(837)

In this respect,

Furthermore, the Commission considers that Thiame-
thoxam is a new product and will have to compete
against the only two existing products, which are
considered by third parties as being the best products
on the market. Gaucho (Imidacloprid) and Regent
(Fipronil) are established brand names. These products
are well recognised and the companies who supply
them have a proven expertise on the market. Bayer
has virtually created the seed treatment market with
Imidacloprid and, thus, has considerable know-how
and a reputation on the seed treatment insecticides
market. Both parties have an established customer
base and proven expertise of cooperation with seed
companies, coaters and pelleters (‘breeders’) in seed
treatment insecticides.
it has been
indicated to the Commission that the seed treatment
market is ‘highly technical’ and, to enter, one needs,
inter alia, know-how accumulated over a period of
time. The Commission’s investigation shows that cus-
tomers do not easily switch suppliers on the seed
treatment market. The responsibility of the seed treat-
ment company is to sell coated seeds that have full
germination power and which are totally protected
from insects and diseases. It has been indicated to the
Commission that no seed manufacturer would take the
risk of rapidly switching from one set of active
ingredient to another, as this could prove highly risky
for the reputation of the brand. In this respect, it has
been indicated that it would take at least three years of
testing before switching to another active ingredient.
Moreover, it has been indicated that seeds must be
dressed often within a very short period of time and
companies are unwilling to take the risk of failure with
a new supplier. Internal documents of the parties seen
by the Commission also recognise that barriers to
entry to seed treatment are high.

(838) While it is true that Syngenta is active on the market,
Syngenta is on the market primarily as a fungicides
seed treatment provider. In seed treatment insecticides,
Syngenta faces high entry barriers in the form of
the parties’ established brands and reputation. The
Commission considers that the proven expertise and
high entry barriers in the seed markets could also
partly explain why Fipronil has hardly been introduced
in any of those markets, where Imidacloprid is already
targets economically
present and where Fipronil
It would also partly
important pests (e.g. maize).

(833)

Second, as
regards maize and cereals, both the
additional information provided by the parties at the
Commission’s request and also information obtained
from Syngenta does not lend support to the parties’
argument that Thiamethoxam is a superior product to
Imidacloprid. Based on the information submitted
by Syngenta, [confidential comparison between the
product characteristics relating to the effectiveness
and the application rates between Imidacloprid, [...],
Fipronil and Thiamethoxam as regards maize and
cereals].

(834) As regards maize, [confidential comparison between
the product characteristics relating to the effectiveness
and the application rates between Imidacloprid, [...],
Fipronil and Thiamethoxam as regards maize].

(835)

Therefore, on the basis of the above, the Commission
believes that the combination of Imidacloprid, [...] and
Fipronil will allow the parties’
to maintain their
dominating market position vis-à-vis Thiamethoxam.

(836)

The parties have provided a number of studies which
describe the distinguishing features of Thiamethoxam.
The Commission notes, however, that most of the
studies quoted by the parties do not address maize or
cereals. The study on the chemodynamic behaviour of
Thiamethoxam, which discusses maize, does not make
any comparisons with any of the parties’ products.
Another study comparing Thiamethoxam with Imida-
cloprid has been conducted in Brazil on cornstalk borer
(Elsamopalpus lignosellus) which, to the Commission’s
knowledge and based on the pest spectrum provided
by both the parties and Syngenta, is either not existing
or at least not economically important in the EEA. The
only study addressing cereals has been conducted in
Brazil and addresses only aphids and a lepidoptera
Diloboderus abderus which is not found in Europe. The
study does not address the most important pest in the
EEA, the wireworm. Therefore, the Commission does
not consider these studies as relevant for the assessment
of the EEA market in general or the markets which are
relevant for this investigation.

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L 107/97

explain why Fipronil has a lower market share in those
markets where Imidacloprid is already present.

(842)

(839)

The parties have provided examples of markets which
they consider as evidence of Syngenta making inroads
into the seed treatment insecticides with Thiamethox-
am. It is to be noted that the parties have been able to
provide only one example in Europe, that is, Finland.
However, as the Finnish market concerns only beet
insecticides, it has no direct relevance for the case at
hand because Fipronil cannot be used for beets and
beet insecticides are therefore not a concern in the
present case. Moreover, Finland is an exceptional
market in that farmers are obliged, by law, to stop
using Imidacloprid after four years. This explains why
Thiamethoxam is able to take market share from
Imidacloprid. The Commission is not aware of similar
restrictions for the use of Imidacloprid in other seed
treatment markets. The parties have used both the
United States and Canada as examples of successful
market penetration by Thiamethoxam. However, infor-
mation submitted by Syngenta shows that [confidential
information concerning the market position of Thia-
methoxam]. As regards Turkey, information submitted
by Syngenta shows that
information
concerning the market position of Thiamethoxam]. In
any event,
is not
present in any of the markets discussed by the parties.
Therefore, the evidence is not comparable with the
situation in the EEA and especially with the maize and
cereals markets in France and Italy.

is to be noted that Fipronil

[confidential

it

(840)

It is also important to note that [confidential infor-
mation concerning the product characteristics of Thia-
methoxam] (61). Therefore, the parties’ argument that
[...] will come on the market considerably after the
introduction of Thiamethoxam, may not be true.

(841)

[...]. The Commission considers that this is unlikely in
cereals in France, where Imidacloprid is on the market
only in the form of combination products. As regards
maize, [...], the Commission considers that, with three
products on the market, the parties are in a position to
defend their market position by for instance offering
discount packages of
the three products to seed
companies.

(61) Confidential information concerning the product properties of

Thiamethoxam.

Finally, the parties have argued in their reply to the
Commission’s supplementary statement of objections
that Syngenta enjoys secure links to the downstream
seed markets since it is active also as a seed company.
The parties have argued that Syngenta is one of the
biggest seed companies worldwide, currently ranking
third in terms of worldwide sales immediately after
DuPont/Pioneer and Monsanto. However, in view of
the fact that, to the Commission’s knowledge, the two
leading seed companies are unconnected to Syngenta
and that the parties have established links with these
companies, the Commission does not consider that,
should Syngenta enter the market, the parties would
not be able to find a buyer for their products. Moreover,
in view of the parties’ strong product offering, they
will be in a unique position to offer discount packages
to seed companies.

(843)

in general

there is no evidence that,

For the foregoing reasons, the Commission concludes
that
terms,
Thiamethoxam is a superior product compared to the
parties’ products. The Commission also concludes that
the entry barriers in seed treatment insecticides markets
are very high and that it is unlikely that Thiamethoxam
will be able to rebut the market power of the new
entity. The Commission also notes that [confidential
information concerning the product characteristics of
Thiamethoxam]. In any event, the notified operation
will reduce the number of players in this market from
three (Bayer, ACS and Syngenta) to two. This means
that even when Syngenta, if at all, becomes an estab-
lished competitor, the reduction form three players to
two will prevent conditions of effective competition
from being preserved in these markets. The parties
have argued that they settled the patent dispute with
Syngenta following the competition concerns the
Commission raised in the decision based on
Article 6(1)(c) of the Merger Regulation. Some internal
documents obtained by the Commission show, how-
ever, that Bayer expected Syngenta to win the patent
dispute in the EEA. Therefore, in the absence of the
present transaction, the Commission considers it likely
that three companies would have been active on the
European seed treatment market.

(a)

S e e d
t r e a t m e n t
c e r e a l s a n d r i c e

i n s e c t i c i d e s

f o r

(844) As regards straight insecticides for cereals and rice,
Bayer is currently the only player in the United
Kingdom with Tefluthrin (Evict CS 010), a product
supplied by Syngenta under a long-term supply agree-
ment. [...]. ACS is the only player in France with
Fipronil-based products under the brand names Metis
and Texas.

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Official Journal of the European Union

15.4.2004

(845)

The market for straight cereals products in France was
EUR [...] million in 2000. As regards seed treatment
combination products (insecticides and fungicides),
that market amounted to some EUR [...] million in
2000. The two markets together amount to some EUR
[...] million.

product Zoon will be sold. The parties could source
Guazatine for their product Zoon in the future.

(846)

Bayer seems to have chosen to first introduce Imidaclo-
prid on the cereals markets as combination products.
Bayer sells such combination products in France, the
United Kingdom and Belgium. As regards France, there
is an important overlap between the parties: Bayer is
on the French market with combination products
(Gaucho blé FS 337,5 and Gaucho orge FS 375) [...].
ACS is selling a combination product Zoom and it is
the only supplier of a straight insecticides (Fipronil) on
this market. There is therefore a current overlap
between Bayer and ACS and their products are compet-
ing. As will be shown below, a customer wanting to
use seed treatment insecticides for cereals would to a
very large extent be constrained to choose the parties’
products, either a combination product or a straight
insecticide.

(847) On the overall cereals market in France (wheat, rye,
triticale and barley), Bayer would have [70 to 80] % of
combination products and ACS [0 to 10] %, while
Syngenta has the remaining [20 to 30] % of this
market. ACS has [90 to 100] % of
the straight
insecticides for seed treatment. In the hypothetical
overall market comprising both straight insecticides
and combination products, Bayer would have [70 to
80] % and ACS [0 to 10] %. If considering only the
insecticides being part of this market (i.e. the straight
insecticides and the insecticides in the combination
products), the parties are likely to have a higher market
share, since part of the overall market includes also
fungicides, part of ACS’s sales are straight insecticides
and the parties have the latest chemistry on the market.
Looking separately at wheat and barley, the overlap
would be in the barley segment: in this segment, the
parties would have [60 to 70] % (Bayer [40 to 50] %,
ACS [10 to 20] %). Again,
the
insecticides part, the market share of the parties is
likely to be higher since part of the overall market
includes also fungicides, part of ACS’s sales are straight
insecticides and the parties have the latest chemistry
on the market. The parties have argued in their
reply to the Commission’s supplementary statement of
objections that due to the termination of the Guazatine
business to Makhteshim, any existing overlap would
be eliminated in this market. The Commission notes
that even if the Guazatine business is sold to Makhte-
the parties have not submitted that ACS’s
shim,

looking only at

(848) After the implementation of the proposed transaction,
the merged entity would control [...] active ingredients
for seed treatment insecticides for rice and cereals in
the EEA: Imidacloprid and Fipronil, which are currently
on the market, [...]. The only remaining competitor
Syngenta would control Thiamethoxam, which is not
yet
that
launched on the market, and Tefluthrin,
however is a old chemistry class, compared to the new
chemistries neonicotinoids and pyrazoles. In the light
of the investigation, the Commission considers that
Tefluthrin does not exercise sufficient competitive
pressure on the parties’ neonicotinoids and pyrazole.
This is evidenced by the relatively low market share of
Tefluthrin in the cereals market in France, even though
according to the parties Tefluthrin was first launched
in 1986 and Imidacloprid only four years later, in
1990.

(849)

The parties have argued that Syngenta’s neonicotinoid
Thiamethoxam will provide competition to the new
entity and that no competition concerns would arise.
However, for the reasons given above, the Commission
considers that Syngenta is unlikely to be in a position
to offset the market power of the new entity in the
near future. As to the question whether the transaction
would lead to the elimination of ACS as a potential
competitor in the United Kingdom where Bayer is
currently the only player with a third party product
[...], the parties have argued that Fipronil is used in
France for the control of wheat bulb fly which has
no economic importance in the United Kingdom.
Therefore, the parties have argued that ACS has never
developed Fipronil for cereal seed treatment use in the
United Kingdom and has no plans to do so either.

(850)

Therefore, the Commission considers that combining
Fipronil with [...] will have a negative effect on
competition. For these reasons the Commission has
reached the conclusion that the proposed transaction
will create or strengthen a dominant position on the
insecticides for
for seed treatment
French market
cereals and rice. The above assessment is not materially
affected if considering cereals and rice together, as
neither party is active in insecticides used for seed
treatment for rice in France.

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Official Journal of the European Union

L 107/99

(b)

S e e d
m a i z e

t r e a t m e n t

i n s e c t i c i d e s

f o r

power of the new entity. (Confidential information
concerning the sales forecasts of Thiamethoxam).

(851)

Bayer considers that maize is one of the fastest growing
insecticides seed treatment market. Currently ACS and
Bayer are the only significant players in the French
market (Bayer: [70 to 80] %, ACS [10 to 20] %) and
the only players in the Italian market (Bayer: [60 to
70] %, ACS: [30 to 40] %) for seed treatment insecti-
cides for maize. Contrary to what has been stated in
the statement of objections given to a misinterpretation
of the data provided by the parties, ACS is currently
not active in the market for seed treatment insecticides
for maize in the Netherlands. The parties have explai-
ned that these seeds are exported to France (62). How-
ever, since Bayer’s neonicotinoid Imidacloprid and
ACS’s pyrazole Fipronil are considered generally to be
the best active ingredients currently used in the EEA in
seed treatment insecticides for maize and their pest
spectrum overlaps, ACS is currently a potential com-
petitor of Bayer in all the EEA national markets where
Bayer is active.

(852) As regards seed treatment for maize, the EEA market
was estimated as EUR [...] million in 2000, of which
only France and Italy accounted in the same year for
EUR [...] and [...] million, respectively. The French and
the Italian markets together represent more than [...] %
of the whole EEA-wide market for seed treatment
insecticides for maize.

(853) ACS sells Fipronil marketed under the brand Regent
both in France and Italy. Bayer sells Imidacloprid under
the brand Gaucho in both countries (63). [...]. Third
parties have indicated that there are no present substi-
tutes
Imidacloprid and
for
Fipronil.

the parties’ products

(855)

The Commission has therefore reached the conclusion
that the transaction would create or strengthen a
dominant position in seed treatment insecticides for
maize in France and Italy. In addition to this, the
transaction will remove Fipronil as a potential competi-
tor in all those markets where Imidacloprid is currently
present and where [...] will be introduced, that is, in
Austria, Belgium, Germany, Greece, the Netherlands,
Portugal and Spain.

Seed treatment for other crops

(856)

The Commission considers that competition would be
restricted not only in those areas, where the parties
have current overlaps but also in crops, where only
one of the parties is currently present, because the
operation would remove a potential competitor from
those markets.

(857) As regards potatoes, even though the parties have
argued that Fipronil is not suitable as potato tuber
treatment, the information obtained from the parties
shows that Fipronil has good activity against wire-
worm, a pest affecting potatoes. It cannot therefore be
excluded that Fipronil could have, in the absence of
the merger, been developed for this high-value market,
where Imidacloprid is the only effective competitor at
the moment in Spain and the Netherlands.

(854)

The parties have argued that the new entity will have
to face strong competition by Syngenta’s pipeline
product Thiamethoxam. However,
for the reasons
indicated above, the Commission considers that Thia-
the market
methoxam will not be able to offset

(858)

[...]. The parties have not provided evidence which
would show that Imidacloprid could not be developed
for this high-value market. The Commission considers,
therefore, that Bayer would be removed as a potential
competitor in these countries following the trans-
action.

(62) The allocation of the sales derived from the exports of Fipronil
from the Netherlands to France would not materially affect the
sales and market share figures provided by the parties in the
French market.

(63) Market data submitted by the parties suggests that Bayer sells
also Methiocarb under the brand Mesurol FS 500 in France. The
parties have argued, however, that Bayer’s sales of Mesurol are
exclusively derived from the export of this product since it is not
registered in France for corn seed treatment.

(859)

The parties have submitted in their reply to the
Commission’s supplementary statement of objections
that, as regards oil seed rape, the key pest to be
controlled in oil seed rape is the flea beetle Phyllotretta
spp. The parties have argued that Fipronil has only
very weak activity against this pest and has therefore
never been developed or registered for this use. The
parties have submitted that the whole crop is not
accessible to Fipronil. No issues of potential compe-
tition therefore are likely to arise on this market.

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Official Journal of the European Union

15.4.2004

(860) On the basis of the foregoing, the Commission has
reached the conclusion that the removal of a potential
competitor would lead to the creation or strengthening
of a dominant position in seed treatment for potatoes
in Spain and the Netherlands and for vegetables in
France and in the Benelux.

E.2.2. Seed treatment fungicides

(864)

The only three seed treatment fungicides markets,
where competition problems are found, are the two
cereals markets barley and wheat (including rye and
triticale) and potatoes.

Conclusion on insecticides for seed treatment

(861)

The investigation shows that the merger would create
the most powerful company in insecticides used for
seed treatment. The only two existing products con-
sidered by all third parties as relevant for seed treatment
and which are currently competing, will be owned
by the same company. The parties’ products would
strengthen the position both by targeting the same
pests and also by complementing each other. Imidaclo-
prid and Fipronil are said to constitute the ideal
combination to have the strongest market position in
seed treatment. [...]. For the reasons given above,
the Commission does not consider that Syngenta’s
Thiamethoxam will be able to offset the resulting
market power of the new entity. Even if Syngenta were
to enter the market, the transaction would reduce
competition in the market since it would reduce the
number of players from three to two.

(862)

In the light of the above, the Commission considers
that the transaction would lead to the creation or
strengthening of a dominant position in seed treatment
insecticides for cereals and rice in France and seed
treatment insecticides for maize in France, Italy, Aus-
tria, Belgium, Germany, Greece, the Netherlands, Portu-
gal and Spain. The operation would further lead to the
creation or strengthening of a dominant position in
seed treatment insecticides for potatoes in Spain and
the Netherlands and in seed treatment insecticides for
vegetables in France and in the Benelux by removing a
potential competitor from the market.

(863) Almost all third parties consulted by the Commission
have expressed serious concern over the transaction
and indicated that competition in the seed treatment
markets would be severely restricted in the future as a
result of the operation.

(a)

Seed treatment for cereals and rice

(865)

The parties estimate that the total EEA-wide markets
for seed treatment with fungicides for cereals in 2000
was barley EUR 34 million and wheat EUR [...] million.
On these markets, the parties estimate their combined
share to be [60 to 70] % in barley (Bayer: [30 to 40] %,
ACS: [20 to 30] %) and [20 to 30] % in wheat (Bayer:
[10 to 20] %; ACS: [10 to 20] %). The parties reckon
that Syngenta is the largest competitor with [20 to
30] % (barley) and [40 to 50] % (wheat) of the total
market.

B a r l e y

(866)

In barley, Bayer sells Tebuconazole straight and with
various mixing partners under the brand name Raxil:
Raxil ES 015 (straight Tebuconazole), Raxil S FS 040
(Tebuconazole and Triazoxide) and Raxil IM ES 035
(Tebuconazole and Imazalil). It also sells Triadimenol
with various mixing partners under the brand name
Baytan: Baytan DS 17,5 (Triadimenol and Imazalil) and
Baytan Universal FS 094 (Triadimenol, Fuberidazol
and Imazalil). It finally sells Fludioxonil with mixing
partners under the brand name Solitär FS 060 (Flu-
dioxonil, Cyprodinil and Tebuconazole).

(867) ACS sells Triticonazole with various mixing partners
under the brand names Premis Delta (Triticonazole
and Iprodione), Kinto TS and Seman (Triticonazole,
Prochloraz and Anthraquinone). It sells Prochloraz in
mixtures with other active ingredients under the brand
names Abavit UF and Abavit UT (Prochloraz and
Carboxin), Abavit Universal AB and Prelude Universal
(Prochloraz, Carboxin and Anthraquinone) and Rubin
(Prochloraz, Pyrimethanil and Flutriafol). It sells Guaza-
tine straight and with various mixing partners under
the brand names Pallas, Ravine, Panoctine 35, Panocti-
ne 70 (straight Guazatine), Panoctine, Panoctine Aqua
and Panoctine Plus (Guazatine and Imazalil), Panoctine
GF (Guazatine, Fenfuram and Imazalil). It sells Ipro-
dione with mixing partners under the brand names
Germipro (Iprodione and Carbendazim) and Geriko
Biop (Iprodione, Diniconazole and Anthraquinone).
Finally, it sells Imazalil straight under the brand name
Fungazil.

15.4.2004

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Official Journal of the European Union

L 107/101

The parties in their reply to the statement of objections
argue that the Commission has not sufficiently taken
into account that the parties expect their market shares
to decrease because of competitive pressure resulting
from generic Tebuconazole. They also argue that the
Commission has failed to acknowledge that [...]. Bayer
submits that its new product [...] is not expected to
fully compensate for the losses in market share due to
the termination of Solitär and the expected generic
pressure on Tebuconazole. The parties furthermore
argue that the Commission does not take into consider-
ation the strong competition which the parties are
facing in the fungicides seed treatment
in cereals
from Syngenta, Monsanto and, after acquisition of
Guazatine, from Makhteshim. Syngenta’s market share
is expected to increase because of
its technically
superior products. Syngenta’s product portfolio
encompasses the fungicidal active ingredients Difeno-
conazole, Fludioxonil and Fludioxonil. Syngenta’s cur-
rent fungicidal portfolio (products marketed under the
brand names Celest, Celest Gold, Beret Gold) shows the
best performance especially against Fusarium (snow-
mould) and is in this respect unmatched by the product
range offered by competitors. In addition, the parties
lead the attention to the fact that Monsanto will launch
a new product under the brand name Latitude.

(873)

(868)

In 2001 ACS divested Guazatine to Makhteshim.
However, in several countries ACS retained the distri-
bution rights for the products based on Guazatine,
while it in others will continue to sell mixture products
with Guazatine while Makhteshim distributes straight
Guazatine products. The effects of this divestment have
therefore to be analysed in the light of the situation in
the individual Member State. However,
it is worth
noting that ACS in internal documents discussing the
information of ACS]. The
divestment [confidential
assessment of the importance of the divestment of the
Guazatine business will be done in light of these
statements.

(869) According to the data submitted by the parties, affected
markets arise in the following Member States: Austria
([20 to 30] %), Germany ([60 to 70] %), Ireland ([60 to
70] %), Italy ([60 to 70] %), the United Kingdom ([80
to 90] %). The Commission has reached the conclusion
that the proposed transaction would create or strength-
en a dominant position on the markets for fungicides
for seed treatment of barley in Germany, Ireland, Italy
and the United Kingdom.

(870)

The German market amounted in 2000 to EUR [...]
million and is expected by the parties to grow slightly
to EUR 16 million by 2004. The parties estimate their
combined market share in Germany to be [60 to 70] %
(Bayer: [30 to 40] %, ACS: [30 to 40] %) with Syngenta
the largest competitor with [30 to 40] %.

(871)

(872)

Bayer’s main product
is Baytan Universal FS 094
(Triadimenol, Fuberidazol and Imazalil), followed by
Raxil S FS 040 (Tebuconazole and Triazoxide) and
Solitär FS 060 (Fludioxonil, Cyprodinil and Tebucona-
zole). ACS sells mainly Prochloraz in mixtures with
other active ingredients, Abavit UF and Abavit UT
(Prochloraz and Carboxin) and Rubin (Prochloraz,
Pyrimethanil and Flutriafol). ACS also sells Panoctine
GF (Guazatine, Fenfuram and Imazalil).

(874)

The parties argue that ACS will
lose market share
since it divested Guazatine, including Panoctine GF in
Germany, to Makhteshim Agan in 2001. As Panoctine
GF only achieved [0 to 10] % out of ACS’s total market
share of [30 to 40] % in Germany, this does, however,
not change the assessment in any fundamental way.
The parties furthermore argue that Fludioxonil
is
supplied to Bayer by [...]. The parties claim that they
do not expect that [...]. The parties have not, however,
provided any evidence that this will actually happen.
On the other hand, it should be noted that ACS’s Rubin
was only introduced in 1999 and managed to achieve
a market share of [10 to 20] % by 2000.

the Commission notes that

The Commission cannot share these views put forward
by the parties. As to the generic pressure in Tebucona-
zole,
the Commission has no evidence that such
generic pressure will be more effective as a competitive
restraint on the parties than generic competition has
been in other markets. In a market so specialised as
seed treatment, the effects of generic competition are
likely to be even less strong. [...]. As to the claim that
Syngenta should have technically superior products
and an unmatched product range offered by competi-
tors,
the two parties
individually have been able to achieve as high market
shares in Germany as has Syngenta. These two individ-
ual positions are now being joined; it seems hard to
accept that Syngenta after the transaction would have
an ‘unmatched product range’. As to the effect of
the launch of Latitude, this is a specialised product
competing basically against ACS’s Jockey product line,
which is the only other product treating this disease.
According to the data provided by the parties, ACS has
no sales of Jockey in barley in Germany. It therefore
seems difficult for Monsanto to take away any of the
parties’ sales in this market.

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Official Journal of the European Union

15.4.2004

The parties have a very strong position on the German
market for seed treatment of barley with fungicides.
There is no indication that any competitor should be a
serious candidate to challenge this strong position.
Competition on the market would basically be reduced
to two companies, the new entity and Syngenta, with
Syngenta having a much weaker position.

(882)

The market in the United Kingdom amounted in 2000
to EUR [...] million and is expected by the parties to
remain at that level in 2004. The parties estimate their
combined market share in the United Kingdom to be
[80 to 90] % (Bayer: [70 to 80] %, ACS: [0 to 10] %)
with Syngenta the largest competitor with [10 to
20] %. Bayer sells Raxil S FS 040 (Tebuconazole
and Triazoxide), while ACS sells Ravine (straight
Guazatine).

(875)

(876)

The Irish market amounted in 2000 to EUR [...]
million and is expected by the parties to remain at
EUR 0,8 million in 2004. The parties estimate their
combined market share in Ireland to be [60 to 70] %
(Bayer: [20 to 30] %, ACS: [40 to 50] %) with
unspecified ‘others’ having the remaining part of the
market.

(877)

Bayer sells Raxil ES 015 (straight Tebuconazole) and
Raxil IM ES 035 (Tebuconazole and Imazalil), while
ACS sells Fungazil (straight Imazalil) and Panoctine
Plus (Guazatine and Imazalil).

(878)

The parties argue that Panoctine Plus was divested
to Makhteshim in 2001. However, ACS keeps the
distribution rights to Panoctine Plus in Ireland until
[...]. Their very strong position in the Irish market can
thus be expected to remain in the near future.

(879)

The Italian market amounted in 2000 to EUR [...]
million and is expected by the parties to grow slightly
to EUR [...] million by 2004. The parties estimate their
combined market share in Italy to be [60 to 70] %
(Bayer: [20 to 30] %, ACS: [30 to 40] %) with
unspecified ‘others’ having the remaining part of the
market.

(883) Also in this market, the parties bring forward the
argument about ACS’s divestment of Guazatine to
Makhteshim Agan as of 2001. However, ACS will
anyway keep the distribution rights for Ravine in the
United Kingdom until [...]. The parties claim that they
expect Bayer’s market share to decline from the present
[70 to 80] % to [50 to 60] % by 2004. They have,
however, not explained the reasons for such a [...]
decline. The Commission therefore considers that
Bayer has a dominant position on the market for
fungicides for seed treatment of barley in the United
Kingdom.

(884)

For all the above reasons, the Commission has reached
the conclusion that the proposed transaction would
create or strengthen a dominant position on the
markets for fungicides for seed treatment of barley in
Germany, Ireland, Italy and the United Kingdom.

(880)

Bayer sells Raxil IM ES 035 (Tebuconazole and Imaza-
lil), while ACS sells Premis Delta (Triticonazole and
Iprodione) and Panoctine 70 (straight Guazatine).

(885)

(881)

The parties argue that ACS has divested Guazatine to
Makhteshim in 2001, including Panoctine 70 in Italy.
This product had the majority of the ACS’s sales in this
market in 2000. However, the parties also estimate
that Premis Delta in 2004 will have a market share on
its own of [40 to 50] %, while Raxil IM ES 035 will [...]
its share of [20 to 30] %. The parties therefore expect
to improve on their already very strong position in
Italy despite the sale of Guazatine to Makhteshim.

W h e a t , r y e a n d t r i t i c a l e

In wheat, rye and triticale, Bayer sells Bitertanol with
various mixing partners under the brand name Sibutol:
Sibutol FS 398, Sibutol LS 298 and Sibutol FS 199
(all Bitertanol and Fuberidazol), Sibutol A FS 325
(Bitertanol and Anthraquinone), Sibutol Morkit FS 375
(Bitertanol, Fuberidazol and Anthraquinone). It sells
Tebuconazole straight and with various mixing part-
ners under the brand name Raxil: Raxil ES 015 and
Raxil ES 025 (straight Tebuconazole), and Raxil T
FS 515 (Tebuconazole and Thiram).
It also sells
Triadimenol under the brand name Baytan: Baytan
DS 17,5 (Triadimenol and Imazalil). It finally sells
Fludioxonil with various mixing partners under the
brand names Landor CT FS 050 (Fludioxonil, Difeno-
conazole and Tebuconazole) and Arena C FS 030
(Fludioxonil and Tebuconazole).

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Official Journal of the European Union

L 107/103

(886) ACS sells Triticonazole straight and with various
mixing partners under the brand names Premis, Real
(straight Triticonazole), Legat, Premis, Premis Blé, Pre-
mis Geta and Real Geta (all Triticonazole and Guazati-
ne), Kinto TS and Seman (Triticonazole, Prochloraz
and Anthraquinone) and Rubin (Prochloraz, Pyrime-
thanil and Flutriafol). It sells Prochloraz in mixtures
with other active ingredients under the brand names
Abavit UF and Abavit UT (Prochloraz and Carboxin),
Abavit Universal AB and Prelude Universal (Prochloraz,
Carboxin and Anthraquinone). It sells Fluquinconazole
straight and with various mixing partners under the
brand names Jockey Flexi (straight Fluquinconazole),
Jockey and Jockey Plus AB (Fluquinconazole and
Prochloraz), Jockey Plus AB (Fluquinconazole, Prochlo-
raz and Anthraquinone). It sells Iprodione with mixing
partners under the brand name Germipro (Iprodione
and Carbendazim). It sells Guazatine straight and with
various mixing partners under the brand names Pallas,
Panoctine, Panoctine 30, Panoctine 35, Panoctine 70
and Panoctine 400 (straight Guazatine), Panoctine,
Panoctine Aqua and Panoctine Plus (Guazatine and
Imazalil), Lotus (Guazatine and Flutriafol) and Panocti-
ne GF (Guazatine, Fenfuram and Imazalil). Finally, it
sells Carboxin straight under the brand name Vitavax.

(887) Also in this market the parties refer to ACS’s divestment
of Guazatine in 2001 to Makhteshim. The comments
made in the assessment of the barley market apply also
here.

(888) According to the data submitted by the parties, affected
markets arise in the following Member States: Austria
([50 to 60] %), Belgium ([30 to 40] %), Finland ([30 to
40] %), France ([30 to 40] %), Germany ([60 to 70] %),
Ireland ([40 to 50] %), Italy ([80 to 90] %), Sweden
([70 to 80] %), United Kingdom ([40 to 50] %). The
Commission has reached the conclusion that
the
proposed transaction would create or strengthen a
dominant position on the markets for fungicides for
seed treatment of wheat, rye and triticale in Germany,
Italy, Sweden and the United Kingdom.

(890)

(891)

(892)

(893)

and Cyprodinil. ACS sells mainly Prochloraz in mix-
tures with other active ingredients.

The parties argue that ACS will loose market share
since it divested Guazatine, including Panoctine GF in
Germany, to Makhteshim Agan in 2001. As Panoctine
GF only achieved [0 to 10] % out of ACS’s total market
share of [40 to 50] % in Germany, this does, however,
not change the assessment in any fundamental way.
Furthermore, ACS will still be selling Legat (Triticona-
zole and Guazatine), which accounts for another [0 to
10] %.

The parties furthermore argue that Fludioxonil
is
supplied to Bayer by [...] on the basis of a supply
agreement, which terminates by the end of [...]. [...].
The parties have not, however, provided any evidence
that this will actually happen. On the other hand, it
should be noted that ACS’s Rubin and Jockey were
only introduced in 1999 and managed to achieve
market shares of [...] % and [...] %, respectively, by
2000.

The parties also argue the Monsanto will enter with its
product Latitude, which according to the parties will
take [...] % of the total market for fungicides for seed
treatment for wheat. In this respect it should be noted
that Latitude only treats the take-all disease and is
therefore not in direct competition with most other
fungicides products. The only other product treating
the take-all disease is ACS’s Jockey products, which
however also treat other diseases than the take-all
disease.

The Italian market amounted in 2000 to EUR [...]
million and is expected by the parties to grow to
EUR [...] million by 2004. The parties estimate their
combined market share in Italy to be [80 to 90] %
(Bayer: [10 to 20] %, ACS: [60 to 70] %) with Syngenta
the largest competitor with [10 to 20] %. Bayer sells
Raxil ES 025 (straight Tebuconazole), and Raxil T
FS 515 (Tebuconazole and Thiram), while ACS sells
Panoctine 70 (Guazatine) and Real Geta (Triticonazole
and Guazatine).

(889)

The German market amounted in 2000 to EUR [...]
million and is expected by the parties to grow slightly
to EUR [...] million by 2004. The parties estimate their
combined market share in Germany to be [60 to 70] %
(Bayer: [20 to 30] %, ACS: [40 to 50] %) with Syngenta
the largest competitor with [30 to 40] %. The parties
estimate that their combined market share in 2004
will be [50 to 60] %, while that of Syngenta will remain
at [30 to 40] % and Monsanto will enter with [0 to
10] %. Bayer generates its entire turnover in this market
with Fludioxonil sold as mixtures with other active
ingredients including Tebuconazole, Difenoconazole

(894) ACS divested Guazatine,

including the distribution
rights to Panoctine 70 in Italy, to Makhteshim Agan as
of 2001. In year 2000, about [60-70 %] of ACS’s sales
in Italy came from the sale of Panoctine 70, while the
rest came from sales of Real Geta. Real Geta was
introduced in 1999 and had by 2000 already achieved
a market share of [20 to 30] %. It should in this respect
be kept in mind that ACS kept distribution rights for
Guazatine, where (confidential information of ACS). It
thus seems rather unlikely that ACS will only have [10
to 20] % in 2004, as projected by the parties.

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(895)

The Swedish market amounted in 2000 to EUR [...]
million and is expected by the parties to decrease
slightly to EUR [...] million by 2004. The parties
estimate their combined market share in Sweden to be
[70 to 80] % (Bayer: [30 to 40] %, ACS: [30 to 40] %)
with Syngenta the largest competitor with [20 to
30] %. Bayer sells Sibutol LS 298 (Bitertanol and
Fuberidazol), while all of ACS’s sales in Sweden in year
came from the sale of Guazatine, either straight or
mixed with Imazalil.

(896)

The parties refer again to ACS’s divestment of Guazati-
ne to Makhteshim Agan as of 2001. However, although
ACS divested Guazatine in 2001 it keeps the distri-
bution rights in Sweden until [...]. The parties would
therefore have keep control over the vast majority of
sales on the Swedish market at least until [...].

(897)

The market in the United Kingdom amounted in 2000
to EUR [...] million and is expected by the parties to
increase to EUR [...] million by 2004.
In earlier
submissions the parties estimated their combined
market share in the United Kingdom to be [40 to 50] %
(Bayer: [20 to 30] %, ACS: [20 to 30] %) with Syngenta
the largest competitor with [30 to 40] %. The parties
have in their reply to the statement of objections
corrected their own market share figures to [50 to
60] % (Bayer: [30 to 40] %, ACS: [20 to 30] %) because
of an omission of Bayer’s product Baytan. Bayer also
sells Sibutol LS 298 (Bitertanol and Fuberidazol), while
ACS sells Jockey (Fluquinconazole and Prochloraz),
Ravine (Guazatine) and Premis (Triticonazole and
Guazatine).

(898) Also in this market, the parties argue that ACS’s
divestment of Guazatine to Makhteshim Agan as of
2001 will result in a decrease in market share. How-
ever, the sale of Ravine only accounted for [0 to 10] %
out of ACS’s [20 to 30] % in year 2000, and ACS will
anyway keep the distribution rights in the United
Kingdom until [...].

(899)

The parties also argue the Monsanto will enter with its
product Latitude. In this respect it should be noted that
Latitude only treats the take-all disease and is therefore
not in direct competition with most other fungicides
products. The only other product treating the take-all
disease is ACS’s Jockey products, which however also

treat other diseases than the take-all disease. Although
this product may take some of ACS’s sales of Jockey,
the overall strong position of the parties will not be
challenged by this one product.

(900)

For all the above reasons, the Commission has reached
the conclusion that the proposed transaction would
create or strengthen a dominant position on the
markets for fungicides for seed treatment of wheat, rye
and triticale in Germany, Italy, Sweden and the United
Kingdom.

(901)

(902)

(903)

(b)

Seed treatment for potatoes

The parties estimate that the total EEA-wide market for
seed treatment with fungicides for potatoes was EUR
[...] million in 2000. On this market, the parties
estimate their combined share to be [70 to 80] %
(Bayer: [40 to 50] %, ACS: [20 to 30] %). The parties
reckon that Syngenta is the largest competitor with [0
to 10] % of the total market.

Bayer sells Pencycuron straight (Monceren DS 12,5
and Monceren FS 250) and mixed with Imazalil
(Monceren IM DS 13,3). ACS sells Thiabendazole
mixed with Imazalil (Fungaflor TZ), Flutolanil (Iota,
Symphonie and Monarch), Mepronil (Basitac), Imazalil
straight (Fungazil) and Validamycin (Solacol). All of
the active ingredients are owned by third parties,
Imazalil by Janssen and the others by Japanese com-
panies.

Several Dutch respondents to the Commission’s market
investigation argue that the parties would have a very
large position (90-100 %) of the market for control of
the disease Rhizoctonia in potatoes in the Netherlands.
As a response to an Article 11 request, the parties have
argued that this problem relates to seed treatment of
potatoes. According to the parties, Rhizoctonia is
the main disease affecting potatoes not only in the
Netherlands, but in all countries within the EEA. The
disease can be controlled by a treatment of the potato
tubers, which must therefore be considered a seed
treatment. According to the parties, all products used
for the treatment of potato tubers are designed to
combat Rhizoctonia. According to the parties, the
two main active ingredients treating Rhizoctonia are
Pencycuron from Bayer and Flutolanil, which is a third
party product supplied by [...] to ACS. Other active
ingredients used for the treatment of Rhizoctonia
include Imazalil, supplied to Bayer and ACS by [...],
and Mepronil [...].

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(904) While third parties agree that Rhizoctonia is the main
disease affecting potatoes in the Netherlands and in all
countries within the EEA, they do not agree to the
parties’ assertion about which active ingredients can
effectively be used to combat Rhizoctonia. For instance,
it is argued that Imazalil and Thiabendazole give no
effective control of Rhizoctonia. Third parties under-
line that Pencycuron and Flutolanil are the two major
active ingredients, which provide such control, and
must therefore be seen as each other’s closest substi-
tutes.

(905)

The parties also argue that Pencycuron is off-patent
and faces growing generic competition; however, the
parties have not provided the names of any competitor
selling products based on Pencycuron for use as seed
treatment in Europe. Asked where Pencycuron faces
generic competition, the parties replied that generic
Pencycuron is currently produced (and sold) in Taiwan
and Corea. The parties are not aware of any company
selling generic Pencycuron within the EEA. The parties,
in fact, are the main sellers in the EEA of all the four
active ingredients mentioned above as being used for
the treatment of Rhizoctonia (Pencucuron, Flutolanil,
Imazalil and Mepronil).

(906)

In a reply to an Article 11 letter during the phase I
investigation the parties argue that competition is
already strong on the market for seed treatment of
potatoes with Syngenta having introduced two new
active ingredients treating Rhizoctonia over the past
years, that is, Fenpiclonil (marketed under the brands
Gambet, Galbas, Beret) and Fludioxonyl
(marketed
under the brands Maxim, Celest, Beret gold). Further-
more, the parties argue that Syngenta is currently
developing Azoxystrobin, which will be marketed
under the brand Amistar.

(907)

In the reply to the phase I Article 11 letter, the parties
also argue that the following two active ingredients
are under development or registration: Thifluzamide,
developed by Dow, which will be marketed under
the brand Pulsan, and Furametpyr, developed by
Sumitomo, which will be marketed under the brand
Limber. In their observations on the decision based on
Article 6(1)(c) of the Merger Regulation, the parties
again argue that Dow, but now also DuPont, are
expected to develop new seed treatment products for
use in potatoes, which will increase the competitive

(908)

(909)

pressure on the combined entity. The parties do not
explain when they expect these new products to enter
the market. However, as witnessed above, the parties
apparently do not think that the launch of these new
products will have any major impact on the parties’
combined position when comparing 2004 to 2000.

The Commission has, in its market investigation, asked
third parties to comment on the claims by the parties
relating to the new products that the parties argue
have recently been introduced or are in the pipeline.
Syngenta has explained that it has withdrawn the active
ingredient Fenpiclonil from all countries in the EEA in
1999 and ceased to manufacture this active ingredient
and has no plans to re-introduce it for sale. Syngenta
also does not agree that the active ingredient Flu-
dioxonil has been introduced into any country within
the EEA for use on potatoes. The market investigation
has furthermore shown that no other new products
can be expected to seriously challenge the position of
the parties in the near future (64).

The parties submit that affected markets arise in the
following Member States: Belgium ([70 to 80] %),
France ([80 to 90] %), Ireland ([50 to 60] %), the
Netherlands ([80 to 90] %) and the United Kingdom
([70 to 80] %). Furthermore, Bayer has a relatively
strong market position in a number of Member States,
according to the market shares provided by the parties:
Denmark ([60 to 70] %), Germany ([50 to 60] %), Italy
([40 to 50] %), Spain ([40 to 50] %) and Sweden ([50
to 60] %). It is noteworthy that, on all these markets,
multinational companies are all but absent, except
Syngenta having [10 to 20] % in Germany and Italy,
and the parties have allocated [40 to 50] % of the
market share to local and generic companies. Third
parties have suggested that Bayer’s market position
could actually be stronger in some of these countries.
By way of example, Bayer is said to account for [80 to
90] % of the market in Germany.

(910)

The Belgian market totalled EUR [...] million in 2000
and is expected to grow slightly. The parties estimate
their combined market share in Belgium to be [70 to
80] % (Bayer: [20 to 30] %, ACS: [50 to 60] %) with
Syngenta the largest competitor with [20 to 30] %.
The parties estimate that their combined market share
in 2004 will be [60 to 70] %. Bayer sells Pencycuron
(Monceren DS 12,5), while ACS sells Flutolanil (Sym-
phonie) and Mepronil (Basitac).

(64) Business secrets: Deleted confidential information about competi-

tors’ product introductions.

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(911)

The French market was at EUR [...] million in 2000
and is expected to grow slightly. The parties estimate
their market share to be [80 to 90] % (Bayer: [30 to
40] %, ACS: [50 to 60] %) with Syngenta having [10
to 20] % of the market. The parties estimate that their
combined market share in 2004 will be [70 to
80] %. Bayer sells Pencycuron (Monceren DS 12,5 and
Monceren FS 250) while ACS’s main product is a
mixture of Thiabendazole and Imazalil (Fungaflor TZ).
This product accounts for [30 to 40] % of ACS’s sales
in that market. Other products are based on Flutolanil
(Iota and Symphonie) and Mepronil (Basitac).

(912)

The Irish market amounted to EUR [...] million in
2000 and is not expected to grow. The parties estimate
their market share to be [50 to 60] % (Bayer: [20 to
30] %, ACS: [20 to 30] %) with Syngenta having [30
to 40] %. The parties estimate that their combined
market share in 2004 will remain [50 to 60] %. On
this market, Bayer sells a mixture of Pencycuron and
Imazalil (Monceren IM DS 13,3) while ACS sells a
product based on straight Imazalil (Fungazil).

(915)

For all the above reasons, the Commission has reached
the conclusion that the proposed transaction would
create or strengthen a dominant position on the
markets for fungicides for seed treatment of potatoes
in Belgium, France, Ireland, the Netherlands and the
United Kingdom.

Conclusion on fungicides for seed treatment

(916)

For all the above reasons, the Commission has reached
the conclusion that the proposed transaction would
create or strengthen a dominant position on the
markets for fungicides for seed treatment of barley in
Germany, Ireland, Italy and the United Kingdom; on
the markets for fungicides for seed treatment of wheat,
rye and triticale in Germany, Italy, Sweden and the
United Kingdom; and on the markets for fungicides for
seed treatment of potatoes in Belgium, France, Ireland,
the Netherlands and the United Kingdom.

F. ACTIVE SUBSTANCES

F.1. Relevant Markets

(913)

(914)

The Dutch market was at EUR [...] million in 2000 and
is not expected to grow. The parties estimate that their
combined market share is [80 to 90] % (Bayer: [60 to
70] %, ACS: [20 to 30] %). Syngenta is not present in
this market and the competitors are national and local
companies, accounting for a combined market share
of [10 to 20] %. The parties expect their combined
share in 2004 to be [70 to 80] %. Bayer sells
Pencycuron in different
(Monceren
DS 12,5 and Monceren FS 250). ACS’s product port-
folio includes Flutolanil (Symphonie and Monarch) and
Validamycin (Solacol).

formulations

The market in the United Kingdom amounted to EUR
[...] million in 2000 and is expected to decrease slightly.
The parties estimate that they have a market share of
[70 to 80] % (Bayer: [40 to 50] %, ACS: [20 to 30] %).
The parties submit that they mostly face competition
from local suppliers, accounting for a combined market
share of [20 to 30] %. Syngenta has only [0 to 10] %
of the market. The parties expect their combined share
in 2004 to be [70 to 80] %. Bayer sells Pencycuron
straight (Monceren DS 12,5 and Monceren FS 250)
and mixed with Imazalil (Monceren IM DS 13,3) while
ACS sells Imazalil straight (Fungazil).

(917)

The active substances constitute key raw materials in
order to manufacture agricultural protection products.
The production in crop protection takes place in three
stages: the manufacture of the active substances, the
manufacture of the formulations (i.e. formulated prod-
ucts) from the active substances, and the packaging
of such formulations. Bayer and ACS are vertically
active
integrated enterprises which manufacture
ingredients primarily for internal use to produce their
own end-products.

(918)

In Case M.737 — Ciba-Geigy/Sandoz, the Commission
arrived at the conclusion that active substances are
basically not substitutable for one another but form
separate product markets. Each active substance has its
unique properties and, where appropriate, is patented.
The parties follow the Commission’s definition.

(919) As to the geographic market, the parties submit that
that the upstream markets for active substances are at
least EEA-wide,
if not worldwide given that active
substances are registered European-wide according to
Directive 91/414/EEC and market access restrictions
as a result of national authorisation requirements do
not exist, market and distribution takes currently place
worldwide and, finally, transport costs are insignificant.
The Commission agrees with this view.

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F.2. Competitive Assessment

Active substances supplied by Bayer

(925) With respect to the active ingredients sold by ACS for
the formulation of non-agricultural products, including
parasiticides for small animals, pesticides to be applied
by the private home gardener and household insecti-
cides, reference can be made to the information
provided in the corresponding sections.

(920)

Bayer sells a number of active ingredients used for
the formulation of herbicides: Aminotriazole, Diuros,
Flufenacet and Metamitron. All of them are already off-
patent, with the exception of Flufenacet, which is
for a limited value of EUR [...]
supplied to [...]
million in 2000. As to active ingredients used for the
formulation of fungicides sold to third parties, Bayer
currently supplies [...] with Tebuconazole, mainly used
for the formulation of cereal fungicides. With respect to
active ingredients used on the downstream insecticides
markets, Bayer’s sales to third parties are limited to
Oxydemeton-Methyl to [...] (EUR [...] million) and
Fentitrothion to [...] (EUR [...] million).

Active substances supplied by ACS

(921) As regards ACS, of all the active ingredients used
for the formulation of agricultural crop protection
products including insecticides, fungicides and herbi-
cides, only a few enjoy patent protection, including
Diflufenican, Isoxaflutole, Fenpiroximate, Glufosinate,
Propamocarb and Fosethyl. With the exception of some
limited sales of Fosethyl to [...] and of Diflufenican to
[...], all of these patented products are sold to Bayer.

(922)

For all those active ingredients where no overlapping
will be produced as a result of the transaction, the
prospected merger will not result, therefore, in any
changes of the current market structure.

G.

INDUSTRIAL WEED CONTROL

G.1. Relevant Markets

Product market

for

(926) As the Commission held in Hoechst/Rhône-Poulenc,
industrial weed control products
the market
encompasses products which are used for clearing
weeds in a variety of non-agricultural applications,
including weed clearance at industrial sites, railway
tracks, electricity wires, car parks and aquatic appli-
cations. Industrial weed control products are sold in
formulations different from agricultural herbicides and
to different customers.

Geographic market

(927)

The parties submits that the relevant geographic mar-
ket for industrial-weed control products is EEA-wide.
This view is supported by the existence of major
multinational suppliers, central production sites and
low transport costs. A final market definition, however,
can be left open, because even if the relevant product
markets have to be defined on a narrow basis as
only being national, the transaction does not lead to
concerns over market dominance.

(923) Of all active ingredients sold by Bayer and ACS for the
formulation of crop protection products, off-patent
Diuron is the only one which is sold by both Parties.
The volume of the EEA-wide market for Diuron sales
amounts to about EUR [...] million and the parties’
combined market share in the market is far below [10
to 20] %.

G.2. Competitive assessment

Parties’ portfolio

(924)

In view of the above, the Commission concludes that
the transaction will not lead to the creation or the
strengthening of a dominant position on the different
markets for active substances.

(928)

Bayer’s activities are concentrated on the German
market, where it sells glyphosate under the brand name
‘Tender’ and the herbicide Ustinex G, consisting of a
mixture of
the active ingredients Glyphosate and
Diuron. The Glyphosate products are supplied to Bayer
by [...] and [...] on the basis of non-exclusive supply
contracts.

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(929) ACS also sells formulated products in the industrial
weed control market either directly to the end user or
through distributors in different Member States. ACS
is selling its products and/or services to railway com-
It has service contracts with [...] and [...]
panies.
(France).

H.

PROFESSIONAL PEST CONTROL (INSECTICIDES,
RODENTICIDES)

H.1. The relevant product markets

Market position

(930) At EEA level, according to the parties figures, the
market is estimated to have a size of [...] Meuro. The
market share of the merged entity would be of [20 to
30] % (Bayer [0 to 10] %, ACS [10 to 20] %).

(931)

(932)

In the EEA, the parties face strong competition, in
particular from Monsanto (around [10 to 20] %), but
also from other international players (Dow and BASF)
and a range of national suppliers such as Spiess Urania
and Feinchemie. Furthermore, Bayer adds only little to
ACS’s market share and the transaction therefore does
not lead to a significant change in the market structure.

The only Member State where there is a product
overlap between the Parties and in which an affected
market arises is Germany. On the German market, the
combined market share of the Parties amounts to [20
to 30] % (Bayer: [10 to 20] %, ACS: [10 to 20] %).
Spiess Urania with a market share of around [50 to
60] %, remains the clear market leader even after
completion of the transaction. Another strong com-
petitor is Monsanto with a market share of [10 to
20] %. Furthermore, there are a number of other local
suppliers, such as Lauff and Evers, with a combined
market share of [10 to 20] %.

(933) Moreover, the turnover of both, Bayer and ACS, in
industrial weed control in Germany is almost exclus-
ively derived from their sales to one single customer,
which is [...].

Conclusion in Industrial Weed Control

(934)

In view of the above, the Commission concludes that
the transaction will not lead to the creation or the
strengthening of a dominant position on the market
for industrial weed control.

(935)

(936)

(937)

Professional pest control products are insecticides
especially designed for use by professional pest control
operators, industrial customers and local authorities
and municipalities. The products differ in packaging,
distribution and formulation from products sold to the
household customer.

Insecticides for professional pest control are applied
against all kinds of insects including, inter alia, flies,
cockroaches and ants. According to the parties, most
of the products are designed to combat a variety of
insects. The parties submit that the overall professional
pest control market can be split into multi-purpose
insecticides, rodenticides and products for flies, ticks
and fleas. Multi-purpose insecticides include liquid and
spray products (mainly residual and space sprays)
against various types of crawling and flying insects.

Insecticides, which are designed to combat only specific
insects, include in increasing numbers ‘passive’ treat-
ments such as gels and baits for the control of
cockroaches and ants. The efficacy of the formulated
product depends on the suitability of the active ingredi-
ent to be ingested by mouth, the palatability of the
product, that must be attractive to insects in the
presence of abundant alternative food supplies, and
the proper design of the bait station.

The parties submit that gel/baits against cockroach-
es do not form a separate market

(938)

The parties argue that products against specific targets
and based on gel and baits do not constitute a distinct
product market since multi-purpose insecticides are
used as effective replacements for target specific gel
and baits.

(939) According to the parties’ written observations to the
Commission decision, ‘It is not appropriate to define a
separate market for gels/baits against cockroaches, but
the market for cockroaches insecticides has to be
defined as encompassing both sprays and active treat-
ment and gel/baits for passive treatment’. This state-
ment is based on the view that ‘sprays differ from gels/
baits only the manner in which they are applied to
insects (active treatment versus passive treatment) but
they are equally suitable for combating the target
animal’.

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Respondents
efficiency advantages in use of gel/baits

claim existence of

substantial

Conclusion

(940)

The respondents, customers as well as consumers,
agreed during the investigation that both sprays and
gel are effective against cockroaches. The broader
spectrum and the quickness of action in sprays make
them more suitable to deal with heavy infestation
when a knock-down treatment is required. Gel and
baits are specifically targeted against cockroaches and
do not have this immediate action though they present
generally a longer duration. They appear more
adequate for a regular control of cockroaches and also
more suitable for cases where selective target impacts
are desired, (e.g. zoos).

(941)

Even if some respondents view the efficacy against
cockroaches of both products as comparable, it has
been pointed out that the use of gel/baits has efficiency
gains that cannot be ignored.

(942)

In particular, it has been consistently indicated that
treatment based on gel/baits presents environmental
benefits that sprays cannot compete with. Among
others, the use of gel/baits does not pose the problems
of toxic deposits on surface that the sprays may
present.

(943) Given the lack of residual toxicity associated with gel/
baits, this technology presents substantial advantages
on the treatment of indoor facilities and in general,
places with continuous presence of human or pets.
Additionally, treatments based on sprays bring about
some degree of disruption of the normal activities,
which puts them also in disadvantage in the treatment
of facilities such as hospitals, schools, restaurants, etc.

(944)

Furthermore, the application of gel and baits does not
require as many protection measures and equipment
as spray-based treatments. This is also pointed out as a
practical advantage from the pest control operators’
point of view.

(946)

The professional pest control operators as well as the
final beneficiaries of pest control treatment consider
that the environmental and safety benefits that are
associated with gel and baits are relevant features of
the products. Gel and baits are then perceived as new
generation products belonging to a technology that is
environmentally safer and easier to use.

(947)

These attributes are indeed taken into account by
the operators and final beneficiaries along with the
effectiveness of the product.

(948)

(949)

(950)

(951)

(952)

It is not therefore accurate to state that gel/baits and
sprays constitute merely two modes of application,
sprays being a curative treatment and gel/baits a
preventive treatment. As mentioned before, features
related to environment benefits, safety and practicality
in the application are substantial advantages of gel/
baits.

In terms of economical relationship between the two
products, they present features of complementarity in
a long run treatment of cockroaches control, since
both active and passive treatments are likely to be
necessary.

In the short run they would present some degree of
one-direction substitutability. Gel and baits would not
successfully replace sprays when a general ‘clean-out’
action is required given their narrower spectrum and
its limited immediate action.

In the other hand, sprays would substitute gel/baits
since sprays are effective against cockroaches. How-
ever, the substitutability is necessarily limited as it
would not apply in situations where the practical
advantages of use of gel and baits are requested.

In view of the additional features and benefits before
mentioned that place gel/ baits as new generation
products with respect to spray treatments and the
limited capacity of sprays to effectively replace them,
the Commission considers that gel and bait
for
cockroaches form a distinct separate product market.

(945) As a premium for the advantages above mentioned,
gel and baits are viewed as a more expensive product
when compared to sprays. As also stated by the parties,
the use of gel/baits has been increasing over the last
years.

(953)

The exact delimitation of the rest of markets within
professional pest control can be left open since, even if
the narrowest definition is taken, the notified operation
does not raise competition concerns.

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H.2. Competitive assessment

H.2.1. Multi-purpose insecticides

(961)

In the Netherlands, the combined market share of the
parties is [40 to 50] % (Bayer: [20 to 30] %; ACS: [10
to 20] %). Syngenta is firmly active in this market with
around [30 to 40] %.

(954)

The EEA market for multi-purpose insecticides has a
size of around EUR [...] million. Bayer and ACS
are present with formulations of Pyrethroids and
Carbamates. The active ingredients are all off-patent.
Main competitors on that market are Dow, with
products formulated from the generic active substance
Chlorpyrifos, BASF, with Alpha-Cypermethrin-based
products, Sumitomo and Syngenta. The parties would
hold a combined market share of [20 to 30] %.
Products provided by Syngenta and Dow, would have
an estimated market shares of [10 to 20] % and [10 to
20] % respectively.

(955) At national level, the Member States which constitute
affected markets are Austria, Belgium, Denmark,
France, Italy and the Netherlands.

(956)

(957)

(958)

(959)

(960)

In Austria, the parties’ combined market share amounts
to [20 to 30] % (Bayer [10 to 20] %, ACS [10 to
20] %). Clear market leader is Dow with a market share
estimated to be of [50 to 60] %. Local suppliers are
also present in this market ([20 to 30] %).

the parties’ combined market

In Belgium,
share
amounts to [20 to 30] % (Bayer [0 to 10] %, ACS [10
to 20] %). The Parties face competition by Syngenta
([40 to 50] %) and Dow ([10 to 20] %). The market
share of local suppliers account for [20 to 30] %.

In Denmark, the parties have a combined market share
of [30 to 40] % (Bayer [20 to 30] %, ACS [0 to 10] %).
The Danish market is characterised by a large number
of local suppliers with a combined market share of [60
to 70] %.

In France, the parties have a combined market share of
[20 to 30] % (Bayer [0 to 10] %, ACS [20 to
30] %). They face vigorous competition by a range of
multinational companies such as Dow ([10 to 20] %),
Syngenta ([10 to 20] %), FMC ([0 to 10] %), BASF ([0
to 10] %) and Sumitomo ([0 to 10] %), as well as local
suppliers with a combined market share of [20 to
30] %.

In Italy, the parties have a combined market share of
[20 to 30] % (Bayer [0 to 10] %, ACS [20 to
30] %). The parties face competition by a number of
multinational companies, such as Dow with a market
share of [10 to 20] %, Sumitomo ([10 to 20] %) and
Syngenta ([10 to 20] %). Other competitors include
local suppliers such as Leica ([10 to 20] %) and Copyr
([0 to 10] %).

Conclusion

(962)

In all the affected markets abovementioned, due to the
presence of well-established competitors in the market
place, sufficient alternatives will be available for cus-
tomers. Therefore, the Commission considers that the
notified operation would not lead to the creation of a
dominant position on the market of professional pest
control, multi-purpose insecticides in Austria, Belgium,
Denmark, France, Italy and the Netherlands

H.2.2. Professional pest control for cockroaches

(a) The parties’ portfolio

(963) ACS is present in the cockroach segment with its
Fipronil based product named Goliath and a Hydrame-
thylnone based product named Maxforce, which is
supplied by the American based company Clorox.
Bayer is selling two products (Premise and Proficid)
based on Imidacloprid

(964) All active ingredients used for this market, except the
parties’ Imidacloprid and Fipronil, are off-patent.

(965)

(966)

Fipronil, particularly,
is in general regarded as the
leading and most efficient active ingredient in this field
in view of its effectiveness at lower doses and higher
speed of action. Hydramethylnone also provides a
mode of action that is different from that provided
by traditional insecticides. Although off-patent, BASF
American Cyanamid is at present the only Hydrame-
thylnone manufacturer worldwide.

It is worth mentioning that Bayer’s has known a
significant growth of its sales and market share thanks
to the product Premise, recently introduced. Following
parties’ figures, Bayer was insignificantly present at
EEA level in 1998 and only held a market share of [0
to 10] % in 1999, whereas in 2000 it reached a share
of [0 to 10] %. According to the parties’ estimation for
2004, Bayer would be expected to attain then a market
share of [10 to 20] %.

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T h e a c q u i s i t i o n o f M a x f o r c e

(967) During the investigation, it has come to the knowledge
of the Commission that negotiations between Clorox
and ACS were taking place. The object of the nego-
tiations would be the transfer of all the assets used
primarily or exclusively in the professional pest control
from Clorox to ACS. The assets under negotiation
include intangible assets regarding the product Max-
force.

(968) According to the information subsequently made
available by ACS, the agreement has taken place and
ACS will be the owner of Maxforce trade mark and
related patents, technical know-how and goodwill.
Those intangible assets would be eventually acquired,
and the corresponding rights exerted, by Bayer as a
natural result of the merger transaction.

(969) At the present day, the company Clorox has introduced
already the active ingredient Fipronil in the formulation
of the product in the market of the US, not in the EEA.
As confirmed by the parties, Fipronil presents higher
efficiency in the action compared to Hydramethylnone.
The parties also admit that the cost of the active
ingredient does not represent a significant proportion
of the final product and that therefore, the cost of
production is very similar in case Maxforce is based on
Fipronil or on Hydramethylnone. The parties also state
that the price for the end-consumer in both cases
would be very similar.

(970) As a result of the transaction between ACS and Clorox,
ACS’s market position is qualitatively different since
Maxforce is now to be seen in the portfolio as a
company product and not as a third party product
distributed by the company. In addition, in view of the
new content of Maxforce related rights, it would be
rational to introduce Fipronil as active ingredient in
the formulation of the product. Besides the gains in
terms of effectiveness, this production switch would
eliminate the dependence on Hydramethylnone, an
active ingredient controlled ultimately at present by
BASF, a competitor in this segment.

(b) The competitors’ portfolio

(971) As to the other major players, BASF offers the product

Faslane, based on Hydramethylnone.

of this market (Bayer: [0 to 10] %, ACS: [40 to 50] %).
The largest competitor is BASF ([10 to 20] %). The
parties argue that there is little transparency in this
market. The investigation has confirmed this point.

(973)

The resulting entity of the proposed merger would
therefore enjoy a leading position. The parties argue
that nevertheless no competition concerns would arise
given that Bayer only adds in general a small percentage
to ACS’s market share.

(974)

It is also argued that international companies including
Dow and BASF are present in this market and can
respond to any anti-competitive behaviour of
the
merged entity. However, the Commission has found
during the investigation that the Dow has withdrawn
its product, the organophosphate-based named Swat,
from the market during year 2000 and therefore is no
longer present. It has also been confirmed that Syngen-
ta does not directly or indirectly manufacture, market
or distribute any gel and bait for cockroach control.

(975) Due to the lack of transparency, it is in general difficult
to verify the identity and the sales and market shares
of minor competitors.

(d) Assessment

(976)

In a pre-merger situation, only three major agrochemi-
cal players are therefore present at EEA level: ACS,
BASF and Bayer. As shown before, ACS is clearly the
leading player in this market with products considered
to be of high quality formulation and based on the
leading active ingredient. Bayer and BASF are currently
offering products containing effective active ingredi-
ents, Imidacloprid and Hydramethylnone respectively,
not belonging to old chemistry classes.

(977)

The merged entity would be able to offer a range of
products based on the two only active ingredients in
the market enjoying patent protection. There would
only remain at EEA level one major player, BASF,
that would offer a product acting through an active
ingredient, Hydramethylnone, that does not belong to
an old family class.

(c) Market position

(972) At EEA level and according to the parties’ figures, the
total market for professional pest control products
against cockroaches amounted to EUR [...] million in
2000. Bayer and ACS would account for [50 to 60] %

(978) As a result of the exclusive rights related to the off-
patent active ingredients, only the merged entity is in a
position to offer a treatment alternating modern active
ingredients. This ability provides an outstanding com-
petitive advantage in order to manage potential resist-
ance effects.

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(979) Alternatively, in view of the lack of resistance shown
so far with respect to Fipronil and imidacloprid, the
merged entity could rationally have the option of
simply eliminating Bayer’s current products.

(986)

In Spain, with a total market size of [...] million, the
combined entity would enjoy a market share of [40 to
50] % (Bayer: [10 to 20] %, ACS: [30 to 40] %). BASF
is present in the Spanish market with a market share
of [10 to 20] %. Local suppliers’ market share add up
to [40 to 50] %, though the verification of their
identities and market sales and shares is problematic.

(980)

The parties command high combined market shares in
several national markets: Austria ([30 to 40] %),
Belgium ([60 to 70] %), France ([60 to 70] %), Germany
([50 to 60] %), the Netherlands ([40 to 50] %) and
Spain ([40 to 50] %).

(981)

In Austria, market size is estimated to be of EUR [...]
million, the combined parties’ market share in 2000
would total [30 to 40] % (Bayer: [0 to 10] %, ACS: [30
to 40] %). It is considered that the market share is not
sufficiently high for the parties to impede competition.
Therefore, the Commission has reached the conclusion
that the proposed transaction will not create a domi-
nant position on the market for gel and baits for
cockroaches in Austria.

(982) No major player is present neither in the market of
Belgium, where the market volume is estimated to be
EUR [...] million. The parties would hold a combined
market share of [60 to 70] % in 2000 (Bayer: [40 to
50] %, ACS: [20 to 30] %).

(988)

(983)

France represents the biggest market in Europe with a
value of EUR [...] million. The parties’ joint market
share is estimated at [60 to 70] % (Bayer: [0 to 10] %,
ACS: [60 to 70] %). BASF would be present in the
market and would hold a market share of [10 to 20] %,
according to the parties’ estimations. Though Bayer’s
market share is significantly lower, the new entity
could take advantage of the possibilities in products
management above-mentioned given the broader port-
folio availability. Again,
the qualitative advantages
explained above of merging the leading product with
the main emerging competitor ought to be underlined.

(984) A similar situation appears in Germany, whose market
value is EUR [...] million. The combined market shares
of the parties are estimated at [50 to 60] % (Bayer: [0
to 10] %, ACS: [40 to 50] %). BASF holds a market
share of approximately [10 to 20] %.

(985)

The market in the Netherlands accounts for EUR [...]
million. The combined market shares of parties would
total [40 to 50] % (Bayer: [0 to 10] %, ACS: [30 to
40] %). The only international competitor present in
the market in 2000 was Dow with a market share of
[0 to 10] %. As mentioned before, Dow has retired
from this market. The remaining market share of
would be held by minor suppliers.

Conclusion

(987) Given the parties’ portfolio, the proposed transaction
leads to the concentration of the most effective prod-
ucts of ACS with the promising and successfully
introduced product of Bayer. No other player rivals the
capacity of product development of the merged entity.
Taking also into account the high market shares of the
combined entity, the Commission considers that the
proposed transaction will create a dominant position
on the market for gel and baits for cockroaches in
Belgium, France, Germany, the Netherlands and Spain.

It is noteworthy that in some countries totalling [20 to
30] % of the global EEA market, ACS enjoys presently
an unrivalled position without any international sup-
plier present in the market. According to the parties’
information this situation is given in Greece (ACS: [60
to 70] %), Italy (ACS: [50 to 60] %), Portugal (ACS: [50
to 60] %) and the United Kingdom (ACS: [30 to 40] %).
Consequently, Bayer would not have to enter into a
launching effort for the introduction of its new prod-
ucts, since the proposed transaction allows the acqui-
sition of a portfolio enjoying already the leading
position.

H.2.3. Professional pest control for flies, ticks

and fleas

(989)

The EEA market for professional pest control products
against flies, ticks and fleas was EUR [...] million in
2000. The Parties’ combined market share accounts
for [0 to 10] % (Bayer: [0 to 10] %, ACS: [0 to 10] %).
Syngenta is leading the market with a market share of
[40 to 50] % and Dow is also active with a market
share of [0 to 10] %.

(990)

France is the only national affected market, the Parties’
combined market share is [10 to 20] % The Parties
face competition from the clear market leader Syngenta
([60 to 70] %) and also from Dow ([20 to 30] %).

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(991)

The Commission considers, for the above reasons, that
the notified operation would not lead to the creation
of a dominant position on the market of professional
pest control for flies, ticks and fleas in France.

I. NON-AGRICULTURAL CROP PROTECTION AGENTS

FOR HOME AND GARDEN

H.2.4. Professional pest control — rodenticides

(998)

(992)

The EEA market for rodenticides was around EUR [...]
million in 2000. The parties’ combined market share
accounts for [10 to 20] % (Bayer: [0 to 10] %, ACS: [0
to 10] %). Syngenta leads the market with a market
share of around [20 to 30] %. Lipha ([10 to 20] %),
Sorex ([0 to 10] %) and BASF ([0 to 10] %) are also
present.

(993)

The Member States which constitute affected markets
are Belgium and Germany.

(999)

(994)

(995)

the Parties’ combined market

In Belgium,
share
amounts to [30 to 40] % (Bayer [0 to 10] %, ACS [30
to 40] %). Competition conditions prevail due to the
presence of BASF and Syngenta, both with a market
share of [20 to 30] % and Lipha with a market share
of [0 to 10] %.

In Germany,
the Parties’ combined market share
amounts to [10 to 20] % (Bayer [0 to 10] %, ACS [10
to 20] %). Sufficient alternative suppliers are present in
this market including Syngenta ([10 to 20] %), Frowein
([10 to 20] %) Lipha ([0 to 10] %), Killgem, Hygan,
Sorex and BASF, each with a market share of [0 to
10] %.

(996)

The Commission considers, for the above reasons, that
the notified operation would not lead to the creation
of a dominant position on the market of rodenticides
in Belgium and Germany.

General conclusion in professional pest control

I.1. Relevant product markets

The parties have submitted that non-agricultural crop
protection agents for home and garden (NACPAHG)
products constitute a separate market from agricultural
products because these products are sold in different
formulations and to different customers. Furthermore,
the parties submit that separate markets must be
defined for herbicides, fungicides and insecticides, and
that a further breakdown of these markets by type of
plant is not appropriate, as most products have broad
and general application labelling and can be used to
protect various types of plants.

The Commission’s investigation has, to a large degree,
confirmed this market definition. However, for the
purpose of assessing this sector it is not necessary to
reach a precise definition of the relevant product and
the market
geographic markets as,
definitions adopted, the proposed acquisition will not
give rise to competition concerns.

irrespective of

I.2. Competitive assessment

(a) The current market structure

(1000) Bayer is active in the NACPAHG sector, through its
Garden/Professional Care Division (GPC). In Europe,
the GPC division is only active in the overall home
and garden sector and does not sell products for
professional applications.

(1001) ACS is not active in the supply of formulated products
for the NACPAHG sector after the divestiture of
the former Rhône-Poulenc Jardin to Scotts in 1998.
Consequently, there are no horizontal overlaps of the
parties’ activities in this sector. However, a vertical
relationship exists to the extent that ACS manufactures
and distributes active ingredients to manufacturers of
home and garden crop protection agents, including
Bayer’s biggest competitor, Scotts.

(997)

the Commission has
In professional pest control,
reached the conclusion that the proposed transaction
will create a dominant position on the market for gel
and baits for cockroaches in Belgium, France, Germany,
the Netherlands and Spain.

(1002) Scotts is an international home and garden consumable
products company supplying a range of fertilisers,
growing media and control products in all the world’s
major markets.

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(b) Links created between Bayer and Scotts as a
consequence of the proposed acquisition

(1003)

In 1998 Scotts acquired Rhone-Poulenc’s lawn and
garden business. Shortly after this transaction Rhone-
Poulenc merged with AgrEvo to form ACS. As part of
the transaction between Scotts and Rhone-Poulenc,
[...].

(1004) Due to Bayer’s succession in the agreements between
Scotts and ACS, links will be created between Bayer
and Scotts. The most important agreements are (i) [...].
The remaining agreements are all to some extent
related to the two former agreements.

(i) The supply agreement

(1005) The supply agreement between ACS and Scotts

includes [...].

(1006) The Commission’s investigation has shown that the
supply from Bayer, after the proposed acquisition,
would not account for a significant part of Scotts’ total
purchase of active ingredients and that by far most of
these active ingredients are off-patent. Moreover, the
active ingredients supplied are used to produce various
products, without any concentrated effect on a single
product area. As the Commission does not regard
these factors to be sufficient to give rise to competition
concerns in this sector,
the Commission has no
competition concerns regarding the supply agreement.

ii) The R & D agreement

(1007) Since the R & D expenses of

large agrochemical
companies like Bayer and ACS account for a large
proportion of the total costs, it seems unlikely that
their R & D facilities will not be merged to a very large
extent, in order to increase profits and share know-
how. Therefore, the Commission has investigated to
what extent the proposed acquisition would make it
difficult to distinguish new developments by Bayer
from those of ACS, and whether the two major players
in this sector would, to some extent, base their future
products on the same R & D, which could diminish
future competition between Bayer and Scotts

(1008) However, the parties have shown to the Commission
that Bayer and Scotts will not have access to the same
R & D pool and that it will be possible to distinguish
new active ingredients belonging to Bayer from those
belonging to ACS. [...]. Therefore, the R & D agreement
will not create a situation where future competition
will be eliminated between Bayer and Scotts, because
they will not have access to the same R & D pool.

Conclusion

(1009) Taking all the above arguments into consideration, the
Commission decides that the proposed acquisition will
not create or strengthen a dominant position in the
NACPAHG markets.

J.

SMALL ANIMAL ECTOPARASITICIDES

J.1. Relevant product market

(1010) Bayer is active in the production and sale of small
animals ectoparasticides (SAEs), i.e. products used for
control of fleas and/or ticks on small companion
animals such as dogs and cats. Bayer’s main SAE’s
brand is Advantage, an anti-flea product for dogs and
cats. ACS is not active in the production and sale of
SAEs. However, ACS produces the active substance
Fipronil which it sells to Merial, a 50-50 joint venture
of Aventis Agriculture SA and Merck & Co. Inc. Merial
uses Fipronil
to manufacture Frontline, a product
against fleas and ticks for dogs and cats.

(1011) As in Ciba-Geigy/Sandoz (65) in the present case the
investigation has also shown that SAEs do not consti-
tute a homogeneous product market. From the investi-
gation it appears, in particular, that the SAE sector
should be subdivided into three categories of products:
(i) adulticides, which kill adult fleas, (ii) insect growth
regulators (IGRs), which control flea eggs, larvae and
pupae, and (iii) combination products, which act at the
same time as adulticides and IGRs.

(65) Commission decision of 17 July 1996 in Case IV/M.737 — Ciba-
Geigy/Sandoz (OJ L 201, 29.7.1997, p. 1) paragraph 229.

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(1012) Adulticides and IGRs are not substitutable. Adulticides
are short-term curative solutions (they kill the current
flea population once fleas appear, and might prevent a
new infestation for some weeks after their application),
IGRs are long-term preventive solutions (they combat
flea reproduction by killing the eggs so preventing the
development of adult fleas), but do not have an effect
against adult parasites. Combination products combine
both properties of adulticides and IGRs. Therefore,
there appears to be a certain substitutability between
adulticides and combination products on the one hand,
and between IGRs and combination products on the
other hand.

(1013) A large majority of the SAEs’ wholesalers who submit-
ted their comments clearly stated that IGRs cannot
substitute adulticides. The reason is that when a pet
owner notices adult fleas on its dog or cat he wants to
get immediately rid of them, and the only products that
give quick relief from flea infestations are adulticides,
which kill adult fleas within 24 hours. IGRs, on the
contrary, have no adulticidal properties and effective
flea control
is generally not achieved for several
weeks following their use. A wholesaler stated that
combination products can substitute adulticides.

(1014) Similarly, all competitors surveyed during the investi-
gation recognise that IGRs cannot replace adulticides
for quick relief from flea infestations, and that in case
of a small but permanent relative price increase of
adulticides only an insignificant number of customers,
if any, would switch to IGRs in response to such price
increase. Some competitors submitted that IGRs and
adulticides are complementary but not substitutable,
because for an effective flea treatment it is necessary to
use both IGRs and adulticides, or a combination
product.

(1015) These findings are not denied by the parties. In their
notification, in fact, the parties state that they agree
with the Commission’s approach in Ciba-Geigy/Sandoz
and that, on that basis, ‘the proposed transaction does
not have any impact on the IGR segment’.

(1016) The investigation has shown that, to define the relevant
product market, a distinction of anti-flea products for
cats and dogs by distribution channel, depending on
whether they are distributed over the counter (OTC) or
through veterinarians (veterinary),
is not necessary,
because buyers have access to both distribution chan-

nels, where largely identical products can be obtained.
Similarly,
it appears from the investigation that a
distinction of anti-flea products for cats and dogs by
dosage form (spot-on, spray, tablets, injection) is not
necessary for the definition of the relevant product
market.

(1017)

In the light of the above, the Commission concludes
that the relevant product market for the purpose
of assessing the competitive impact of the present
concentration in the SAEs sector is the market for the
production and sale of adulticides and combination
products.

J.2. Competitive assessment

(a) General conditions of the SAEs sector

(1018)

In the last decade the SAEs sector has been among the
fastest growth rate sectors of the animal health indus-
try. Market growth has been led by three products in
particular: (i) Frontline, an adulticide manufactured by
Merial, administrated as a topical application, that kills
adult fleas and prevents reinfection for more than a
month and also killed ticks; (ii) Advantage, an adulti-
cide manufactured by Bayer, administrated as a topical
application, that kills adult fleas and prevents reinfec-
tion for approximately a month; (iii) Program, an IGR
manufactured by Novartis, given once monthly as a
tablet, that effectively blocks development of flea eggs,
pupae, and larvae for a month. Pet owners who use
these products can effectively eliminate fleas, and
prevent their return.

(1019) The SAEs sector, however, is reaching its mature stage
and a much slower growth rate is expected in the
coming years. According to Bayer, growth of the SAEs
sector over the next four years will be much flatter
than it was in the last four to five years. Ignoring
inflation Bayer expects the market to grow by only a
total of [0 to 10] % in the four years from 2000 to
2004 from EUR [...] million to around EUR [...] million.
Bayer expects its overall sales of SAEs to decline from
[10 to 20] % to [10 to 20] % and Merial’s sales to
increase from [40 to 50] % to [40 to 50] %.

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(b) The market for adulticides and combination

products

(1025) Merial sells the following adulticide anti-flea products
in all EEA Member States: Frontline spot-on dog,
Frontline spot-on cat, and Frontline spray. All these
products are based on the active ingredient Fipronil.

(1020) According to Bayer’s estimates, in 2000 the total size
by value of the market for adulticides and combination
products in the EEA was of about EUR [...] million,
accounting for about [90 to 100] % of the overall SAE
sector. In 2000 the total size by value of the market
for IGRs in the EEA was of about EUR [...] million.

(1021) Combination products join the effects of adulticides
and IGRs, offering to the user an integral way to fight
against fleas. Bayer estimates that in 2000 combination
products constituted still a negligible part of the EEA
national markets for adulticides and combination
products, generally accounting for less than [0 to 10] %
of such market. However, combination products are
expected to increase their market position and to
gradually replace adulticides in the next years.

(1022) Despite the presence of a number of different brands
in the various EEA national markets for adulticide and
combination products, Merial’s adulticide Frontline
and Bayer’s adulticide Advantage constitute by far the
market leaders, although Frontline has higher market
shares than Advantage in most EEA national markets.
The success of
these two brands is due to their
innovative active ingredients: Imidacloprid (for Advan-
tage), and Fipronil (for Frontline), which are under
patent protection in the EEA mostly [...].

(1023) Compared to old molecules, in fact, both Fipronil and
Imidacloprid have a high and quick efficacy against
adult fleas and a quite long residual power, providing
a continuous protection against new infestations for
about one month for Imidacloprid and longer for
Fipronil. They also have a reasonably low toxicity for
both humans and pets. So far no resistance against
these products has been reported for the target parasite
species. Fipronil is also effective against ticks, and its
protection period against fleas could be longer than
Imidacloprid. Convenient formulations and presen-
tations are also key factors for the success of Frontline
and Advantage.

Main brands of adulticides and combination products in the
EEA

(1024) Besides the leading product Advantage, other Bayer’s
adulticides are: ‘Sebacil Wash’ based on Phoxim, ‘Kiltix
Collar’ based on Flumethrin and Propoxur, ‘Tivugon
spot-on’ based on Fenthion, ‘Bolfo — powder/sham-
poo/spray/collar’ based on Propoxur, and ‘Asuntol
Powder’ based on Coumaphos. Not all brands are sold
in all countries.

(1026) The other main adulticides sold in various EEA national
markets by competitors of Bayer and Merial are:
EXspot, a spot-on product against fleas and ticks on
dogs, based on Permethrin and sold by Schering-
Plough; Behaphar, sold by the homonymous company
under different formulations and based on Diazinon
and Permethrin; Defendog, sold by Virbac under
different formulations and based on a number of active
ingredients; and Frento, sold by SaraLee under different
formulations and based on a number of active ingredi-
ents. A number of small competitors sell minor brands
or private labels only in few national markets, as for
instance Emax OTC and Crisco, that are active only in
the Netherlands and Denmark, respectively.

(1027) The main combination products sold in the EEA are:
Stronghold, a spot-on product based on Selemectin
and sold by Pfizer, and Duowin, sold by Virbac in spot-
on and spray form and based on pyroproxifen and
permethrin. Bayer’s main combination product is ‘Flea-
gard environment spray’, which is an adulticide/IGR
combination used to control fleas and flea larvae in the
animal’s bedding and environment based on Pyriprox-
ifen and Cyfluthrin.

Market shares

(1028) Most EU national markets for adulticides and combi-
nation products are highly concentrated. As it appears
from the table below, in 2000 Merial and Bayer had a
combined market share between 60 to 80 % in nine
national markets (Belgium, Denmark, Greece, Ireland,
Italy, the Netherlands, Portugal, Sweden and the United
Kingdom) and between 50 to 60 % in four national
markets (Austria, France, Germany, and Spain). In most
of these national markets, the remaining sales are
divided between one or two main competitors with
important market shares, and a number of very small
competitors or private labels each with very low or
insignificant market shares.

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TABLE 1

Parties’ estimates of market shares by value in the main EU national markets for adulticides and combination products
(year 2000)

Bayer

Merial

Close competitors

Austria

[30-40]

[10-20]

[30-40] (Sara Lee)
[10-20] (Pfizer)

(%)

Others (small
competitors/
private labels)

[0-10]

Belgium

Denmark

France

Germany

Greece

Ireland

Italy

[20-30]

[40-50]

[10-20] (Beaphar)

[10-20]

[10-20]

[50-60]

[20-30] (Crisco)

[10-20]

[0-10]

[50-60]

[10-20] (Nestlé-Friskies)

[30-40]

[30-40]

[20-30]

[10-20] (Essex/Schering-Plough)
[10-20] (Beaphar)

[10-20]

[10-20]

[60-70]

[10-20] (Virbac)

[10-20]

[40-50]

[20-30]

[10-20] (Pfizer)

[10-20]

[60-70]

[10-20]

[20-30]

[10-20]

Netherlands

[30-40]

[30-40]

[10-20] (Emax OTC)
[0-10] (Beaphar)

Portugal

Spain

Sweden

[0-10]

[60-70]

[0-10] (Sara Lee)

[10-20]

[10-20]

[30-40]

[10-20] (Virbac)
[0-10] (Pfizer)

[10-20]

[0-10]

[60-70]

[30-40] (Schering-Plough)

United Kingdom

[10-20]

[50-60]

[0-10] (Pfizer)

[10-20]

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(1029) The combined position of Bayer and Merial on the
above markets is not expected to change substantially
for the next three years. From 2000 to 2004, in fact,
Bayer expects its overall sales of SAEs to decline from
[10 to 20] % to [10 to 20] % and Merial’s sales to
increase from [40 to 50] % to [40 to 50] %. Considering
that the overall sales of adulticides and combination
products account, as explained above, for about 90 %
of the total SAE sector, it seems reasonable to believe
in the year 2004 the combined position of
that
Bayer and Merial on the various national markets for
adulticides and combination products will remain
overall substantially unchanged.

Market entry

(1030) Entry in the market for adulticides and combination
products can take place by means of generic or
innovative products. Generic products are based on
active ingredients that are off-patent. There are already
a number of products based on off-patent active
ingredients in the various national markets for adulti-
cides and combination products. These products, how-
ever, are not as efficacious as the leading products of
Merial and Bayer, which are based on the innovative
and patented active ingredients Fipronil and Imidaclop-
rid. That explains why the combined market share of
Merial and Bayer has increased over the last years and
is expected to remain stable, if not to increase further,
during the coming years. Potential market entry of
generic products, therefore, does not exercise competi-
tive pressure on innovative products such as Frontline
and Advantage.

(1031) Market entry by means of

can

cost

innovative products is
extremely difficult and resource-intensive. The costs of
R & D and registration programs vary widely, but for
exceed
the
products,
innovative
EUR 100 million and the total
time can exceed
10 years. This is the case regardless whether the
product
is an adulticide or an IGR. Combination
products may require more work and time by virtue of
the fact that they contain two active ingredients. Other
barriers to enter this market are represented by the
need to build a brand, to educate the sales forces and
to establish solid relationships with veterinarians.

(1032) From the investigation it appears that, since the launch
of Advantage and Frontline in the EEA more than six
years ago,
the only companies that have entered
the adulticide and combination product market with
innovative products are Pfizer, with Stronghold, a
combination product based on the active ingredient

Selemectin, and Novartis, with Capstar, an adulticide
based on the active ingredient Nitempyran. Both
companies, however, do not expect their products to
substantially change the market position of Bayer and
Merial in the coming years.

(1033) No adulticides based on innovative active ingredients
are expected to be launched on the market for the next
five years, nor new companies are expected to enter
the market with adulticides based on active ingredients
off-patent because these products would not be able to
capture a substantial market share.

(1034) [...]. Although other combination products based on
existing active ingredients might be launched on the
market in the coming years, it is very unlikely that they
might challenge the leading position that Bayer and
Merial have established on the adulticide and combi-
nation product market through their innovative and
now largely notorious branded products.

(c) Assessment

(1035) As it appears from above, the market for adulticide
and combination products has the characteristics of an
oligopolistic market. The investigation has shown that
such market has practically reached its maturity, that
it is highly concentrated, that is dominated by two
leading firms (Bayer and Merial) having a combined
market share between [50 to 60] % to [80 to 90] % in
most national markets, that these firms are expected
to maintain their combined position substantially
unchanged in the coming years, and that the market is
characterised by high barriers to entry.

(1036)

It also appears from the investigation that in such a
market competition takes place mainly at the R & D
and promotional level. Consumers are not price sensi-
tive. Their choice depends on the effectiveness of the
product and on the notoriety of the brand.

(1037) New products can successfully enter the market and
achieve a reasonable market share only if their active
ingredient produces more effective results against
parasites than the active ingredient of existing products,
if their level of toxicity is acceptable, if their adminis-
tration to the pet appears easy and safe from a pet
owner point of view, and if the brand is well promoted
to the public. Bayer and Merial have gained a strong
position on the adulticide and combination product
market precisely because their products Advantage and
Frontline met all these conditions. If Frontline has been
than Advantage in most national
more successful

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is because, besides combating adult
markets that
fleas, Frontline is also effective against ticks. Effective
competition in R & D and promotional activities
are therefore crucial factors for competition to be
maintained on the market for adulticides and combi-
nation products.

(1038) Currently, Merial’s position on the market for adulti-
cides and combination products is guaranteed by its
Fipronil licensing and supply agreements with ACS.
(Confidential information of ACS). [...]. [Confidential
information of ACS].

(1039) Following the implementation of the proposed trans-
action, not only Bayer would become the supplier and
licensor of Fipronil to Merial, but it would also become
a party to the current research and license agreement
for future products between ACS and Merial. Given to
links between Bayer
the creation of such vertical
and Merial, serious concerns arise that the proposed
transaction might lead to the creation or strengthening
of a collective dominant position on the market for
adulticides or combination products.

(1040) First of all, Bayer’s control of the active ingredient used
for Merial’s most important product (Frontline) would
give Bayer an incentive to discipline Merial’s behaviour
by, for instance, lowering or threatening to lower the
quality or the quantity of Fipronil supplies.

(1041)

In their reply to the Commission’s statement of
objections, the parties have claimed that, as the current
supply obligations of ACS towards Merial will be
transferred to Bayer, Bayer would not have the incen-
tive to engage in any squeezing behaviour with regard
to the quantities of Fipronil needed by Merial [...].

research activities of the merged entity that might be
used to produce innovative products in the market for
adulticide and combination products.

(1044) As a result, after the implementation of the proposed
transaction, the two leading firms in the market for
adulticides and combination products would share the
results of such crop research activities carried out by
the merged entity. This co-operation in crop research
would very likely lead to a co-ordinated behaviour of
the two market leaders in the downstream market for
adulticides and combination products.

(1045)

In this respect it is indicative that, under the heading
‘Marketing JV Agreement’, a draft version of a prospect-
ed agreement between Bayer/ACS and Merial submitted
to the Commission during the investigation states that
[Confidential information of ACS].

(1046) The parties have submitted that the research agreement
between Merial and the merged entity would not
eliminate the incentives of the two leading players in
the market for adulticide and combination products to
compete against each other.

(1047)

In particular, the parties have submitted that crop
research is not essential for the development of adulti-
cides and combination products, and that in the future
pharmaceutical
research will become increasingly
important in this field. This would be demonstrated,
according to the parties, by the fact that [Confidential
information of ACS].

(1042) With regard to the parties’ submission that Merial
might claim compensation and damages before a
court in case of a breach of contract by Bayer, the
Commission considers that post-merger Bayer would
have the ability and the incentive to discipline Merial’s
behaviour by foreclosing Merial or by threatening to
do so. [Confidential information of ACS].

(1043) Furthermore, as explained above, following the pro-
posed transaction Bayer would gain control also over
the research activities of ACS relating to the animal
health sector which are currently carried on exclusively
for Merial. After the proposed transaction, therefore,
Merial and the animal health business of Bayer/ACS
would both have access to the results of the crop

(1048) The Commission recognises that crop research appears
not to be essential for developing innovative adulticides
and combination products. Indeed this is demonstrated
by the fact that [Confidential information of ACS] and
that Pfizer’s combination product Stronghold is based
on an active ingredient, Selemectin, which is not
a result of crop research activities. However,
the
investigation has shown that research in the crop
sector may still be relevant for the development of
new adulticides or combination products. Therefore,
although it is certainly possible that innovative adulti-
cides or combination products will result in the future
from non-crop research activities, serious concerns
if Bayer and Merial shared the same
remain that
crop research activities to develop adulticides and
combination products, they would have very strong
incentives to engage in co-ordinated behaviour in a
market where they are already the two leading players.

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(1049) The parties have also submitted that even if a successful
new molecule resulting from the merged entity’s crop
research had to be shared between Merial and the
animal health division of Bayer, the two companies
would still remain independent with regard to all the
development activities of the respective final products.
These development activities which, according to the
include tests for animal
parties, are cost intensive,
health-specific
field
studies, target expansion, combinations, etc.

long-term toxicology, global

General conclusion on small animal ectoparasiticides

(1054)

In the light of the above, the Commission concludes
that the concentration would lead to the creation or
strengthening of a dominant position in the following
national markets for adulticides and combination
products: Austria, Belgium, Denmark, France, Germ-
any, Greece, Ireland, Italy, the Netherlands, Portugal,
Spain, Sweden and the UK.

(1050)

that

In the Commission’s view, however, this does not
eliminate the fact
the pre-condition for any
development activities is the discovery of new mol-
ecules and that, after the merger, the two dominant
players in the market for adulticides and combination
products would share the same discoveries of the
merged entity’s crop research activities.

(1051) The parties have also submitted that the merged entity
and Merial would still compete in the future on
factors such as brands and advertising, and that a co-
promotion agreement for any future product of Merial
and Bayer based on the same molecule is unlikely.

(1052) According to the Commission, however, [Confidential

information of ACS].

(1053) Finally, the parties have submitted that there is a
significant competitive fringe in some countries. In the
Commission view, however, the fact that in some
countries (such as Austria, Germany, Belgium or
Denmark), certain competitors of Bayer and Merial
have achieved markets shares above [10 to 20] %, and
in the case of Sara Lee in Austria even above [30 to
40] %, does not mean that these competitors would be
able to exercise a significant competitive pressure on
Merial and Bayer’s post-merger coordinated behaviour,
given to the innovative properties of Frontline and
Advantage, the future launching of Merial’s combi-
nation product (which would not be matched for
instance by companies such as Sara Lee, and Schering-
Plough that do not currently sell nor expect to sell in
the future combination products), and the strong
potential for innovation of these two companies.

K. HOUSEHOLD INSECTICIDES

(1055) Household insecticides are formulated as ready-to-use
products which are applied against various kinds of
insects, including cockroaches, flies, moths and ants.
Household insecticides are applied by so-called do-it
yourself customers.

(1056) Bayer’s consumer care group, which is part of its
is active in the market of

pharmaceutical business,
household insecticides.

(1057) ACS is no longer active in the distribution of active
ingredients for household insecticides after its recent
its household insecticides business to
disposal of
Sumitomo. Consequently, there is no horizontal over-
lap of the Parties’ activities in the market for formulated
household insecticides products.

(1058) The only remaining business of ACS on this market is
the supply of active ingredients to [...]. The supply is
guaranteed under a long-term supply agreement start-
ing in [...], ACS supplies to [...] active ingredients for
the formulation of household insecticides.

(1059)

In view of the above, the Commission concludes that
the transaction will not lead to the creation or the
strengthening of a dominant position on the market
for household insecticides.

L. OVERALL CONCLUSION OF COMPETITIVE ASSESS-

MENT

(1060)

In view of the above, the Commission has come to the
conclusion that the transaction as originally notified
is incompatible with the common market and the
functioning of the EEA Agreement, since it would
create or strengthen dominant positions in the markets
for foliar insecticides for beets (France and Greece),
cereals (Italy and Portugal), citrus fruit
(Portugal),
cotton (Greece), fruits and nuts (Belgium, Denmark,

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Germany, Greece and Portugal), grapes (Germany),
potatoes (Portugal and Spain), rice (Portugal), tobacco
(Greece and Italy) and vegetables (France, Portugal,
Spain and Italy); and in soil insecticides for bananas
(Spain), beets (Belgium, France, the United Kingdom
and Italy), ornamental plants (Italy), potatoes (Greece
and Portugal), tobacco (Spain) and vegetables (Greece
and Portugal); in the following national markets for
molluscicides: the United Kingdom, Belgium, Ireland,
Portugal, Sweden, Finland and Iceland; in the markets
for beets herbicides (other than post-emergence grami-
nicides) in the whole of the EU, for cereal herbicides in
Belgium, Germany and Sweden, for maize herbicides
in Belgium and the Netherlands, for potato herbicides
in Greece, Portugal, Spain and Sweden, in vegetable
herbicides in Portugal and Sweden and for cotton
defoliants in Greece and Spain;
in the markets for
cereal fungicides in Italy, fruits and nuts in Denmark,
France and Germany, strawberry fungicides in Sweden,
fungicides for botrytis on grapes in France, Germany,
Greece and Portugal, hops fungicides in Germany,
fungicides for oil and protein crops in Germany,
and vegetable fungicides in Austria, Belgium, France,
Germany, Greece, Netherlands, Portugal, and Sweden;
in seed treatment insecticides for cereals and rice in
France and seed treatment insecticides for maize in
France, Italy, Austria, Belgium, Germany, Greece, the
Netherlands, Portugal and Spain. The operation would
further lead to the creation or strengthening of a
dominant position in seed treatment insecticides for
potatoes in Spain and the Netherlands and in seed
treatment insecticides for vegetables in France and in
the Benelux; in the markets for fungicides for seed
treatment of barley in Germany, Ireland, Italy and the
United Kingdom; in the markets for fungicides for seed
treatment of wheat, rye and triticale in Germany, Italy,
Sweden and the United Kingdom; and in the markets
for fungicides for seed treatment of potatoes in
Ireland,
Belgium, France,
the Netherlands and the
United Kingdom;
in the market for gel and baits
for cockroaches in Belgium, France, Germany, the
Netherlands and Spain and in the following national
markets for adulticides and combination products:
Austria, Belgium, Denmark, France, Germany, Greece,
Ireland, Italy, the Netherlands, Portugal, Spain, Sweden
and the United Kingdom.

V. COMMITMENTS SUBMITTED BY BAYER

(1061)

In order to remove the abovementioned competition
concerns, Bayer has submitted a number of commit-
ments with a view to modifying the original concen-
tration plan. The commitments are set out in full in
the Annex, which forms an integral part of
this
Decision. The assessment of the competition effects of
the modified transaction is presented in the following
paragraphs.

V.1.

INSECTICIDES

(1062) Bayer has offered to the Commission the divestment
of the Fipronil business on a worldwide basis.
In
addition, Bayer has offered to the Commission the
following Europe-wide divestments: the divestment of
the Acetamiprid business; the Cyfluthrin business; the
Beta-Cyfluthrin business; the Fenamiphos business; the
Oxydemeton-Methyl business; the Phosalone business;
and the Cypermethrin business.

(1063) Bayer has also offered the following exclusive licences:
a Europe-wide exclusive licence for the Acrinathrin
business; an exclusive licence for Endosulfan-based
formulations in Greece and Portugal and Carbaryl-
based formulations in France.

(1064)

In addition, Bayer has proposed to discontinue a
number of third party distribution agreements, as
specified in the annexed undertakings.

(1065) The divestment of Acetamiprid includes the parties
transferring the current agreements concluded between
ACS and Nippon Soda in Europe back to Nippon Soda.
The parties have also undertaken to make their best
efforts to find a third party to take over these agree-
ments. Finally, the divestment includes all the mixtures.
The divestment of Acetamiprid will remove any current
or future overlap between Bayer and ACS in the
neonicotinoids. The Commission considers that the
divestment of Acetamiprid, together with other under-
takings submitted in this case, is sufficient to restore
competitive conditions in the insecticides markets and
especially as regards neonicotinoids.

(1066) As concerns Fipronil, the parties have offered the
for agricultural uses on a
divestment of Fipronil
worldwide basis. The divestment includes all assets and
intellectual property rights. Outside Europe and the
United States, the parties have the right to negotiate a
licence back for the Fipronil business. Such nego-
tiations can, however, commence only after the whole
of the worldwide Fipronil business has been divested
to the new purchaser so as to prevent Bayer condition-
ing the divestiture of Fipronil on the obtention of
licences outside Europe and the United States. Any such
license will have to be approved by the Commission. As
regards Ethiprole,
the parties have undertaken to
grant an European-wide exclusive licence to develop,
manufacture, use and sell Ethiprole for agricultural
uses. Finally, Bayer commits to abstain from any use

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of ACS’s existing and pending patents worldwide
related to the pyrazole family as well as any future
patents obtained by Bayer worldwide following its
acquisition of ACS to the extent
that this would
prevent, inter alia, the purchaser of the Fipronil and
Ethiprole businesses from developing, producing, using
or selling Fipronil and/or Ethiprole or analogues. The
proposed divestment of Fipronil will remove the
possibility of combining the neonicotinoids and the
pyrazoles in the new entity’s insecticides portfolio and
will remove the competition concerns as regards the
new entity’s strength vis-à-vis the distribution sector.
Together with other undertakings submitted in this
case, the divestment of Fipronil is likely to restore
competitive conditions in the insecticides markets and
especially as regards the new chemistries, neonicotino-
ids and pyrazoles. The divestment of Ethiprole will in
particular ensure that the new entity will not be able
to undermine the divestment of Fipronil by developing
a competing pyrazole in the European markets. Fur-
thermore, the Commission considers it particularly
important that the purchaser of Fipronil will have the
possibility to develop and launch a second generation
pyrazole in the European market following the loss of
patent protection of Fipronil in the near future.

(1067) The Commission considers that the purchaser of these
divested products should be a R & D company who is
able to take over the relevant production assets and
the full position of ACS before the merger with regard
to the divested assets.

(1068) As regards the individual markets, the assessment of

the undertakings is as follows:

(1069) Banana Soil, Spain: Bayer has proposed to divest the
Fenamiphos business (including the mixture product
consisting of the active substances Fenamiphos and
Imidacloprid). The proposed remedy will practically
eliminate the overlap created by the merger and reduce
the market share to only [10 to 20] %. On this basis
the Commission considers that no dominant position
will be created or strengthened on this market.

(1070) Beets Foliar, France: Bayer has proposed a package
of remedies which includes the divestment of the
the Beta-
Cyfluthrin business;

the divestment of

Cyfluthrin business; the divestment of the Oxydeme-
ton-Methyl business; and the divestment of the Cyper-
methrin business. The proposed remedies will elimin-
ate the overlaps created by the merger. On this basis
the Commission considers that no dominant position
will be created or strengthened on this market.

the divestment of

(1071) Beets Foliar, Greece: Bayer has proposed a package
of remedies, which includes the divestment of the
the Beta-
Cyfluthrin business;
Cyfluthrin business; the divestment of the Cypermethr-
in business; and a non-exclusive license for Deltamethr-
in. In addition, the parties will terminate the distri-
bution of Azymphos-Methyl. The Parties have explai-
ned that the complete removal of the overlap between
the parties would be disproportionate, because both
Deltamethrin (ACS) and Fethion (Bayer) are used only
to a very small extent in this crop. The Commission
has therefore decided to approve, under these very
exceptional circumstances, a non-exclusive licence for
Deltamethrin. The Commission estimates that this,
together with the offered divestments,
is sufficient
under the very particular conditions to create competi-
tive conditions on this market both as regards the
overall market and also the sucking and the chewing
insects segments. On this basis the Commission con-
siders that no dominant position will be created or
strengthened on this market.

(1072) Beets Soil, Belgium: Bayer has proposed a package of
remedies which includes the divestment of the business
conducted under the trade names Curaterr and Yaltox
based on the third party active substance Carbofuran.
In addition, Bayer has proposed to divest Fipronil and
all the formulations in the EEA. The proposed remedies
will reduce the parties’ market share from [80 to 90] %
to only [0 to 10] %. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1073) Beets Soil, France: Bayer has proposed a package of
remedies which includes the divestment of the business
conducted under the trade names Curaterr and Yaltox
based on the third party active substance Carbofuran;
the
the divestment of
divestment of
the
divestment of the Oxydemeton-Methyl business; and
the divestment of the Fipronil business. The proposed
remedies will remove the market share overlap between
the parties. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

the Cyfluthrin business;
the Beta-Cyfluthrin business;

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(1074) Beets Soil,

the divestment of

Italy: Bayer has proposed a package of
remedies which includes
the
Cyfluthrin business; the divestment of the Fipronil
business; and the termination of the commercialising
of the third party product Marshall (Carbosulfan). The
proposed remedies will eliminate the overlaps created
by the merger. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1075) Beets Soil, United Kingdom: Bayer has proposed to divest
its business conducted under the trade names Curaterr,
Yaltox and Marshall based on the third party active
substance Carbofuran on an EEA-wide basis. The
proposed remedy will eliminate the overlaps created
by the merger. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1076) Cereals Foliar,

Italy: Bayer has proposed a package
of remedies which includes the divestment of the
Cyfluthrin business; and the divestment of the Oxyde-
meton-Methyl business. The proposed remedies will
eliminate the market share overlaps created by the
merger. On this basis the Commission considers that
no dominant position will be created or strengthened
on this market.

(1077) Cereals Foliar, Portugal: Bayer has proposed to divest the
Oxydemeton-Methyl business. The proposed remedy
will eliminate the overlaps created by the merger. On
this basis the Commission considers that no dominant
position will be created or strengthened on this market.

Commission considers that competitive conditions will
be sufficiently ensured. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

the divestment of

(1079) Cotton Foliar, Greece: Bayer has proposed a package of
remedies which includes the following: the divestment
of the Acetamiprid business; the divestment of the
Cyfluthrin business;
the Beta-
Cyfluthrin business; the divestment of the Oxydeme-
ton-Methyl business; an exclusive licence for Endosul-
fan; and the termination of the commercialising of the
third party products Xentari (Bacillus T.), Azinphos-
Methyl (Gusathion M-EC) and Omite (Propargite). The
proposed remedies would bring down the combined
market share to [20 to 30] % on the overall market
and to [30 to 40] % in sucking insects. In chewing
insects, the parties’ market share would be [20 to
30] %. On this basis, in view of the market shares of
the competitors ([confidential information concerning
the market position of a competitor]) and the compet-
ing product launches, the Commission considers that
no dominant position will be created or strengthened
on this market.

(1080) Fruits/Nuts Foliar, Belgium: Bayer has proposed a pack-
age of remedies which includes the divestment of the
Cyfluthrin business; the termination of the commer-
cialising of the third party products Masai and Pyranica
(Tebufenpyrad), Dimilin (Diflubenzuron) and Mimic
(Tebufenozide). The proposed remedies would reduce
the Parties’ combined market share to [30 to 40] % in
the overall market and to [30 to 40] % in the
sucking insects segment. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1078) Citrus Foliar, Portugal: Bayer has proposed a package
of remedies which includes the divestment of the
Oxydemeton-Methyl business and the termination of
the commercialising of the third party products Cas-
cade (Flufenoxuron) and Lorvek (Chlorpyrifos). The
proposed remedies would bring down the parties’
combined market share to [30 to 40] % on the overall
market and to [30 to 40] % in sucking insects and to
[30 to 40] % in chewing insects. In view of these
market shares, those of the competitors ([confidential
information concerning the market position of a
competitor]), in view of the competing product launch-
es, and given [confidential information of ACS], the

(1081) Fruits/Nuts Foliar, Denmark: Bayer has proposed a
package of remedies which includes the divestment
of the Phosalone business; the termination of the
commercialising of the third party products Maladan
(Malathion), Nissorun (Hexythiazox) and Dimilin
(Diflubenzuron). The proposed remedies will eliminate
the overlaps created by the merger. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

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(1082) Fruits/Nuts Foliar, Germany: Bayer has proposed a
package of remedies which includes the divestment of
the Oxydemeton-Methyl business; the termination of
the commercialising of the third party products Xentari
(Bacillus T.), Dimilin (Diflubenzuron), Kiron (Fenproxi-
mate) and Mimic (Tebufenozide). The proposed rem-
edies will eliminate the overlaps created by the merger.
On this basis the Commission considers that no
dominant position will be created or strengthened on
this market.

product launches both in the sucking and the chewing
insects segments in the near future, the Commission
considers that these undertakings are sufficient to
ensure competitive conditions. On this basis the Com-
mission considers that no dominant position will be
created or strengthened on this market.

(1083) Fruits/Nuts Foliar, Greece: Bayer has proposed a package
of remedies which includes the divestment of the
Acetamiprid business, the divestment of the Cyfluthrin
business; the divestment of the Beta-Cyfluthrin busi-
ness; the divestment of the Oxydemeton-Methyl busi-
ness; the divestment of the Phosalone business; an
exclusive licence for Endosulfan; the termination of the
commercialising of the third party products Xentari
(Bacillus T.), BT (Bacillus T.), Metamidophos (Monitor),
Azinphos-Methyl (Gusathion-M) and Omite (Propar-
gite). The proposed remedies would bring down the
combined market [...] [30 to 40] % on the overall
market and to [30 to 40] % in sucking insects and [30
to 40] % in chewing insects. In view of these markets
shares, and those of the competitors ([confidential
information concerning the market position of a
competitor]), taking into account the fact that the
parties have undertaken to divest Acetamiprid, which
has already been launched an the market, and given
the competing product launches both in the sucking
and the chewing insects segments in the near future,
the Commission considers that these undertakings are
sufficient to ensure competitive conditions. On this
basis the Commission considers that no dominant
position will be created or strengthened on this market.

(1085) Grapes Foliar, Germany: Bayer has proposed a package
of remedies which includes the divestment of the
Oxydemeton-Methyl business; and the termination of
the commercialising of the third party products Xentari
(Bacillus T.), Mimic (Tebufenozide) and Kiron (Fenpy-
roximate). The proposed remedies will eliminate the
overlaps created by the merger. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1086) Ornamentals Soil, Italy: Bayer has proposed a package
of remedies which includes the divestment of the
Fenamiphos business; the termination of the commer-
cialising the third party products Pyrinex (Chlorpyrifos)
and Marshall (Carbosulfan). The proposed remedies
will eliminate the overlaps created by the merger. On
this basis the Commission considers that no dominant
position will be created or strengthened on this market.

(1084) Fruits/Nuts Foliar, Portugal: Bayer has proposed a pack-
age of remedies which includes the divestment of
the Beta-Cyfluthrin business; the divestment of the
Oxydemeton-Methyl business; the divestment of the
Phosalone business; an exclusive licence for Endosul-
fan; the termination of the commercialising of the
third party products Cascade (Flufenoxuron), Mimic
(Tebufenozide) and Omite (Propargite). The proposed
remedies would reduce the parties’ combined market
share on the overall insecticides market to [30 to 40] %
and to [30 to 40] % in sucking insects and to [20 to
30] % in chewing insects. In view of these market
shares, and those of the competitors ([confidential
information concerning the market position of a
competitor]), and taking into consideration that [confi-
dential information of ACS], and given the competing

(1087) Potatoes Foliar, Portugal: Bayer has proposed to divest
the Beta-Cyfluthrin business and terminate the com-
mercialising of the third party product Biotrata (Bacil-
lus T.). The proposed remedies would reduce the
parties’ market share to [20 to 30] % on the overall
market and to [30 to 40] % in chewing insects. The
EEA-wide divestment of the Cyfluthrin business will
also create a potential new entrant on the market with
a competing pyrethroid, who will also have a mixture
product of Cyfluthrin and Imidacloprid. According to
the parties, the combination product has already been
registered on this market and the sales can start
immediately. On this basis,
in view of the market
shares of the competitors ([confidential information
concerning the market position of a competitor]) and
the competing products launches, the Commission
considers that no dominant position will be created or
strengthened on this market.

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(1088) Potatoes Foliar, Spain: Bayer has proposed a package of
remedies which includes the divestment of the Fipronil
business; the divestment of the Cyfluthrin business;
the divestment of the Beta-Cyfluthrin business; the
divestment of the Oxydemeton-Methyl business; the
divestment of the Cypermethrin business; and the
termination of the commercialising of the third party
products Mimic and Confirm (Tebufenozide) and Azin-
phos-Methyl (Gusathion M WP). The proposed rem-
edies would reduce the parties’ market share by [10 to
20] % to [30 to 40] % on the overall market. In
chewing insects, mainly due to the divestment of
Fipronil, the market share is reduced to [20 to 30] %.
This divestment would eliminate the Commission’s
concern that the parties could offer attractive spraying
programmes for the control of the Colorado potato
beetle together with Imidacloprid. In sucking insects,
the parties would still have [40 to 50] % of the market.
However, this market share is derived largely from
Imidacloprid. The Commission considers that because
the parties have divested Acetamiprid, a new entry
with a competing neonicotinoid is possible in the
near future.
information
the competitors].
concerning pipeline products of
Finally, the divestment of the Cyfluthrin business and
the Beta-Cyfluthrin business and the mixture product
with Imidacloprid is likely to provide competition on
this market. On this basis, and in view of the market
shares of the competitors ([confidential information
concerning the market position of a competitor]), the
Commission considers that no dominant position will
be created or strengthened on this market.

[confidential

In addition,

(1089) Potatoes Soil, Greece: Bayer has proposed a package
of remedies which includes the divestment of the
Fenamiphos business; and the divestment of the busi-
ness conducted under the trade names Curaterr, Yaltox
and Marshall based on the third party active substance
Carbofuran. The proposed remedies will eliminate the
market share overlaps created by the merger. On this
basis the Commission considers that no dominant
position will be created or strengthened on this market.

(1090) Potatoes Soil, Portugal: Bayer has proposed to divest the
Fenamiphos business. This will eliminate the overlaps
created by the merger. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1091) Rice Foliar, Portugal: Bayer has proposed to divest the
Oxydemeton-Methyl business. This will eliminate the

overlaps created by the merger. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1092) Tobacco Foliar, Greece: Bayer has proposed a package
of remedies which includes the divestment of the
Acetamiprid business; the divestment of the Cyfluthrin
business; the divestment of the Beta-Cyfluthrin busi-
ness; the divestment of the Oxydemeton-Methyl busi-
ness; and the termination of the commercialising of
the third party product Monitor (Metamidophos). The
remedies will eliminate the overlaps created by the
merger. On this basis the Commission considers that
no dominant position will be created or strengthened
on this market.

(1093) Tobacco Foliar,

Italy: Bayer has proposed to divest
the Cyfluthrin business and the Oxydemeton-Methyl
business. These divestments will remove the addition
of the market share created by the operation. On this
basis the Commission considers that no dominant
position will be created or strengthened on this market.

the divestment of

(1094) Tobacco Soil, Spain: Bayer has proposed a package
of remedies, which includes the divestment of the
Cyfluthrin business;
the Beta-
Cyfluthrin business; and the divestment of the Fenami-
phos business. The proposed remedies eliminate the
entire market share overlap and, most importantly,
remove the overlap between the parties’ leading soil
insecticides. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1095) Vegetables Foliar, France: Bayer has proposed a package
of remedies which includes the divestment of the
Cyfluthrin business; the divestment of the Phosalone
business; the divestment of the Oxydemeton-Methyl
business; the divestment of the Acrinathrin business;
an exclusive licence for Carbaryl-based formulations in
France; and the termination of commercialising of the
third party products Umuter (Diazinon), Rhodocide
(Ethion), Azinphos-Methyl
(Gusathion M WP) and
Orthene (Acephate). Following these divestments, the
parties combined market share both on the overall
market and also in the sucking and chewing insects
segments will be reduced to [...] below 40 %. The
Commission has taken into account the fact that
[confidential information of ACS]. The Commission
considers that these undertakings, which address effec-
tively all the market segments where the Commission
identified competition concerns, will also facilitate the
market penetration of the competitors, who will launch

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competing products both in the sucking and the
chewing insects segments [confidential
information
concerning pipeline products of the competitors] in
the near future. Therefore, the Commission considers
that these undertakings are sufficient to ensure com-
petitive conditions. On this basis, and in view of
the market shares of the competitors ([confidential
information concerning the market position of a
competitor]), the Commission considers that no domi-
nant position will be created or strengthened on this
market.

(1096) Vegetables Foliar, Italy: Bayer has proposed a package
of remedies which includes the divestment of the
Cyfluthrin business; the divestment of the Oxydeme-
ton-Methyl business; and the termination of the com-
mercialising of the third party products Dipel (Bacillus
T.), Smart (Malathion), Azinphos-Methyl (Gusathion
SC, Gusathion M WP) and Omite (Propargite). Follow-
ing these divestments, the Parties’ combined market
share would be [30 to 40] % on the overall market and
[30 to 40] % in the sucking insects segment. On this
basis, in view of the market shares of the competitors
([confidential information concerning the market pos-
ition of a competitor]) and the competing product
launches, the Commission considers that no dominant
position will be created or strengthened on this market.

the

remedies which includes

following:
the Beta-Cyfluthrin business;

(1097) Vegetables Foliar, Portugal: Bayer has proposed a package
the
of
divestment of
the
divestment of the Phosalone business; the divestment
of the Oxydemeton-Methyl business; the divestment of
the Acrinathrin business; an exclusive license for
Endosulfan; and the termination of the commercialis-
ing of the third party product Omite (Propargite).
Taking into account of the products which have been
divested during 2001, the proposed remedies would
bring down the combined market share by [20 to
30] %, to around [30 to 40] %, on the overall market.
The Commission has estimated that these undertakings
would reduce the market share in both sucking and
chewing insects to below [30 to 40] %. For essentially
the same reasons as apply for the French vegetables
market for foliar application, the Commission con-
to
siders the undertakings submitted as sufficient
ensure competitive conditions. On this basis, and
in view of
the competitors
([confidential information concerning the market pos-
ition of a competitor]), the Commission considers that
no dominant position will be created or strengthened
on this market.

the market shares of

ton-Methyl business: the divestment of the Phosalone
business; the divestment of the Cypermethrin business;
the divestment of the Acrinathrin business;; and the
termination of the commercialising of the third party
products Mimic and Confirm (Tebufenozide), Dimilin
(Diflubenzuron), Xentari (Bacillus T.), Omite (Proparg-
ite) and Dipel (Bacillus T.). The proposed remedies
would bring down the combined market share to [20
to 30] % on the overall market and to [30 to 40] % in
the sucking insects segment. On this basis, in view of
the market shares of the competitors ([confidential
information concerning the market position of a
competitor]) and the competing product launches, the
Commission considers that no dominant position will
be created or strengthened on this market.

(1099) Vegetables Soil, Greece: Bayer has proposed a package
of remedies which includes the divestment of the
Cyfluthrin business; the divestment of the Fenamiphos
business; and the divestment of the business conducted
under the trade names Curaterr and Yaltox based
on the third party active substance Carbofuran. The
proposed remedies would reduce the parties’ market
share to [0 to 10] %. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1100) Vegetables Soil, Portugal: Bayer has proposed to divest
the Fenamiphos business (including the mixture of
Fenamiphos and Imidacloprid). The proposed remedy
will eliminate the overlaps created by the merger. On
this basis the Commission considers that no dominant
position will be created or strengthened on this market.

V.2. MOLLUSCICIDES

(1101) The parties undertake to grant an Europe-wide exclus-
ive licence to manufacture and sell Thiodicarb-based
snail bait
formulation, marketed under the brand
‘Skipper’. The exclusive licence will include a licence to
all property rights, registration rights, know-how,
documentation and trade names relating to the ‘Skip-
per’ formulation for use as snail bait. If requested by
the licensee, Bayer would enter into a transitional toll
manufacturing agreement with the licensee on cost
plus terms.

(1098) Vegetables Foliar, Spain: Bayer has proposed a package
of remedies which includes the divestment of the
Cyfluthrin business;
the Beta-
Cyfluthrin business; the divestment of the Oxydeme-

the divestment of

(1102) This undertaking will have the effect to eliminate the
overlap in this market, as ACS’s Thiodicarb-based
molluscicide Skipper is the only molluscicide produced
and sold by ACS in Europe. On this basis the Com-
mission considers that no dominant position will be
created or strengthened on this market.

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V.3. HERBICIDES

BEETS HERBICIDES

manufactured by Bayer on request for a period of three
years on a cost plus basis, and on an arm’s length basis
thereafter if requested by the purchaser. The licencing
of Isoxaflutole, a patent protected broad leaf maize
herbicide, would eliminate the overlap. On this basis
the Commission considers that no dominant position
will be created or strengthened in these markets.

(1103) Bayer proposes to eliminate the overlap by divesting
European-wide the entire Metamitron (Goltix) business
and offers toll-manufacturing of the active ingredient
for three years on a cost plus basis and on an arm’s
length basis thereafter if requested by the purchaser.
On this basis the Commission considers that no
dominant position will be created or strengthened in
these markets.

CEREAL HERBICIDES

the acquirer. All

(1104) As concerns Belgium and Germany, Bayer proposes to
divest the majority of the overlap and two other
molecules which will be more than the remaining
overlap. The package consists of a divestiture of Herold
(Flufenacet/Diflufenican), of Ralon Super and Puma
Super (Fenoxaprop) and a European-wide licence to
use Propoxycarbazone in mixtures with the molecules
of
three commitments together
account for a higher market share than what Bayer
achieves in those two Member States. Moreover, all
three products control grass weeds, the segment in
which the merged entity would become very strong
also in France and the Netherlands. Both Herold and
Radon/Puma will be toll-manufactured by Bayer on
request for a period of three years on a cost plus basis,
and on an arm’s length basis thereafter if requested by
the purchaser. As concerns Sweden, the divestment of
Gullviks would eliminate the current overlap. On this
basis the Commission considers that no dominant
position will be created or strengthened in these
markets.

POTATO AND VEGETABLE HERBICIDES

(1106) Bayer offers to divest the Europe-wide Linuron-busi-
ness including the brand Afalon. Toll-manufacturing is
offered for three years on a cost plus basis, and on
an arm’s length basis thereafter if requested by the
purchaser. This would eliminate the overlap (Portugal,
Spain) or bring down market shares to an acceptable
level (Greece, to around [40 to 50] % in 2000 and
below [30 to 40] % in 2004, with Syngenta as a strong
competitor with close to [20 to 30] %). To remedy the
situation in Sweden, Bayer offers to sell the majority in
Gullviks, its wholesaler in the Swedish market, and to
grant an exclusive licence for the vegetable herbicide
Aclonifen. This package would also eliminate the
overlap. On this basis the Commission considers that
no dominant position will be created or strengthened
in these markets.

COTTON DEFOLIANTS GREECE AND SPAIN

(1107) Bayer offers to grant an exclusive licence for its only
product DEF (active ingredient tribufos) until
it is
withdrawn from the market in Greece and Spain after
2003. On this basis the Commission considers that no
dominant position will be created or strengthened in
these markets.

V.4.

FUNGICIDES

MAIZE HERBICIDES

(a) CEREAL FUNGICIDES

(1105) Bayer would become dominant in those two Member
States based on the figures of 2000. In the meantime,
however, the direct competitor to Bayer’s Mikado,
Callisto, has been introduced in those two countries
(2001 and 2002 respectively). In order to bring down
market shares in those two countries to an acceptable
level, Bayer proposes to grant an exclusive licence to
manufacture, use and sell
in
Belgium and the Netherlands. Isoxaflutole will be toll-

Isoxaflutole (Merlin)

(1108)

In cereal fungicides the Commission has concluded
that the proposed transaction as notified would have
created or strengthened a dominant position in Italy.
For this market the remedy offered by the parties to
divest ACS’s Prochloraz business including mixtures
with Fenpropimorph would mean divesting the
majority ([90 to 100] %) of ACS’s business in the
Italian cereals market. The resulting addition of market
share would be very small (less than [0 to 10] %) and

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the new entity would have less than [20 to 30] %. The
market test of the remedies has largely confirmed that
this remedy would be sufficient
to eliminate the
competition problem created by the proposed trans-
action. On this basis the Commission considers that
no dominant position will be created or strengthened
on this market.

(b)

FRUITS AND NUTS FUNGICIDES

(1109)

In fruits and nuts fungicides the Commission has
concluded that the proposed transaction as notified
would have created or strengthened a dominant pos-
ition in Denmark, France and Germany.

(1110) The remedies affecting the Danish market are the
divestment of Pyrimethanil (Europe-wide), including
the brand name Scala, and the granting of an exclusive
licence for Bitertanol (including the brand name Baycor
for a period of [...]). According to the parties’ data, the
sales of Scala account for [10 to 20] % of the total
market, while the remaining ACS sales, which will be
taken over by Bayer, account for only [0 to 10] %. On
the other hand, Bayer’s Baycor, which will be licensed,
accounts for [10 to 20] %. The new entity would thus
have [0 to 10] % less than Bayer’s current market share
and less than [30 to 40] % of the market. The market
test of the remedies has largely confirmed that this
remedy would be sufficient to eliminate the compe-
tition problem created by the proposed transaction.
On this basis the Commission considers that no
dominant position will be created or strengthened on
this market.

(1112) The remedies affecting the German market are the
divestment of Pyrimethanil and mixtures with Fluquin-
conazole (Europe-wide) and the granting of an exclus-
ive licence for the Triadimenol based formulation
Bayfidan (including the brand name for a period of
[...]). The ACS part of the commitment accounts for all
of ACS’s sales based on own active ingredients and [50
to 60] % of total ACS sales. According to the parties’
data the divested ACS products have a market share of
[0 to 10] %, the one remaining ACS third party product
a share of [0 to 10] % and the licensed Bayfidan a share
of [0 to 10] %. According to the parties, the remaining
addition is [0 to 10] % to be added to Bayer’s remaining
[30 to 40] %. It should, however, be noted that the
market investigation has shown that the parties slightly
overestimate their share of this market. Instead of [40
to 50] % they would have around [40 to 50] % with
only a small increase in market share, as Bayer already
today has about [30 to 40] %. As for France, the ACS
products mentioned by third parties as being the main
contributions to Bayer’s portfolio are divested, while
the remaining addition is a third party product, which
the parties anyway expect to stop selling before 2004.
The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(c)

STRAWBERRY FUNGICIDES IN SWEDEN

(1111) The remedies affecting the French market are the
divestment of Pyrimethanil and mixtures with Fluquin-
conazole (Europe-wide), the divestments of Iprodione
and Prochloraz (Europe-wide), including brand names.
This would account for [80 to 90] % of ACS’s sales
based on own active ingredients and [50 to 60] % of
total ACS sales. The parties would have just around
[40 to 50] % with Bayer having [30 to 40] % and ACS
[10 to 20] %. However, the main part of ACS’s
remaining sales would be based on third party prod-
ucts, while the ACS active ingredients mentioned by
third parties as being the main contributions to Bayer’s
portfolio would be divested. The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1113) The Commission has concluded that the proposed
transaction as notified would have created or strength-
ened a dominant position in strawberry fungicides in
Sweden. The remedies affecting this market are the
divestments of Pyrimethanil and Iprodione (Europe-
wide). This would mean a divestment of Scala (Pyrime-
thanil) and Rovral (Iprodione). The only remaining
addition to Bayer’s portfolio would thus be Aliette
(Fosetyl-Al) which treats different diseases on straw-
berries than Bayer’s own products. The divestment of
Gullviks would furthermore mean that Bayer would
no longer distribute Syngenta’s Topas. The main
competition problem identified by the Commission
was the near-monopoly for fungicides to treat botrytis
on strawberries. The remedies would completely elim-
inate the overlap. The addition of Aliette to Bayer’s
portfolio will not significantly change the competitive
situation as Aliette treats other diseases than botrytis.
Furthermore, the divestment of Topas through the sale

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of Gullviks would be a counterbalance to the addition
of Aliette. The market test of the remedies has largely
confirmed that this remedy would be sufficient to
eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

account for [50 to 60] % of the sales of ACS in Greece.
The combined market share of the parties would after
the commitments be less than [20 to 30] %. The
market test of the remedies has largely confirmed that
to eliminate the
this remedy would be sufficient
competition problem created by the proposed trans-
action. On this basis the Commission considers that
no dominant position will be created or strengthened
on this market.

(d) GRAPE FUNGICIDES FOR CONTROL OF BOTRYTIS

(1114)

In grape fungicides for control of botrytis the Com-
mission has concluded that the proposed transaction
as notified would have created or strengthened a
dominant position in France, Germany, Greece and
Portugal.

(1118) The remedies affecting the Portuguese market are
the Europe-wide divestments of Pyrimethanil and
Iprodione. Products based on these active ingredients
account for the entire sales of ACS in Portugal. The
market test of the remedies has largely confirmed that
this remedy would be sufficient
to eliminate the
competition problem created by the proposed trans-
action. On this basis the Commission considers that
no dominant position will be created or strengthened
on this market.

(1115) The remedies affecting the French market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients
account for [90 to 100] % of the sales of ACS in
France. The addition of market share would be close to
zero and Bayer has around [10 to 20] % share in this
market. The market test of the remedies has largely
confirmed that this remedy would be sufficient to
eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1119)

(1116) The remedies affecting the German market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients
account for [50 to 60] % of the sales of ACS in
Germany. The combined market share of the parties
would after the commitments be less than [20 to
30] %. The market test of the remedies has largely
confirmed that this remedy would be sufficient to
eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(e) HOPS FUNGICIDES

In hops fungicides the Commission has concluded
that the proposed transaction as notified would have
created or strengthened a dominant position in Ger-
many. The remedy affecting this market is an exclusive
license giving access to the Triadimenol-base product
Bayfidan 250 EC (including the brand name Bayfidan
for a period of [...]). Bayfidan 250 EC accounted for
[60 to 70] % of Bayer’s sales in 2000, although it
would be a smaller proportion of sales in 2001 since
Bayer’s new Flint product in that year achieved sales
similar to those of Bayfidan. Based on those figures the
parties would after the remedy have a present market
share of around [30 to 40] % (including sales of Flint)
expected to decrease to about [30 to 40] % in 2004.
The gap to the next competitor, BASF, would therefore
be reduced significantly (66). The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1117) The remedies affecting the Greek market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients

(66) Business secrets: deleted confidential

information based on

competitors’ sales data.

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(f) OIL AND PROTEIN CROPS FUNGICIDES

(1120)

In oil and protein crops fungicides the Commission
has concluded that the proposed transaction as notified
would have created or strengthened a dominant pos-
ition in Germany. The remedies affecting this market
are the Europe-wide divestment of Iprodione and the
transfer of the existing distribution rights currently
held by ACS to sell Folicur (Tebuconazole) in Germany
to a third party. The sales of Virisan (Iprodione) and
Folicur accounted in 2000 for [80 to 90] % of ACS
sales in Germany. The remaining ACS product is
Derosal (Carbendazim), which adds less than [0 to
10] % to Bayer’s [30 to 40] %. Sales of Derosal are
forecast to go down to account for less than [0 to
10] % in 2004. Furthermore, the gap to BASF would
be drastically reduced (67). The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(g) VEGETABLE FUNGICIDES

(1121)

In vegetable fungicides the Commission has concluded
that the proposed transaction as notified would have
created or strengthened a dominant position in Austria,
Belgium, France, Germany, Greece, Netherlands, Portu-
gal, and Sweden.

(1122) The remedies affecting the Austrian market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients
account for [60 to 70] % of the sales of ACS in Austria.
The combined market share of the parties would after
the commitments be less than [20 to 30] % based on
2000 sales. The market test of the remedies has largely
confirmed that this remedy would be sufficient to
eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on this market.

(1123) The remedies affecting the Belgian market are the
Europe-wide divestments of Pyrimethanil, Iprodione
and Prochloraz. Products based on these active ingredi-
ents accounted for [40 to 50] % of the 2000 sales of

(67) Business secrets: deleted confidential

information based on

competitors’ sales data.

ACS in Belgium. The combined market share of the
parties would after the commitments be around [30 to
40] % based on 2000 sales. The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1124) The remedies affecting the French market are the
Europe-wide divestments of Pyrimethanil, Iprodione
and Prochloraz. Products based on these active ingredi-
ents accounted for [20 to 30] % of the sales of ACS in
France in 2000. They were also equivalent to almost
five times the sales of Bayer in this market in 2000.
The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1125) The remedies affecting the German market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione; an exclusive licence giving access to the Triadi-
menol-base product Bayfidan 250 EC; the transfer of
the existing distribution rights currently held by ACS
to sell Folicur (Tebuconazole) in Germany to a third
party; and an exclusive licence to the product Matador
(based on the active ingredients Tebuconazole and
Triadimenol) in Germany. Products based on these
active ingredients account for [20 to 30] % of the sales
of ACS in Germany in this market as well as [40 to
50] % of those of Bayer. The total sales of remaining
products in year 2000 would be [10 to 20] % less than
those sold by Bayer in 2000. The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on this market.

(1126) The remedies affecting the Greek market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients
account for [10 to 20] % of the sales of ACS in Greece.
The addition to Bayer’s portfolio of products based on
these two active ingredients was the main competition
concern identified during the course of the market
investigation in the vegetable fungicides markets. Tak-
ing into account also the fact that Afugan is no longer
sold in Greece, the sales of the products being acquired
by Bayer would account for [60 to 70] % of ACS’s
sales in year 2000. The total sales of the new entity
would on a year 2000 basis be less than [40 to 50] %

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and would be falling to below [30 to 40] % by 2004.
The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1127) The remedies affecting the Dutch market are the
Europe-wide divestments of Pyrimethanil, Iprodione
and Prochloraz. Products based on these active ingredi-
ents account for [40 to 50] % of the sales of ACS in
the Netherlands. They are also equal to nine times the
sales of Bayer in 2000 in this market. The market test
of the remedies has largely confirmed that this remedy
would be sufficient
to eliminate the competition
problem created by the proposed transaction. On this
basis the Commission considers that no dominant
position will be created or strengthened on this market.

(1128) The remedies affecting the Portuguese market are
the Europe-wide divestments of Pyrimethanil and
Iprodione. Products based on these active ingredients
account for [10 to 20] % of the sales of ACS in Portugal
in 2000. However, they are also equal to [150 to
160] % of the sales of Bayer in 2000 in this market.
The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

(1129) The remedies affecting the Swedish market are the
Europe-wide divestments of Pyrimethanil and Ipro-
dione. Products based on these active ingredients
accounted for all the sales of ACS in Sweden in 2000.
The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on this market.

V.5.

SEED TREATMENT

V.5.1.

SEED TREATMENT INSECTICIDES

(1131)

In order to remove the competition concerns arising
in seed treatment insecticides, Bayer has proposed to
divest the whole of ACS’s Fipronil business for seed
treatment purposes. This undertaking removes the
overlap between the Parties’ activities in seed treatment
insecticides. On this basis the Commission considers
that no dominant position will be created or strength-
ened on any of the seed treatment insecticides markets.

V.5.2.

SEED TREATMENT FUNGICIDES

(a) Cereal fungicides

(1132)

In fungicides for seed treatment of cereals, the Com-
mission has concluded that the proposed transaction
as notified would have created or strengthened a
dominant position on the barley markets in Germany,
Ireland, Italy and the United Kingdom and on the
wheat, rye and triticale markets in Germany, Italy,
Sweden and the United Kingdom.

Barley

(1133) The remedies affecting the barley markets are the
Europe-wide divestments of Triticonazole and Prochlo-
raz and the termination of an agreement to distribute
Fungazil (Imazalil) in Ireland as well as to terminate all
existing distribution agreements between ACS and
Makhteshim in relation to Guazatine and hand back
all existing distribution rights to Makhteshim.

(1130) Bayer commits to transfer to one single purchaser
the whole of ACS’s existing seed treatment business
including but not
limited to a number of active
ingredients used in ACS’s seed treatment business. This
commitment, including the transfer of necessary know-
how, ensures the viability of ACS’s seed treatment
business in this very concentrated sector, where pre-
sently only Syngenta, Bayer and ACS have a real
significant presence.

(1134) These commitments would eliminate the entire overlap
in all four countries where competition problems were
found, that is, Germany, Ireland, Italy and the United
Kingdom. The market test of the remedies has largely
confirmed that this remedy would be sufficient to
eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on these markets.

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Wheat, rye and triticale

eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on the markets for seed treatment of
wheat, rye and triticale in Germany.

(1135) The remedies affecting the markets for wheat, rye and
triticale are the Europe-wide divestments of Triticona-
zole, Prochloraz and Fluquinconazole (with Bayer,
however, getting a co-exclusive licence to sell Fluquin-
conazole and mixtures of Fluquinconazole for uses in
seed treatment); the transfer of all existing distribution
agreements between ACS and Makhteshim in relation
to Guazatine and hand over of all existing distribution
rights ([...]); and an exclusive licence to the Triadimen-
ol-based formulation Baytan in the United Kingdom
(including the brand name Baytan for a period of [...]).

(1139)

In the United Kingdom, sales of Jockey account for
around [20 to 30] % of the total market. With its
existing market share of [30 to 40] %, Bayer would still
have a quite high market share if it managed to capture
a significant part of
Jockey’s existing sales. Bayer
therefore also offers to give an exclusive licence to the
Triadimenol-based formulation Baytan in the United
Kingdom (including the brand name Baytan for a
period of [...]). According to the year 2000 data
provided by the parties, Bayer would after the commit-
ments have a market share of [20 to 30] % based on
Bayer’s Subitol (Bitertanol) and in addition what it can
achieve with the Fluquinconazole-based product for
which it gets a co-exclusive licence. It is, however, not
likely that it will achieve all the [20 to 30] % that ACS’s
Jockey enjoys today, since Jockey will still be sold by
the purchaser of the Fluquinconazole active ingredient.
Furthermore,
forecasts for the market
shares of Subitol and Jockey in year 2004 are [10 to
20] % and [20 to 30] %, respectively. As in Germany,
Monsanto is in the process of launching Latitude.
Contrary to the situation in Germany, the parties
apparently do not in the United Kingdom consider
that this will reduce the market position of Jockey.
However, the introduction of Latitude will introduce a
direct competitor to Jockey. The market test of the
remedies has largely confirmed that this remedy would
be sufficient to eliminate the competition problem
created by the proposed transaction. On this basis the
Commission considers that no dominant position will
be created or strengthened on the markets for seed
treatment of wheat, rye and triticale in the United
Kingdom.

the parties’

(b) Seed treatment for potatoes

(1140)

the
In fungicides for seed treatment of potatoes,
Commission has concluded that the proposed trans-
action as notified would have created or strengthened
a dominant position on the markets in Belgium, France,
Ireland, the Netherlands and the United Kingdom.

(1136) The commitments would eliminate the overlap in Italy
and Sweden. The market test of the remedies has
largely confirmed that this remedy would be sufficient
to eliminate the competition problem created by the
proposed transaction. On this basis the Commission
considers that no dominant position will be created or
strengthened on the markets for seed treatment of
wheat, rye and triticale in Italy and Sweden.

(1137)

In Germany and the United Kingdom, there would be
some remaining overlap from the addition of a very
specific ACS product line (Fluquinconazole straight or
mixed with Prochloraz) to Bayer’s portfolio through
Bayer receiving a co-exclusive license for this product
line. The product line and the use of the brand name
Jockey will, however, be divested with the active
ingredient Fluquinconazole. Jockey is mainly targeted
against a very specific disease, the ‘take-all’ disease, for
which Bayer has no product. In fact, the only direct
competitor to Jockey with respect to the take-all disease
is Monsanto’s Latitude, which recently has been or
soon will be introduced in both Germany and the
United Kingdom.

(1138)

In Germany the addition of this product range to that
of Bayer will, supposedly, add some market share to
Bayer’s existing [20 to 30] %. However, since Jockey
will also be sold by the purchaser of Fluquinconazole
it is unlikely that Bayer will be able to take over all of
Jockey’s existing market share of [10 to 20] %. It
should also be noted that Syngenta sells identical
products (even the same brand names) to Bayer’s
present products and that Monsanto is in the process
of launching Latitude, which is a direct competitor to
Jockey. The parties forecast that sales of Jockey in
Germany will diminish as a result of this competition
([...]). The market test of the remedies has largely
confirmed that this remedy would be sufficient to

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(1141) The remedy affecting these markets is the proposal to
transfer as many as possible of ACS’s third party
distribution agreements to the purchaser of ACS’s seed
treatment business, and discontinue the remaining
third party distribution agreements. This would elimin-
ate the entirely overlap and ensure that there is at least
one possible, viable distributor for these products, that
is the purchaser of ACS’s seed treatment business. [...].
This would also eliminate the overlap entirely.

(1142) The market test of the remedies has largely confirmed
that this remedy would be sufficient to eliminate
the competition problem created by the proposed
transaction. On this basis the Commission considers
that no dominant position will be created or strength-
ened on the markets for seed treatment of potatoes in
Belgium, France,
the Netherlands and the
United Kingdom.

Ireland,

V.6.

PROFESSIONAL PEST CONTROL

(1143)

In order to remove the competition concerns arising
in gel and baits for cockroaches, Bayer has proposed
to divest the whole of ACS’s Fipronil business for
professional pest control. However, Bayer shall be
entitled to replace this commitment by the grant of an
irrevocable, exclusive licence for Europe and the United
States. to manufacture, use and sell Imidacloprid-based
formulations for use as cockroach gels and baits and
as a termiticide. This option can only be proposed in
the event that Bayer finds a viable Purchaser accepted
by the Commission who is willing to acquire its
Imidacloprid business for use as cockroach gels and
baits and as a termiticide professional pest control in
Europe and in the United States.

(1144) The undertaking offered as first option represent the
divestment of the leading product of this market and
creates a strong alternative for customers. The second
option is also acceptable since the appropriateness of
the acquirer is ensured by the Commission’s right of
approval. Moreover, as prerequisite,
the proposed
candidate must also be in conditions to take over the
business in the United States. On this basis the
Commission considers that no dominant position will
be created or strengthened on any of the markets for
gel and baits for cockroaches identified above.

V.7.

SMALL ANIMAL ECTOPARASITICIDES

(1145) Bayer has undertaken to divest existing inventories,
formulations and all intellectual property rights relating
to Fipronil,
in particular patents and trade names,
know how, registration rights and documentation, as
well as the Fipronil production assets in Elbeuf, France.
Bayer has also undertaken to transfer to the purchaser
of the Fipronil business the Fipronil
licensing and
supply agreements and the research agreement for
future products between Merial and ACS SA. Moreover,
Bayer has undertaken to assign to Merial, at no price,
the intellectual property rights for the transformation
of technical grade Fipronil to animal health grade
Fipronil.

(1146) During the transitional period between the acquisition
of ACS by Bayer and the divestment of the Fipronil
business, Bayer has also undertaken a number of
obligations, set out at paragraph 41 of the Annex to
this decision, vis-à-vis Merial aimed at ensuring that
Merial would receive all the supplies of Fipronil
it
needs to produce Frontline and has undertaken to
irrevocably offer to incorporate these obligations into
the Fipronil supply agreement at the request of Merial
before the divestment of the Fipronil business.

(1147) The Commission takes note that, if Merial does not
consent to the assignment of the Fipronil supply
agreement to the purchaser of the Fipronil business,
Bayer undertakes to honour the same obligations vis-
à-vis Merial also after the divestment of the Fipronil
business.

(1148) The undertakings described above will ensure that
Merial will not be subject to Bayer’s strategic behaviour
as regards to the regularity of Fipronil supplies. In fact,
during the transitional period between the acquisition
of ACS by Bayer and the divestment of the Fipronil
the obligations undertaken by Bayer to
business,
guarantee the continuity of Fipronil supplies will
strongly reduce Bayer’s incentives to foreclose Merial
or to discipline Merial’s behaviour by threatening to do
so. On the other hand, after the Fipronil business
has been divested, Bayer would lose the ability and
incentives to engage into a foreclosing behaviour vis-
à-vis Merial, as the latter would be free to source the
input for its main product Frontline from a supplier
independent from Bayer.

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(1149)

In the event that Merial does not consent to the
assignment of the research agreement for future prod-
ucts between Merial and ACS to the purchaser of the
Fipronil business, Bayer has also offered to divest to a
specialised R & D company the relevant parts of ACS’s
research activities dedicated to animal health that are
currently carried out for Merial. [...]. New compounds
to be generated for insecticides screening will derive
(i) from the research company’s own synthesis of
chemical structures potentially useful in crop protec-
tion primarily targeted to insecticides; or (ii) [...], which
for animal health uses will be exclusively licensed to
and reserved for screening in the interest of Merial.
Bayer commits to finance the crop protection-related
research activities carried out by the R & D company
[...].

(1150) During the transitional period between the acquisition
of ACS by Bayer and the transfer of the Fipronil
licensing agreement and the research for future prod-
ucts agreement to the purchaser of the Fipronil busi-
ness, Bayer has undertaken a series of unilateral waivers
and additional obligations to the Fipronil
licensing
agreement and to the research for future products
agreement, set out at paragraph 184 of the Annex to
this decision, and has undertaken to irrevocably offer
to incorporate these waivers and obligations into
these agreements at the request of Merial before the
divestment of the Fipronil business.

(1151) The Commission takes note that, if Merial does not
consent to the assignment of the Fipronil licensing
agreement and of the research for future products
agreement to the purchaser of the Fipronil business,
Bayer undertakes to honour the same waivers and
obligations vis-à-vis Merial also after the divestment of
the Fipronil business.

(1152) As a result of this divestment, the post-merger research
links between Bayer and Merial will be eliminated as
Bayer will not have access to the animal health results
of the crop research activities which the R & D
company will carry out exclusively for Merial, nor will
Merial have access to the results of the crop research
activities of Bayer which are dedicated to its own
animal health business.

(1153) Moreover, the elimination of the research links between
Merial and Bayer will not compromise the capability
of Merial to maintain a competitive position on the
market for adulticide and combination products either
in the short or in the long term. With regard to the
short term, the market investigation has shown that
the position of Merial on the market for adulticides
and combination products is not expected to change

substantially for the next three to five years, and that it
might even improve given to the expected launch of
Frontline Plus on the European market.

(1154)

In the long term, Merial will be able to maintain a
competitive position in this market given to its privi-
leged access to the research activities of the aforemen-
tioned specialised research company and to the
research activities of Merck. Moreover, Merial will
remain free to enter into R & D agreements with
other agrochemical companies, as well as universities,
research institutes or other third parties owning librari-
es of chemical compounds. The market investigation
has shown not only that animal health companies
(such as for instance Pfizer) can be active in the
adulticide and combination product market without
relying on crop science research activities, but also that
there are agrochemical companies which would have
no impediments to enter into R & D agreements with
Merial for the development of innovative adulticides
or combination products based on the results of their
crop research activities.

(1155) Furthermore, in the long term, innovative adulticides
or combination products could also be launched on
the market by animal health companies other than
Bayer and Merial, such as for instance Pfizer and
Novartis (which have shown to have sufficiently strong
R & D capabilities in the SAEs sector) either alone or
in co-operation with agrochemical companies.

(1156)

In the light of the above undertakings, therefore, the
Commission considers that no dominant position will
be created or strengthened on this market.

VI. CONCLUSION

(1157) The Commission has come to the overall conclusion
that the notified concentration, as modified by the
commitments entered into by Bayer, would not create
or strengthen a dominant position on any of the
markets assessed above,

HAS ADOPTED THIS DECISION:

Article 1

The notified operation whereby Bayer would acquire sole
control of Aventis Crop Science Holding SA within the
meaning of Article 3(1)(b) of the Merger Regulation is, as
modified according to the Annex to this Decision, hereby
declared compatible with the common market and the func-
tioning of the EEA Agreement.

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Article 2

except for paragraphs 189, 190 and 224 of the Annex to this
decision which shall apply as conditions pursuant to Article 2.

Article 1 is subject to full compliance with the conditions set
out in paragraphs 35 to 186 of the Annex to this decision,
except that the provisions of paragraph 41 and 184 of the
Annex to this decision shall apply as condition during the
transitional period between the acquisition of ACS by Bayer
and the divestment of the Fipronil business. Article 1 is also
subject to full compliance with the conditions set out in
paragraphs 189, 190 and 224 of the Annex to this Decision.

Article 4

This decision is addressed to:

Bayer AG
D-51386 Leverkusen

Done at Brussels, 17 April 2002.

Article 3

Article 1 is subject to full compliance with the obligations set
out in paragraphs 187 to 241 of the Annex to this Decision,

For the Commission

Mario MONTI

Member of the Commission

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ANNEX

The full original text of the conditions and obligations referred to in Articles 2 and 3 may be consulted on the
following Commission website:

http://europa.eu.int/comm/competition/index–en.html