CELEX: 32018M8851
Language: en
Date: 2018-04-30 00:00:00
Title: Commission Decision of 30/04/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8851 - BASF / BAYER DIVESTMENT BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 30.4.2018
                                                               C(2018) 2747 final
                                                                             PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted
                                                                pursuant to Article 17(2) of Council
                                                                Regulation (EC) No 139/2004 concerning
                                                                non-disclosure of business secrets and other
                                                                confidential information. The omissions are
                                                                shown thus […]. Where possible the
                                                                information omitted has been replaced by
                                                                ranges of figures or a general description.
                                                               To the notifying party
Subject:            Case M.8851 – BASF/Bayer Divestment Business
                    Commission decision pursuant to Article 6(1)(b) in conjunction with
                    Article 6(2) of Council Regulation No 139/20041 and Article 57 of the
                    Agreement on the European Economic Area2
1
        OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty
        on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
        replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology
        of the TFEU will be used throughout this decision.
2
        OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---                                 TABLE OF CONTENTS
1. THE PARTIES ............................................................................................................ 5
2. THE CONCENTRATION .......................................................................................... 6
3. UNION DIMENSION ................................................................................................. 6
4. COMPETITIVE ASSESSMENT ................................................................................ 6
   4.1. Weed management ............................................................................................ 7
        4.1.1.     Introduction ......................................................................................... 7
        4.1.2.     Definition of innovation spaces in NSH .............................................. 8
                   4.1.2.1.        Commission precedents ....................................................... 8
                   4.1.2.2.        Notifying Party's views ....................................................... 9
                   4.1.2.3.        Commission assessment ...................................................... 9
                   4.1.2.4.        Conclusion ........................................................................... 9
        4.1.3.     Activities of the Parties and their competitors..................................... 9
                   4.1.3.1.        BASF's herbicide innovation ............................................... 9
                   4.1.3.2.        The Bayer Divestment Business's herbicide
                                   innovation .......................................................................... 12
                   4.1.3.3.        Competitors' innovation in NSH ....................................... 14
        4.1.4.     Notifying Party's views...................................................................... 15
        4.1.5.     Competitive assessment in NSH innovation ..................................... 16
                   4.1.5.1.        The Transaction would likely reduce innovation
                                   competition between the Parties' overlapping and
                                   close NSH pipeline projects with a [NSH line of
                                   research 1] ......................................................................... 16
                   4.1.5.2.        The Bayer Divestment Business's [NSH line of
                                   research 2] does not overlap with BASF's NSH
                                   innovation efforts............................................................... 22
                   4.1.5.3.        The Bayer Divestment Business's [NSH line of
                                   research 3] does not overlap with BASF's NSH
                                   innovation efforts............................................................... 23
        4.1.6.     Conclusion ......................................................................................... 24
   4.2. Traits ................................................................................................................ 24
        4.2.1.     Introduction ....................................................................................... 24
        4.2.2.     Activities of the Parties ..................................................................... 27
                   4.2.2.1.        BASF ................................................................................. 27
                   4.2.2.2.        Bayer Divestment Business ............................................... 29
                   4.2.2.3.        Overlaps between BASF and Bayer Divestment
                                   Business ............................................................................. 30
                                                               2
 ---pagebreak---      4.2.3.   Market definition ............................................................................... 31
              4.2.3.1.      Product market definition .................................................. 31
              4.2.3.2.      Geographic market definition ............................................ 33
     4.2.4.   Competitive assessment: price/ product competition in HT
              traits ................................................................................................... 34
              4.2.4.1.      Notifying Party's view ....................................................... 34
              4.2.4.2.      Commission assessment .................................................... 34
              4.2.4.3.      Conclusions on price/product competition in HT
                            traits ................................................................................... 37
     4.2.5.   Competitive assessment: innovation competition in GM HT
              traits ................................................................................................... 37
              4.2.5.1.      Notifying Party's view ....................................................... 37
              4.2.5.2.      Commission assessment .................................................... 37
              4.2.5.3.      Conclusions on competition in GM HT trait
                            innovation .......................................................................... 40
     4.2.6.   Competitive assessment: innovation competition in GM DR
              traits ................................................................................................... 40
              4.2.6.1.      Notifying Party's view ....................................................... 40
              4.2.6.2.      Commission assessment .................................................... 41
              4.2.6.3.      Conclusion on innovation competition in GM DR
                            traits ................................................................................... 43
     4.2.7.   Conclusion on traits ........................................................................... 43
4.3. Seed treatment ................................................................................................. 43
     4.3.1.   Introduction ....................................................................................... 43
     4.3.2.   Market definition ............................................................................... 44
              4.3.2.1.      Product Market Definition ................................................. 44
              4.3.2.2.      Geographic market definition ............................................ 46
     4.3.3.   Activities of the Parties ..................................................................... 46
              4.3.3.1.      BASF's activities in seed treatment ................................... 46
              4.3.3.2.      Bayer Divestment Business' activities in seed
                            treatment ............................................................................ 47
     4.3.4.   Competitive assessment in nematicidal seed treatment..................... 48
              4.3.4.1.      Notifying Party arguments ................................................ 48
              4.3.4.2.      Commission assessment .................................................... 48
              4.3.4.3.      Conclusion on nematicidal seed treatment ........................ 52
     4.3.5.   Insecticidal seed treatment................................................................. 52
     4.3.6.   Vertical links between seed treatment (up-stream) and
              (treated) seeds (down-stream) ........................................................... 53
     4.3.7.   Conclusion on seed treatment ............................................................ 53
                                                        3
 ---pagebreak---    4.4. Digital Agriculture........................................................................................... 53
        4.4.1.   Overview of the digital agriculture sector ......................................... 53
        4.4.2.   Activities of the Parties in digital agriculture .................................... 54
                 4.4.2.1.   BASF's activities in digital agriculture .............................. 54
                 4.4.2.2.   The Bayer Digital Agriculture Assets ............................... 57
        4.4.3.   Market definition ............................................................................... 59
                 4.4.3.1.   Product market definition .................................................. 59
                 4.4.3.2.   Geographic market definition ............................................ 60
        4.4.4.   Competitive assessment: Digital agriculture ..................................... 61
                 4.4.4.1.   Notifying Party's views ..................................................... 61
                 4.4.4.2.   Commission assessment .................................................... 61
        4.4.5.   Conclusion on digital agriculture ...................................................... 62
5. PROPOSED REMEDIES.......................................................................................... 62
   5.1. Framework of the assessment of the commitments ......................................... 62
   5.2. Commitments submitted by the Notifying Party ............................................. 63
   5.3. Initial Commitments ........................................................................................ 63
   5.4. The Commission's market test ......................................................................... 64
   5.5. Final Commitments submitted by the Notifying Party.................................... 66
        5.5.1.   Description of the Final Commitments ............................................. 66
        5.5.2.   Assessment of the Final Commitments ............................................. 66
        5.5.3.   Conclusion on the Final Commitments ............................................. 66
6. CONCLUSION ......................................................................................................... 67
                                                       4
 ---pagebreak--- Dear Sir or Madam,
(1)      On 7 March 2018, the European Commission (the 'Commission') received
         notification of a proposed concentration pursuant to Article 4 of the Merger
         Regulation by which BASF SE ('BASF' or the 'Notifying Party', Germany)
         would acquire, within the meaning of Article 3(1)(b) of the Merger Regulation,
         control over parts of Bayer Aktiengesellschaft ('Bayer', Germany)
         (the 'Transaction').3
(2)      The present Transaction takes place as a result of a prior notification to the
         Commission of a proposed concentration between Bayer and Monsanto. By
         decision of 21 March 2018, adopted in application of Article 8(2) of the Merger
         Regulation, the Commission declared that concentration between Bayer and
         Monsanto compatible with the internal market and the EEA Agreement4
         (the 'Bayer/Monsanto decision'), subject to full compliance with the
         commitments annexed to that decision (the 'Bayer/Monsanto Commitments').
         Pursuant to the Bayer/Monsanto Commitments, Bayer committed to divest
         certain assets.
(3)      On 9 April 2018,5 following a modification of the Bayer/Monsanto
         Commitments, BASF notified to the Commission a modification of the scope of
         the Transaction. The modification6 of the scope of the Transaction consists in:
         (a)    The acquisition of Bayer's Poncho, VOTiVO, Poncho/VOTiVO,
                VOTiVO/RedigoM, COPeO, and ILeVO nematicidal seed treatment
                businesses (the 'Seed Treatment Assets') instead of Monsanto's
                NemaStrike nematicide business; and
         (b)    The acquisition of Bayer's digital agriculture business worldwide
                (the 'Digital Agriculture Assets') instead of the granting to BASF of a
                binding, perpetual, irrevocable and sole worldwide licence to Bayer's
                current and pipeline digital agriculture products.
(4)      The scope of the Transaction is defined in the asset purchase agreements,
         entered into between Bayer and BASF on 13 October 2017 (the 'APAs'), as
         subsequently amended by the non-binding term sheet of 16 February 2018 and
         by the letter of intent dated 5 March 2018. The assets and personnel included in
         the revised scope of the Transaction are referred to in this Decision as the 'Bayer
         Divestment Business'. BASF and the Bayer Divestment Business are referred to
         together as the 'Parties'.
1.       THE PARTIES
(5)      BASF is active worldwide in a range of businesses organised in five segments:
         chemicals (e.g. petrochemicals and intermediates), performance products
         (e.g. dispersion and pigments), functional materials and solutions
3
     Publication in the Official Journal of the European Union No C 96, 14.3.2018, p. 34.
4
     Commission Decision in Case M.8084 – Bayer/Monsanto (2018).
5
     BASF's submission pursuant to Article 5(3) of Commission Regulation (EC) No 802/2004
     ('BASF 5(3) Submission').
6
     The Commission approved Bayer's request to modify the commitments on 11 April 2018.
                                                       5
 ---pagebreak---      (e.g. construction chemicals and coatings), oil & gas, and agricultural solutions.
     In the pesticides sector, BASF offers fungicides, insecticides, and herbicides as
     well as seed treatment products. Moreover, BASF is active in the discovery of
     genes that can be used to develop genetically modified ('GM') crops.
(6)  The Bayer Divestment Business consists of assets and personnel relating to
     Bayer's: (i) global broad acre crop seeds and traits business; (ii) global
     glufosinate ammonium ('GA') business; (iii) EEA agricultural and
     non-agricultural glyphosate business; (iv) non-selective herbicide ('NSH') lines
     of research relating to [NSH line of research 2]; [NSH line of research 3], and
     [NSH line of research 1]; (v) Seed Treatment Assets; (vi) Digital Agriculture
     Assets; and (vi) global vegetable seeds business.
2.   THE CONCENTRATION
(7)  Through the Transaction, BASF would acquire sole control over the Bayer
     Divestment Business within the meaning of Article 3(1)(b) of the Merger
     Regulation by way of purchase of assets.
3.   UNION DIMENSION
(8)  The undertakings concerned have a combined aggregate world-wide turnover of
     more than EUR 2 500 million [BASF: EUR 64.5 billion; the Bayer Divestment
     Business: EUR […]]. Moreover, the undertakings concerned have a combined
     aggregate turnover in excess of EUR 100 million in three Member States and
     have a turnover in excess of EUR 25 million in these three Member States [[…]
     – BASF: EUR […], the Bayer Divestment Business: EUR […]; […] – BASF:
     EUR […], the Bayer Divestment Business: EUR […]; […] – BASF: EUR […],
     the Bayer Divestment Business: EUR […]]. The undertakings concerned do not
     achieve more than two-thirds of their aggregate Union-wide turnover within one
     and the same Member State. The notified operation therefore has an Union
     dimension pursuant to Article 1(3) of the Merger Regulation.
4.   COMPETITIVE ASSESSMENT
(9)  The Commission considers below the competitive effects of the Transaction in
     the areas in which the Parties at least partially overlap: (i) weed management (in
     particular NSH innovation), (ii) traits, in particular herbicide tolerance trait
     innovation and disease resistance trait innovation, (iii) nematicidal seed
     treatment; and (iv) digital agriculture. There is no horizontal overlap between
     the Parties as regards broad acre crop seeds, glufosinate, glyphosate and
     vegetable seeds. There is also no vertical link giving rise to affected markets
     between those activities and the activities discussed in this Decision. These non-
     overlapping activities are, therefore, not further discussed in this Decision.
(10) The Commission assesses below the likelihood that serious doubts arise
     regarding the compatibility of the Transaction with the internal market and
     the EEA Agreement, in relation to current and potential competition as well as
     to innovation competition.
                                              6
 ---pagebreak--- (11)      As set out in Dow/DuPont and Bayer/Monsanto7 and further detailed in
          Section 4.1.5.1, when considering the likely impact of transactions on
          innovation competition the Commission takes into account in particular the
          closeness and importance of the Parties' respective innovation efforts, and
          assesses the corresponding likelihood that at least part of these efforts would be
          discontinued, delayed or reoriented as a result of the Transaction.
4.1.      Weed management
4.1.1.    Introduction
(12)      The Parties do not overlap in the EEA regarding their current activities in NSH
          and selective herbicides, BASF having no NSH sales and the Bayer Divestment
          Business having no selective herbicide sales in the EEA. The Parties also do not
          overlap regarding innovation relative to selective herbicides, the Bayer
          Divestment Business having no selective herbicide research. Finally, the Parties
          do not overlap regarding weed management systems, since BASF is not a weed
          management system player.8 Accordingly, the Commission only assesses the
          Parties' activities in innovation relating to NSH.
(13)      NSH are products that have a broad spectrum of action and kill both grasses and
          broadleaf weeds. In particular, and contrary to selective herbicides, they can
          harm or even kill the crops on which they are used. NSH have four main
          agricultural uses: (i) so-called 'burndown' pre- or post-season to clear a field of
          all vegetation (including volunteer crops), (ii) so-called 'over-the-top' or 'OTT'
          use, in combination with herbicide-tolerant crops to clear fields of weeds during
          the planting season, (iii) as a pre-harvest desiccating treatment, accelerating and
          evening the ripening process, and (iv) so-called 'trees, nuts and vines' or 'TNV'
          uses to kill weeds around resistant crops such as fruit trees. Use of NSH is more
          limited in the EEA than globally, largely because of stricter regulation in terms
          of both authorised doses and uses.
(14)      From a global perspective, there are currently four key NSH molecules or active
          ingredients ('AI's): glyphosate, glufosinate ammonium ('glufosinate' or 'GA'),
          diquat and paraquat. While all four molecules can be characterised as NSH, they
          may differ in terms of mode of action ('MoA') and spectrum, and suitability for
          given uses. NSH are under regulatory pressure globally, in particular in the
          EEA, where paraquat is no longer approved and uses of the other three AIs have
          been already restricted (for instance, glufosinate).
(15)      Since new MoAs have not been introduced to the herbicide market in several
          decades, managing growing resistance to existing MoAs is of paramount
          importance. The issue is particularly acute in NSH because of the widespread
          use of glyphosate over glyphosate-tolerant crops, which has led to the
          development of resistant weed populations. In practice, many AIs can typically
          only be used once or, at most, twice per crop cycle, and sometimes entire MoAs
          are limited to one or two uses per crop cycle.
7
       See Commission Decision in Cases M.7932 – Dow/DuPont (2017) and M.8084 – Bayer/Monsanto
       (2018).
8
       Form CO, chapters 6B.1 and 6B.2. See also Commission Decision in Case M.8084 –
       Bayer/Monsanto (2018), Section XI.1.
                                                    7
 ---pagebreak--- (16)      Because of the two main constraints – resistance management and a limited
          number of windows for treatment – growers need to develop spray programmes
          to fully address their weed control needs. To facilitate this process, commercial
          products are increasingly mixtures of several AIs with different MoAs. Such
          mixtures allow to limit resistance development and to broaden spectrum in order
          to solve as many weed problems as possible in the few available treatment
          opportunities. Another way to limit resistance is to rotate AIs – in particular
          different MoAs and chemical classes.9
4.1.2.    Definition of innovation spaces in NSH
4.1.2.1. Commission precedents
(17)      In Dow/DuPont and Bayer/Monsanto, the Commission considered that
          innovation should not be understood as a market in its own right, but as an input
          activity for downstream product markets. While innovation eventually results in
          products competing on those markets, the assessment of innovation competition
          cannot be directly conflated with the relevant downstream product markets.
(18)      The assessment of the effects on innovation competition of a merger in the crop
          protection industry such as the present one requires the identification and
          analysis of those spaces in which innovation competition occurs, so as to assess
          whether the Transaction would significantly impede innovation competition in
          such spaces.
(19)      Indeed, R&D players such as the Parties do not innovate for all the product
          markets composing the entire crop protection industry at the same time. They do
          not innovate randomly either, but targeting specific spaces within that industry.
          When setting up their innovation capabilities and conducting their research, they
          target specific innovation spaces which are upstream of lucrative product
          markets and product markets which are of strategic interest for the R&D player
          in question. In order to assess innovation competition, it is thus important to
          consider the spaces in which this innovation competition occurs.
(20)      In Bayer/Monsanto,10 the Commission considered that innovation spaces for
          NSH are burndown and over-the-top uses across crops, as well as weed
          management in perennial crops (TNV). It also considered that, when looking at
          innovation spaces for NSH, innovators attempt to discover and develop
          molecules that would be suited for as many areas as possible, and usually at
          least for burndown and over-the-top uses. Therefore, when assessing the parties'
          innovation efforts, the Commission focused on their efforts for NSH overall and
          only further discussed the specific impact on individual NSH uses (burndown,
          over-the-top uses across crops and weed management in perennial crops - TNV)
          as appropriate.
(21)      The Commission further took the view that innovation spaces for NSH are
          global, because innovation efforts are rolled-out in all possible geographies
          across the globe.
9
       See Commission Decision in Case M.7932 – Dow/DuPont (2017), Section V.6.6.1.6.
10
       See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.1.
                                                   8
 ---pagebreak--- 4.1.2.2. Notifying Party's views
(22)      In its submissions, the Notifying Party did not specifically address the question
          of the definition of innovation spaces or more generally the appropriate
          framework to assess innovation competition.
4.1.2.3. Commission assessment
(23)      In the absence of any new facts or arguments brought by the Parties or resulting
          from the Commission's investigation, the Commission confirms the conclusions
          reached in Bayer/Monsanto.11
(24)      The Commission thus takes the view that innovation spaces for NSH are
          burndown and over-the-top uses across crops, as well as weed management in
          perennial crops (TNV). It must be noted, however, that when looking at
          innovation spaces for NSH, innovators attempt to discover and develop
          molecules that would be suited for as many areas as possible, and usually at
          least for burndown and over-the-top uses. Therefore, when assessing the Parties'
          innovation efforts, the Commission will focus on their efforts for NSH overall
          and will only further discuss the specific impact on individual NSH uses
          (burndown, over-the-top uses across crops and weed management in perennial
          crops - TNV), as appropriate.
(25)      The Commission further takes the view that innovation spaces for NSH are
          global, because innovation efforts are rolled-out in all possible geographies
          across the globe.
4.1.2.4. Conclusion
(26)      In light of its precedents and taking into account the results of its investigation,
          the Commission considers that the relevant spaces to assess NSH innovation are
          the ones including R&D investment and activities targeting the development of
          NSH products, either as a whole or for specific NSH uses such as conventional
          use in perennial crops (TNV), burndown and over-the-top uses across crops,
          globally.
4.1.3.    Activities of the Parties and their competitors
4.1.3.1. BASF's herbicide innovation12
(27)      BASF has several herbicide pipeline projects. Those projects relate to the
          following molecules or chemical classes: trifludimoxazin (a protoporphyrinogen
          oxidase inhibitor or '[mode of action 1]'-inhibitor), [NSH line of research 1],
          [NSH line of research 3], [herbicide line of research 4] and cinmethylin (a Fat-A
          inhibitor). Aside from cinmethylin (for which only selective uses in cereals and
          rice are being developed), these chemistries are – depending on the specific
          chemistry – being developed for […]. The following paragraphs detail each
          project.
11
       See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.1.
12
       Form CO, chapter 6B.1, paragraphs 425-426.
                                                   9
 ---pagebreak--- (28)      [NSH line of research 1]. BASF has […] pipeline projects.
(29)      On the one hand, BASF has trifludimoxazin […], a residual broad spectrum
          herbicide with strength on broadleaf weeds and [mode of action 1]-resistance-
          breaking activity currently in Phase 3 (development). Registration activities are
          ongoing, with planned dossier submission in the first semester of 2018
          (excluding the EEA and Brazil). Trifludimoxazin is not intended to be registered
          or launched in the EEA. Target applications globally are burndown, TNV and
          OTT use with herbicide tolerance ('HT') traits across multiple crops both pre-
          emergence and post-emergence.
(30)      The combination of trifludimoxazin with BASF's currently commercialised
          saflufenacil [mode of action 1] chemistry (sold under the Kixor brand, only
          outside the EEA) provides broad spectrum weed control and control of [mode of
          action 1]-resistant weeds. In particular, the combination of [trifludimoxazin]
          with Kixor will offer growers (i) a burndown option for warm season crops, and
          (ii) a herbicide for OTT use – in combination with an HT trait – in several crops,
          including soybean, cotton and corn, giving growers a new resistance-breaking
          option.
(31)      On the other hand, BASF has [NSH line of research 1].
Figure 1 – BASF's [NSH line of research 1] project (1)
[…]
Source:   BASF's response to the Commission's request for information RFI Q32, Annex Q.16.6, page 2.
Figure 2 – BASF's [NSH line of research 1] project (2)
[…]
Source:   BASF's response to the Commission's request for information RFI Q32, Annex Q.16.6, page 4.
(32)      [NSH line of research 3].13 […].14
(33)      [Herbicide line of research 4].15
(34)      Cinmethylin. BASF's pipeline project relating to the cineole class of chemistry
          ([cinmethylin]) is in late-stage development (Phase 3), and its registration
          application is expected to be submitted in the second quarter of 2018.
          [Cinmethylin] is a selective pre-emergence herbicide for cereals and rice. It is in
          particular not intended for OTT use in combination with an HT trait, or for
          burndown or TNV uses.
13
      [NSH line of research 3] are [mode of action 3] from a novel chemical class, which show promising
      efficacy across a large spectrum of weeds – notably weeds resistant to glyphosate and broadleaf
      weeds.
14
      […].
15
      See for instance BASF's response to the Commission's request for information RFI 10, including
      Annex Q.4.3. […].
                                                       10
 ---pagebreak---  ---pagebreak--- 4.1.3.2. The Bayer Divestment Business's herbicide innovation16
(36)     The Bayer Divestment Business includes data and know-how gathered by Bayer
         from laboratory and field trials relating to all non-selective uses conducted on
         certain classes of chemistry (but not data or know-how relating to selective uses,
         which Bayer retains), as well as information on the structure and samples of the
         relevant molecules. The three relevant chemical classes are: [NSH line of
         research 2], [NSH line of research 1] and [NSH line of research 3]. The Bayer
         Divestment Business also includes exclusive licences to Bayer's intellectual
         property rights relating to these chemical classes for non-selective uses (which
         are (i) the control of unwanted vegetation in permanent crops and plantation
         crops, such as trees, nuts and vines; (ii) burndown; and (iii) over-the-top use
         over HT field crops), as well as lead scientists working on these lines of research
         (in accordance with local labour law).
(37)     The Bayer Divestment Business's NSH lines of research target […], as detailed
         in the following paragraphs. In view of the early stage of the Bayer Divestment
         Business's pipeline projects, planned peak sales as well as specific target
         geographic markets are not yet available.
(38)     [NSH line of research 1]. The Bayer Divestment Business is researching [NSH
         line of research 1] system of herbicide tolerant crops. As shown in Figure 3 to
         Figure 6, the latest available pipeline information confirms that the project
         shows promising efficacy and resistance-breaking properties (in regard both to
         older [NSH line of research 1] and to glyphosate). It is being actively pursued,
         with promotion to phase […] planned for […] and market launch for […]. This
         research began at the end of 2016 and the Bayer Divestment Business already
         promoted the first molecule from this class – […] – to field testing in 2017.
         Meanwhile, […] further candidate molecules have been identified and will be
         tested in the 2018 field season in comparison to […].
Figure 3 – The Bayer Divestment Business's [ NSH line of research 1] project (1)
[…]
Source:  BI 33681 ''2017-12-15 WM_RPC_Annual Portfolio Review'', page 88 [highlighting added].
Figure 4 – The Bayer Divestment Business's [ NSH line of research 1] project (2)
[…]
Source:  BI 33681 ''2017-12-15 WM_RPC_Annual Portfolio Review'', page 94 [highlighting added].
Figure 5 – The Bayer Divestment Business's [NSH line of research 1]) information
package (1)
[…]
Source:  Bayer's internal document ''[NSH line of research 1] Information Package'', page 11.
16
      Form CO, chapter 6B.1, paragraphs 432-433.
                                                      12
 ---pagebreak---  ---pagebreak---  ---pagebreak--- Figure 11 – Weed management competitor patent activity
[…]
Source: BI 33681 ''2017-12-15 WM_RPC_Annual Portfolio Review'', page 13 [highlighting added].
Figure 12 – Weed control pipeline landscape (BASF view) (1)
[…]
Source: BASF's response to the Commission's request for information RFI 11, Annex Q.2.2., page 79.
Figure 13 – Weed control pipeline landscape (BASF view) (2)
[…]
Source: BASF's response to the Commission's request for information RFI 11, Annex Q.2.2., page 80.
(48)    […], as detailed in Section 4.1.5.1.
4.1.4.  Notifying Party's views
(49)    In the Form CO, the Notifying Party in essence argued that:
        (a)   BASF does not manufacture or sell NSH in the EEA and there are thus no
              overlaps between the Parties there;
        (b)   BASF's pipeline chemistries are not substitutes for the Bayer Divestment
              Business's current products and lines of research since BASF's projects
              […];
        (c)   BASF would in any event have every incentive to pursue its own NSH
              lines of research in view of (i) glufosinate's uncertain future in the EEA,
              (ii) resistance management and (iii) higher margins on novel patent-
              protected AIs compared with off-patent AIs;
        (d)   the Bayer Divestment Business's [NSH line of research 2] and [NSH line
              of research 1] do not overlap with BASF's existing chemistry, […], and
              BASF would therefore have full incentives to pursue the Bayer
              Divestment Business's lines of research;
        (e)   there is no overlap between BASF's [NSH line of research 3] and
              [herbicide line of research 4] and the Bayer Divestment Business's [NSH
              line of research 3] and [NSH line of research 2], and therefore no scope
              for concerns in that regard;
        (f)   there is likely no overlap between the Parties' respective [NSH line of
              research 1], […], and therefore no scope for concerns in that regard,
              especially given BASF's strong incentives to pursue both [NSH line of
              research 1] as possible complements and in view of the high attrition rate
              of research projects at such early research stages; and
                                                   15
 ---pagebreak---            (g)    there is a high degree of uncertainty regarding the successful outcome,
                  final technical characteristics and commercial prospects of the Parties'
                  herbicide lines of research since they are still in discovery.17
4.1.5.     Competitive assessment in NSH innovation
(50)       Currently, both Parties have R&D efforts in NSH, as detailed in Section 4.1.3.
(51)       The Parties claimed that there would be no overlap or at least sufficient scope
           for differentiation between the Parties' respective lines of research, notably in
           view of different technical profiles (weed spectrum, selectivity, residuality,
           toxicology, resistance-breaking ability, global registrability, target crops and
           uses, etc.) and timing.18 BASF would thus have every incentive to fully pursue
           the Bayer Divestment Business's NSH lines of research in parallel with its own
           lines of research.
(52)       In particular, […]. By contrast, […].19
(53)       Moreover, the Parties also claimed that a large number of competing innovators
           for NSH – including [NSH line of research 1] – would in any event continue to
           constrain the Parties.20
(54)       However, the Commission considers in light of its investigation and the
           available information that the Transaction would raise serious doubts as to its
           compatibility with the internal market and the EEA Agreement in view of a
           possible overlap between the Parties' respective lines of research for the
           development of NSH with a [NSH line of research 1] mode of action. The likely
           effects of the Transaction on innovation for NSH (i) with a [NSH line of
           research 1] mode of action, (ii) based on the [NSH line of research 2] chemistry
           and (iii) based on the [NSH line of research 3] chemistry are assessed separately
           below.
4.1.5.1. The Transaction would likely reduce innovation competition between the
           Parties' overlapping and close NSH pipeline projects with a [NSH line of
           research 1]
                      The Parties have overlapping and close NSH lines of research based on
                      the [NSH line of research 1] MoA
(55)       In spite of the Parties' arguments to the contrary, it is apparent from the
           description of the Parties' R&D efforts in NSH innovation in Section 4.1.3 that
           their respective [NSH line of research 1] projects overlap.
(56)       The Commission's investigation indicates that the Transaction would create an
           overlap likely giving rise to innovation competition concerns because (i) the
17
       Form CO, chapter 6B.1, paragraphs 421, 440, 442 and 449-457. See also the Parties' Memorandum
       on [NSH line of research 1], 21 March 2018.
18
       Form CO, chapter 6B.1, paragraphs 452-457. See also the Parties' Memorandum on [NSH line of
       research 1], 21 March 2018.
19
       Form CO, chapter 6B.1, paragraph 454. The Commission notes that 'total herbicides' is a way for
       BASF to refer to NSH (see Form CO, chapter 6B.1, paragraph 396, second bullet).
20
       Parties' Memorandum on [NSH line of research 1], 21 March 2018, Section 5.
                                                     16
 ---pagebreak---           Parties' respective [NSH line of research 1] pipeline projects appear to be both
          targeting the same uses ([…]), (ii) the Parties' respective [NSH lines of
          research 1] appear to be from the same chemical class and have similar technical
          profiles, and (iii) there is likely only one other competing [NSH line of
          research 1] molecule ([…]) with the potential of having a global reach.
(57)      This conclusion is consistent with the findings in Bayer/Monsanto that the
          combination of […] of the […] existing [NSH lines of research 1] ([…]) would
          likely lead to a significant impediment to effective competition because of
          (i) their close technical characteristics as well as target uses and (ii) similar
          timing for use over HT crops.21
(58)      Indeed, BASF's own assessment of existing [NSH line of research 1] research
          projects suggests that BASF's […] and the Bayer Divestment Business's [NSH
          line of research 1] are as close to one another as […] and the Bayer Divestment
          Business's [NSH line of research 1] in terms of technical characteristics, target
          uses and timing for use over HT crops. This is notably so because BASF's […]
          project is closely derived from the […] molecule, which is for instance
          illustrated in Figure 15.
(59)      Figure 14 and Figure 15, extracted from a BASF presentation to the
          Commission, illustrate the technical closeness of BASF's […] [NSH line of
          research 1] candidate, […].
Figure 14 – Excerpts from BASF's presentation to the case team on
14 March 2018 (1)
[…]
Source:   BASF's presentation to the Commission on 14 March 2018 'New [NSH line of research 1],
          page 7.
Figure 15 – Excerpts from BASF's presentation to the case team on
14 March 2018 (2)
[…]
Source:   BASF's presentation to the Commission on 14 March 2018 'Overview of [NSH line of
          research 1] chemistries'.
(60)      These elements confirm the Commission's view that BASF's […] and the Bayer
          Divestment Business's [NSH line of research 1] project are from the same
          chemical class and have similar technical characteristics.22
(61)      Similarly, the Commission's view that the Parties' respective [NSH line of
          research 1] projects overlap in terms of at least some of their target uses is
          confirmed by their respective descriptions in Section 4.1.3.
(62)      In sum, the Commission considers that the Parties currently have overlapping
          and close NSH pipeline projects with a [NSH line of research 1] MoA.
21
      See the Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.
22
      See also the Parties' Memorandum on [NSH line of research 1], 21 March 2018, paragraphs 3.6
      to 3.8.
                                                   17
 ---pagebreak---                   The Transaction would likely reduce innovation competition in NSH
                  with a [NSH line of research 1] MoA
(63)    Paragraph 38 of the Horizontal Merger Guidelines provides that 'effective
        competition may be significantly impeded by a merger between two important
        innovators, for instance between two companies with 'pipeline' products related
        to a specific product market'.
(64)    This can be the case if the pipeline product (or line of research) of one of the
        merging parties was likely to capture significant revenues from the actual or
        potential competing product of the other merging party (be it another pipeline
        product – or line of research – or products currently marketed). This adverse
        externality is internalised post-merger – from the perspective of each innovator,
        the expected loss of profits on the products of the other merging firm adds to the
        opportunity cost of innovating – making it more likely that post-Transaction a
        pipeline product (or line of research) is discontinued, deferred or redirected
        (particularly in the presence of significant development and commercialisation
        costs as is the case in crop protection).
(65)    Consumers may also ultimately be harmed in this case by both the loss of
        product quality and variety and the reduced intensity of future product market
        competition in the markets where the discontinued/deferred/redirected pipeline
        product(s) would potentially have been introduced but for the Transaction. This
        effect applies both in the short-term, notably in relation to existing pipeline
        products and current lines of research, and over time, in relation to future R&D
        efforts.
(66)    As explained in Section 4.1.5.1.A, in this case the Commission considers that
        the Parties currently have overlapping and close NSH pipeline projects with a
        [NSH line of research 1] MoA. In particular, BASF's […] and Bayer's [NSH line
        of research 1] target – at least partly – the same uses ([…]). They also appear to
        be from the same chemical class and have similar technical profiles ([…]).
(67)    The products resulting from these respective [NSH lines of research 1] are
        therefore likely to cannibalise each other's future NSH sales, thereby reducing
        the incentives for the merged entity to continue post-Transaction with both of
        the Parties' [NSH lines of research 1] with the same intensity as each of the
        Parties would have in the absence of the Transaction.
(68)    Accordingly, the Commission considers it likely that the merged entity would
        discontinue, delay or reorient one or both of the Parties' respective [NSH lines of
        research 1] post-Transaction.
(69)    In alleging that […] and the [NSH line of research 1] project would potentially
        be sufficiently differentiated (in terms of resistance-breaking activity, global
        registrability and launch timing) to provide a clear incentive for the merged
        entity to fully pursue both projects post-Transaction23 – the Parties explained
        that 'BASF would have a clear incentive to develop the Bayer [NSH line of
        research 1] Project […] so as to complement the [NSH line of research 1]
        projects it is currently pursuing' and that the [NSH line of research 1] 'would be
23
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, Section 3.
                                                   18
 ---pagebreak---         a useful and most welcome supplement to the BASF [NSH line of research 1]
        portfolio' (emphasis added in both cases).24
(70)    The Parties argued that these statements and their supporting evidence show that
        […] and the [NSH line of research 1] project are sufficiently differentiated pre-
        Transaction to justify their continued full development post-Transaction in a
        way similar to what the Parties would separately have done in the absence of the
        Transaction: 'BASF would have a clear incentive to develop it […] and this
        incentive would be no different to Bayer's incentive to develop the product,
        absent the Bayer/Monsanto deal' (emphasis added).25
(71)    However, on the contrary, the Commission considers that these statements in
        fact suggest that the merged entity would post-Transaction not have the same
        incentive to develop both projects as they would have been pre-Transaction.
        Indeed, these statements suggest that the merged entity would likely orient the
        two lines of research to be complements rather than (at least partial) substitutes,
        which they likely would have been if left in the respective hands of two
        independent players absent the Transaction.
(72)    In any event, even the Parties acknowledged that this alleged incentive to fully
        pursue both projects would be particularly present "if the new [NSH line of
        research 1] has some combination of differentiated chemistry, resistance-
        breaking properties and/or global registrability", which at this stage is not
        confirmed on the basis of the latest available data on both […] and the [NSH
        line of research 1] project.26
(73)    The Parties further argued that this case would be materially different from
        Bayer/Monsanto in view of (i) the absence of any collaboration creating
        uncertainty as to BASF's ability to pursue [NSH line of research 1]; and (ii) the
        absence of any synergy plans regarding NSH innovation, by contrast with the
        evidence relied upon in Bayer/Monsanto.27
(74)    The Commission notes regarding the first point that the described uncertainty
        was only a subsidiary consideration – specifically related to the identified risks
        regarding the collaboration between Monsanto and Sumitomo on the [NSH line
        of research 1] – in its concerns relating to NSH innovation in Bayer/Monsanto.
(75)    Regarding the second point, the Commission notes that BASF only very
        recently decided to acquire the Bayer Divestment Business, in particular the
        [NSH line of research 1]. It is therefore unsurprising that BASF would not have
        drafted synergy plans in the ordinary course of business, as it would at this stage
        likely not have had sufficient time to prepare such plans.
(76)    Nevertheless, the Commission considers it likely that BASF – once the
        acquisition would be consumed – would proceed with testing to profile the
        [NSH line of research 1] project. Such profiling would likely confirm the
        Commission's view in the present Decision – based on the latest available
24
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, paragraphs 3.9 and 3.20.
25
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, paragraph 3.13.
26
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, paragraph 4.4.
27
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, paragraph 5.4.
                                                   19
 ---pagebreak---        information from Bayer – on the existence of an overlap, with the corresponding
       effect on the merged entity's incentives to fully pursue or instead
       reorient/delay/discontinue at least one of the projects post-Transaction.
(77)   This conclusion is fully in line with the Commission's concern that, post-
       Transaction, the [NSH line of research 1] and [NSH line of research 1] projects
       would no longer compete head-to-head, but likely be reoriented and optimised
       as complementary elements of a single portfolio, and one project could possibly
       even be fully discontinued.
(78)   Furthermore, respondents to the market investigation confirmed that a crop
       protection player such as BASF would likely not develop two NSH projects if
       they are technically very similar as is the case at stake, possibly irrespective of a
       significant difference in timing (which in any event does not arise in the present
       case):28 '[i]f market, size and registerability are similar, a crop protection
       company should select one product enough. Even if there is big gap in its launch
       timing, similar chemical may bring similar resistance problem'; 'our opinion is
       that one of the two similar products would be eliminated. This is because the
       cost of bringing to market a new Active Ingredient is extremely high (+$100M),
       for obvious reasons of cost savings, synergies and avoid 'cannibalism': if there
       were two very similar products, only one would be commercialized'; 'one of the
       two projects would likely fall by the wayside. Such outcome is likely regardless
       of timing between the two projects'.29
(79)   Some respondents also suggested that this could similarly be the case even
       where two NSH projects are technically dissimilar if they are aligned on timing,
       in view of the limited availability of R&D funds:30 '[g]enerally, if two NSH
       pipeline projects are different in terms of technical characteristics, SC believes
       that a difference in timing between the two projects would affect the likelihood
       of them being conducted in parallel. This is principally because the different
       timelines would allow the company in question to allocate funds and human
       resources more efficiently between the two projects'.31
(80)   Based on the above, the Commission considers that serious doubts arise
       regarding the compatibility of the Transaction with the internal market and
       the EEA Agreement in relation to NSH [NSH line of research 1] research.
                  There is only a limited constraint from innovation efforts of competing
                  players in view of high barriers to entry
(81)   In Bayer/Monsanto, the Commission explained the differentiated innovation
       capabilities and incentives by category of crop protection players. In essence, it
       concluded that only global R&D-integrated crop protection players have full
       innovation capabilities, notably in view of the high barriers to entry in crop
       protection innovation. Other players have more limited capabilities, focused on
28
     Questionnaire to Competitors (Q1), questions G.2 and G.2.1.
29
     Questionnaire to Competitors (Q1), ID217, ID235 and ID272, question G.2.1.
30
     Questionnaire to Competitors (Q1), questions G.3 and G.3.1.
31
     Questionnaire to Competitors (Q1), ID217, question G.3.1.
                                                    20
 ---pagebreak---         discovery, development or pure generic competition, typically with a more
        limited ability to register and market products globally.32
(82)    The Commission further explained in Bayer/Monsanto that only players which
        are active both in crop protection and in traits and seeds have full incentives to
        develop NSH lines of research for all possible uses in view of their ability to
        fully monetise such lines of research across all uses, including OTT use over HT
        crops (regarding both NSH and trait revenues).33
(83)    Accordingly, the potential competitive constraint which a given player could
        constitute for the Parties in NSH innovation would to a large extent depend on
        these differentiated capabilities and incentives. In particular, strong potential
        competitive constraints could likely only be exercised by other global R&D-
        integrated crop protection and seed players (Bayer-Monsanto, DowDuPont and
        ChemChina-Syngenta). Other players could only constitute a more limited
        competitive constraint, likely unable to compensate the reduction of competition
        resulting from the Transaction.
(84)    Moreover, the Parties closely monitor competitors' pipelines and patent activity,
        and test molecules patented by competitors to assess targets and efficacy. They
        gather this information through various sources such as investor presentations
        and patent applications from other crop protection companies. On that basis, the
        Parties have a good understanding of their competitors' pipelines, which allows
        them to reliably project future sales and determine the current value of their own
        pipeline projects vis-à-vis competing projects.
(85)    In this case, the Parties' own internal competitive intelligence confirmed that
        competing R&D activity in NSH is limited, especially in the [NSH line of
        research 1] MoA. In particular, Figure 10 to Figure 13, describing the Parties'
        latest view of the industry weed management pipeline and Bayer's latest view of
        industry weed management patent activity, confirm that there are very few, if
        any, NSH projects in the industry, especially with a [NSH line of research 1]
        MoA, since most of the presented projects are selective herbicides.
(86)    The Parties contested this finding, in essence arguing that several other players
        are active in NSH innovation, including in the [NSH line of research 1] MoA.34
        Similar arguments were already raised by Bayer and Monsanto in
        Bayer/Monsanto and assessed by the Commission.35 However, BASF did not
        provide any new arguments or evidence supporting such alleged competition.
        Notably, BASF is ultimately unable to identify more than one specific NSH
        project from strong and independent competing global players.
32
     See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4. See also the
     Commission Decision in Case M.7932 – Dow/DuPont (2017), Sections V.1.5, V.8.3.3 and V.8.6.
33
     See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.
34
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, Section 5. Similar arguments
     were already raised by the Parties in Bayer/Monsanto (see Commission Decision in Case M.8084 –
     Bayer/Monsanto (2018), Section XI.1.4.).
35
     Parties' Memorandum on [NSH line of research 1], 21 March 2018, Section 5. Similar arguments
     were already raised by the Parties in Bayer/Monsanto (see Commission Decision in Case M.8084 –
     Bayer/Monsanto (2018), Section XI.1.4.).
                                                    21
 ---pagebreak--- (87)     Indeed, as already explained in Bayer/Monsanto and further illustrated in Figure
         16, the specific examples of competing ([NSH line of research 1]) NSH projects
         appear to be limited to […]. The additional patenting activities from other
         players are not specifically related to any NSH project.36
Figure 16 – BASF's view of additional [NSH line of research 1] candidate molecules
[…]
Source:  BASF's response to the Commission's request for information RFI Q32, Annex Q.16.4, page 54.
(88)     […] constitutes a limited competitive constraint on global R&D-integrated
         players such as Bayer and BASF in view of its limited development, registration
         and access to market capabilities globally.37
(89)     In addition, […].38 […].
(90)     Similarly, […]. This conclusion is consistent with the Commission's assessment
         in Bayer/Monsanto that the relevant global players for [NSH line of research 1]
         NSH innovation are likely limited to Bayer, […] and BASF.39
(91)     Overall, the […] projects would thus constitute a limited competitive constraint
         likely unable to compensate the likely reduction of innovation competition
         which would result from the Transaction.
(92)     In sum, from all the available information, the Commission understands that
         very few, if any, other players in the industry have NSH as an R&D target or
         pursue specific projects targeting NSH innovation spaces, especially with
         a [NSH line of research 1] MoA.
(93)     In any event, no element on the file would contradict the Commission's
         conclusion that serious doubts arise regarding the compatibility of the
         Transaction with the internal market and the EEA Agreement in relation to NSH
         [NSH line of research 1] research.
                    Conclusion
(94)     For the reasons set out above and on the basis of the data made available during
         the investigation, the Commission therefore considers that the Transaction raises
         serious doubts regarding its compatibility with the internal market and the EEA
         Agreement by eliminating an important and close competitive constraint in
         relation to NSH innovation based on the [NSH line of research 1] MoA.
4.1.5.2. The Bayer Divestment Business's [NSH line of research 2] does not overlap
         with BASF's NSH innovation efforts
(95)     In the absence of any research activities by BASF in [NSH line of research 2] or
         even […] – which the Commission's investigation confirmed – there is no
         overlap in [NSH line of research 2]/[…] R&D between the Parties.40
36
      See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.
37
      See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.
38
      See Bayer's internal document […].
39
      See Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.4.
                                                    22
 ---pagebreak--- (96)      More generally, the Bayer Divestment Business's [NSH line of research 2]
          project targets […].
(97)      On that basis, only BASF's […] chemistry could overlap with the Bayer
          Divestment Business's [NSH line of research 2] project, since both target […].
(98)      However, those two projects are significantly different since the [NSH line of
          research 2] project is mainly planned as a […]. By contrast, BASF's […] is a
          selective molecule,41 not targeted at any of the NSH uses planned for the [NSH
          line of research 2] project and likely not registrable in the EEA.
(99)      These technical differences make it unlikely that the Transaction would affect
          innovation competition in relation to the Bayer Divestment Business's [NSH line
          of research 2].
(100)     The Commission will accordingly not further assess possible effects of the
          Transaction on the Bayer Divestment Business's [NSH line of research 2].
4.1.5.3. The Bayer Divestment Business's [NSH line of research 3] does not overlap
          with BASF's NSH innovation efforts
(101)     Similarly, there is no overlap between the Parties in [NSH line of research 3]
          research since the investigation confirmed that BASF and the Bayer Divestment
          Business are developing [NSH line of research 3] molecules for different
          applications: BASF's [NSH line of research 3] research is […],42 whereas the
          Bayer Divestment Business is developing [NSH line of research 3] molecules
          for […].
(102)     Indeed, the licences to Bayer's NSH lines of research included in the Bayer
          Divestment Business are limited to non-selective uses only and explicitly
          exclude any research and sales into selective uses, where Bayer retains all rights
          to pursue its R&D efforts.
(103)     More specifically, the Bayer Divestment Business's [NSH line of research 3]
          project targets […].
(104)     From a target use perspective, BASF's […] [NSH line of research 1] chemistry
          could thus overlap with the Bayer Divestment Business's [NSH line of
          research 3] project, […].
(105)     The Commission notes that both BASF and the Bayer Divestment Business
          were pre-Transaction pursuing in parallel a [NSH line of research 3] and a [NSH
          line of research 1] for innovation in NSH (although BASF discontinued its own
          [NSH line of research 3] in view of […] and independently from the
40
      Form CO, chapter 6B.1, paragraph 456.
41
      In Bayer/Monsanto, the Commission confirmed its precedents that selective and non-selective
      herbicides constitute separate relevant product markets (see the Commission Decision in Case
      M.8084 – Bayer/Monsanto (2018), Section XI.1.).
42
      Form CO, chapter 6B.1, paragraph 456. See also BASF's response to the Commission's request for
      information RFI 10, paragraphs 3-4 and 8-9, and BASF's response to the Commission's request for
      information RFI Q32, Annex Q.15.3.
                                                     23
 ---pagebreak---           Transaction), thus showing the likely incentive to pursue such lines of research
          in parallel rather than discontinue, delay or reorient them.
(106)     In the present case, one of the drivers for the incentives to develop in parallel
          [NSH line of research 3] and [NSH line of research 1] molecules is likely the
          significant difference between the two projects, deriving from the fact that they
          relate to different chemical classes and act with different MoAs: […] is a [NSH
          line of research 1] and the Bayer Divestment Business's [NSH line of research 3]
          project is an [NSH line of research 3].
(107)     Moreover, as noted in Bayer/Monsanto, both Bayer and Monsanto were
          planning […].43
(108)     Through the Transaction, BASF would acquire Bayer's pre-existing position in
          HT systems and it is likely to have, as Bayer did, an incentive to develop both
          an [NSH line of research 3] chemistry and a [NSH line of research 1] chemistry
          in parallel […].
(109)     The Commission therefore considers that BASF would still have the incentive to
          fully pursue both the Bayer Divestment Business's [NSH line of research 3] and
          its own [NSH line of research 1] project as they would have been separately
          pursued by BASF and Bayer in the absence of the Transaction. This would
          particularly be the case taking into account BASF's acquisition of the
          corresponding HT trait research from the Bayer Divestment Business, which is
          tailored to the Bayer Divestment Business's [NSH line of research 3] and would
          not work in combination with BASF's own [NSH line of research 3] pipeline
          chemistry.44
(110)     The Commission will accordingly not further assess possible effects of the
          Transaction on the Bayer Divestment Business's [NSH line of research 3].
4.1.6.    Conclusion
(111)     For the reasons set out above and on the basis of the data made available during
          the investigation, the Commission considers that the Transaction raises serious
          doubts regarding its compatibility with the internal market and the EEA
          Agreement by eliminating an important and close competitive constraint in
          relation to NSH innovation based on the [NSH line of research 1] MoA.
4.2.      Traits
4.2.1.    Introduction
(112)     Plant 'traits' are phenotyping characteristics of a plant, such as yield, early
          maturing, height, herbicide tolerance, insect or disease resistance, etc.
(113)     Historically, a plant trait referred to a characteristic of a plant obtained via
          natural breeding. Today, breeders have additional tools to provide a plant with
43
       See the Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section XI.1.
44
       Form CO, chapter 6B.1, paragraph 456.
                                                    24
 ---pagebreak---           desired characteristics such as the use of genetically modified ('GM') traits.45
          Developers of GM traits identify a desired trait (for instance drought resistance)
          and the corresponding gene(s). This gene can then be transformed into test lines,
          characterised and later introgressed into elite germplasm 46 for variety
          development.
(114)     Traits can also be developed by prompting genetic mutations using, for example,
          chemical/radiological methods (thus creating a so-called 'non-GM' trait).
          BASF's Clearfield trait, which confers herbicide tolerance to certain
          imidazolinones ('IMIs'),47 is one example of such a non-GM trait.
(115)     The most prevalent types of traits are:
          (a)     Traits conferring tolerance to a given herbicide, often referred to as
                  herbicide tolerance ('HT') traits. For farmers, these traits, in combination
                  with the related herbicide(s), can represent an element of so-called 'weed
                  management' (see Section 4.1). The most common and wide-spread HT
                  trait confers tolerance to glyphosate, a NSH; and
          (b)     Traits conferring resistance to insect species. These traits are often
                  referred to as insect resistance ('IR') traits, and represent for farmers an
                  alternative to insecticides.
(116)     In recent years, some firms have also developed a number of other traits
          providing additional desired characteristics. The designation of those trait
          categories can vary from firm to firm. Based mainly on the classification
          employed by the Bayer Divestment Business, the following categories can be
          distinguished:48 49
          (a)     Disease resistance ('DR') traits: traits that confer specific resistance to
                  selected diseases, such as virus diseases, scab, fusarium, rust, tan spot,
                  septoria, etc.;
          (b)     Crop efficiency ('CE') traits: traits that (i) improve yield (including traits
                  that allow a better nutrient uptake), (ii) enhance or preserve plant health,
                  or (iii) mitigate abiotic stresses, for instance drought or salinity stress; and
45
      For the purpose of the present Decision, the definition provided in Article 2(2) of
      Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the
      deliberate release into the environment of genetically modified organisms and repealing Council
      Directive 90/220/EEC, OJ L 106, 17.4.2001, p. 1, is employed, i.e. ''Genetically Modified Organism
      (GMO)' means an organism, with the exception of human beings, in which the genetic material has
      been altered in a way that does not occur naturally by mating and/or natural recombination', where
      'organism' means 'any biological entity capable of replicating or of transferring genetic material'.
46
      Elite germplasm is the germplasm used for the development of varieties that are already
      commercialised or planned to be commercialised in the near future.
47
      Imidazolinones are a chemical class of herbicides.
48
      Parties'' response to the M.8084 Commission''s request for information RFI 35, questions 7 and 8.
49
      BASF uses different nomenclatures, compared to the Bayer Divestment Business. The Commission
      considers that, for the purpose of the present Decision, BASF's definitions of Fungal Resistance,
      Yield & Stress, and Output traits are equivalent to, respectively, Disease Resistance, Crop
      Efficiency, and Quality traits.
                                                       25
 ---pagebreak---         (c)    Quality traits: traits that produce a modified and differentiated crop when
               compared to the basic one, for example a modified oil/fatty acid profile in
               soybeans. Quality traits are generally developed to service a specific
               consumer/processor demand.
(117)   Traits can be stacked together, thus forming a 'stack', a group of traits
        introgressed in the same seed variety. For example, the Bayer Divestment
        Business's Balance GT stack is composed of two HT traits, one providing
        resistance to glyphosate and the other to isoxaflutole.
(118)   Trait monetisation can occur in two different ways: (i) through licensing of the
        finished trait or stack to seed breeders, or through sales of own seeds containing
        the finished trait or stack; and (ii) through licensing of the technology bearing
        the underlying gene from which a trait for a certain variety can be developed.
(119)   GM trait development and commercialisation require, among other
        requirements, (i) elite germplasm and (ii) broad testing areas. The main reason
        for having both requirements is that the introgression of a GM trait into a variety
        might lead to a number of unwanted, negative effects, such as a yield reduction
        or a change of the germination time. Thus, extensive tests on elite traited
        germplasm are required.
(120)   Therefore, a company like BASF, which pre-Transaction did not have a seed
        business and did not own elite germplasm, cannot develop and commercialise
        GM traits. It can therefore only monetise its GM innovation efforts by out-
        licensing the technology bearing the underlying genes.
(121)   Moreover, different industry players have different business models: a non-
        integrated company like BASF engages in early trait innovation activities in
        view of licensing the results to seed and trait players, whereas the integrated
        crop protection and seed players DowDuPont, Bayer-Monsanto and
        ChemChina-Syngenta typically develop traits from discovery to
        commercialisation in-house for use in their own seeds (in addition to licensing
        to third party seed players). Competition in trait innovation between these
        companies with different business models and innovation activities is therefore
        less strong than it is among companies with the same business model and
        innovation activities.
(122)   In contrast, the requirements for bringing a non-GM trait to the point of
        commercialisation are substantially simpler than for GM traits. This is because
        the unwanted effects mentioned in paragraph (119) are much more limited, thus
        requiring less extensive tests, which, in most cases, can be executed on non-elite
        germplasm.50
(123)   Therefore, a trait innovator with no seed activities (such as BASF pre-
        Transaction) is able to develop non-GM traits and to bring the complete,
        commercially ready technology to market through other seed companies –
        including small seed companies.51
50
      BASF's response to the Commission's request for information RFI 5, question 2, paragraph 6.
51
      BASF's response to the Commission's request for information RFI 5, question 2, paragraph 3.
                                                     26
 ---pagebreak--- 4.2.2.     Activities of the Parties
4.2.2.1. BASF
(124)      BASF is active in non-GM trait research and development. Moreover, BASF is
           active in trait innovation that can be developed into GM traits.
(125)      As it does not have a seed business pre-Transaction, BASF must rely on others
           to develop the genes it discovers into commercial GM traits. Therefore, for GM
           traits, BASF is only active as regards innovation, with no or very limited
           activities in actual development. Indeed, BASF typically only provides support
           and knowledge transfer to a trait development partner.
(126)      In contrast, for non-GM traits, BASF develops commercial traits, ready to be
           introgressed by a seed company that in-licenses them.52
(127)      Therefore, for non-GM traits, BASF can monetise its innovation efforts by
           out-licensing the fully developed traits, whereas for GM traits, BASF monetises
           its trait innovation activities by out-licensing the underlying technologies to trait
           developers. In addition to trait licence fees, in the case of HT traits, BASF
           monetises its GM trait innovation efforts through the sales of the associated
           herbicides.53
(128)      The only two commercial trait products owned by BASF are non-GM,
           namely (i) Clearfield and (ii) Duo Maize System / POAST Protected Corn.54
           Further details about each trait are set out below.
           (a)    Clearfield. Clearfield is a non-GM HT trait conferring resistance to IMIs.
                  Clearfield is available for rice, OSR, wheat, sunflower, corn, barley and
                  lentils. The vast majority (approximately […]) of BASF's Clearfield
                  income is derived from […] seeds. Clearfield is licensed to third-party
                  seed partners, who independently set the price of the Clearfield-traited
                  seeds for growers. Clearfield over-the-top patents have expired in most
                  jurisdictions and will expire by 2023 in all other jurisdictions. IMIs are
                  also off-patent and face a large number of generic competitors. […].
           (b)    Duo Maize System / POAST Protected Corn. BASF offers two non-GM
                  traits which confer tolerance to ACCase-inhibitor herbicides in corn. The
                  Duo Maize System is marketed in Europe and the POAST Protected Corn
                  is marketed in the United States. Both traits were launched in 1996 and are
                  planted on a very small number of acres ([…] hectares in 2016)55. BASF
                  generates […] from licensing them.
52
       In the Form CO, BASF's view is that BASF is only active in the gene discoveries. However, further
       evidence, such as the BASF's response to the Commission's request for information RFI 5,
       question 2, indicates that, for non-GM traits, BASF is active as a trait developer. In developing
       non-GM traits, the need for owning an elite germplasm is reduced, compared to GM traits.
53
       Form CO, chapter 6A, paragraph 260.
54
       BASF also had a GM HT trait for soybean for the Brazilian market called 'Cultivance', which was
       co-developed with Embrapa. Cultivance never reached the market […].
55
       Form CO, paragraph 278.
                                                       27
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- 4.2.3.     Market definition
4.2.3.1. Product market definition
                      Commission precedents
(144)      In its most recent precedent,62 the Commission concluded that trait development
           and licensing is a separate product market, upstream from the markets for the
           breeding and commercialisation of seeds.
(145)      In that decision, the Commission also considered that there appear to be three
           activities relating to the research, development and licensing of traits, all of
           which are upstream of the seeds markets:63
           (a)     Trait discoveries licensing, from which traits can be developed, which is
                   the discovery and initial validation of the underlying trait genes, which are
                   out-licensed to trait developers. The Commission considered that the trait
                   discoveries licensing activities did not constitute a separate product market
                   because these activities concern research and early development, and are
                   to be treated as innovation spaces. The Commission concluded that
                   innovation competition takes place in spaces consisting of groupings of
                   crop/functionality combinations,64 such as HT in soybean, DR in soybean,
                   or IR in cotton.
           (b)     Single trait licensing, for which the Commission concluded that separate
                   product markets were to be distinguished on the basis of the functionality
                   of the relevant trait (e.g. HT, IR etc.) and crop in which it is introgressed;
                   and
           (c)     Stack licensing, for which the Commission concluded that separate
                   product markets exist for each crop (but not for each functionality).65
(146)      With respect to the definition of the innovation space for traits, the Commission
           concluded that innovation competition takes place in spaces consisting of
           groupings of crop/functionality combinations,66 such as HT in soybean, DR in
           soybean, or IR in cotton.
(147)      In defining the product markets for single trait licensing and for stack licensing,
           the Commission did not distinguish between GM and non-GM.67
62
       Commission Decision in Case M.8084 – Bayer/ Monsanto (2018), recital 864.
63
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recitals 866 – 873.
64
       Commission Decision in Case M.8084 – Bayer/ Monsanto (2018), recital 1015.
65
       For stacks, there is no split by functionality, as it is in the nature of stacks to have several functions
       (e.g. tolerance to one or more herbicides and/or one or more insecticides).
66
       Commission Decision in Case M.8084 – Bayer/ Monsanto (2018), recital 1015.
67
       In Commission Decision in Case M.8084 – Bayer/ Monsanto (2018), none of the affected markets
       included non-GM single traits or stacks with at least one non-GM trait. Regarding innovation
       spaces, the parties activities were considered to compete closely if they both focused on GM or on
       non-GM traits (see for example Section X.1.7.5.7 regarding non-GM traits for wheat).
                                                            31
 ---pagebreak---                    Notifying Party's views
(148)    The Notifying Party considers that trait discoveries licensing should not be
         considered as an innovation space, but rather a separate product market.
         According to the Notifying Party, this is because several companies, research
         institutes and universities are active in trait discoveries and typically monetise
         their efforts through licensing agreements with trait developers.
                   Commission assessment
(149)    In light of its precedents and in the absence of new elements, the Commission
         concludes that the development and licensing of traits constitutes a separate
         product market, upstream from the markets for the breeding and
         commercialisation of seeds. The Commission also confirms that three activities
         related to traits can be distinguished, namely: i) trait discoveries licensing from
         which traits can be developed; ii) single traits licensing; and iii) stacks licensing.
(150)    In line with its precedents,68 the Commission notes that there are several players
         active in the licensing of trait discoveries, which monetise their research efforts
         through the licensing of their intellectual property rights, but it confirms that
         trait discoveries should be not be treated as a product markets, but rather as
         innovation spaces.
(151)    Indeed, the Commission also notes that trait discoveries licensing activities are
         related to research or early development of traits, which, in the case of GM
         traits, are further developed and eventually brought to the market by a limited
         number of firms. Therefore, it is appropriate to consider the discovery of genes
         as a research or early discovery part of the trait research and development,
         irrespectively of whether this is conducted in-house by a trait developer or in
         cooperation with third parties.
(152)    Therefore, the Commission considers that trait innovation and its outcomes,
         including trait discoveries licensing, should not be understood as a market in its
         own right, but as an input activity for the trait development and licensing
         market, which is upstream from the seeds markets.69 Such input activity is
         characterised by innovation spaces consisting of groupings of crop/functionality
         combinations such as, for example, HT in soybean, DR in soybean, or IR in
         cotton.
(153)    Regarding single trait licensing, the Commission considers that separate product
         markets are to be distinguished as combinations of crops and functionalities
         (e.g. HT trait for soybean). Further sub-segments are also to be distinguished for
         the IR functionality.
(154)    Also for stack licensing, the Commission considers that separate product
         markets are to be distinguished by crops, for instance stacks for soybean or
         stacks for cotton.
68
      See for example, M.8084 – Bayer/ Monsanto (2018), Section X.1.4.4.
69
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 1023.
                                                   32
 ---pagebreak---                     Conclusion
(155)     The Commission confirms its findings in a previous case70 and considers that
          there are three different activities relating to traits, all of which are upstream of
          seed markets, namely: i) trait discoveries licensing from which traits can be
          developed; ii) single traits licensing; and iii) stacks licensing.
(156)     Trait discoveries licensing is characterised by innovation spaces consisting of
          groupings of crop/functionality combinations such as HT in soybean, DR in
          soybean, or IR in cotton.
(157)     Within single trait licensing, separate markets need to be distinguished by crop
          and functionality. In the case of IR traits, sub-segments also apply (e.g. IR
          Lepidoptera for cotton).
(158)     Finally, within stacks licensing separate markets are to be identified by crop.
4.2.3.2. Geographic market definition
                    Commission precedent
(159)     In its most recent precedent, the Commission considered that the relevant
          geographic markets for single trait licensing, and stack licensing are global.71
          Innovation on traits (including traits discoveries licensing) also takes place on a
          global basis, because innovation efforts are rolled-out in all possible geographies
          across the globe.72
                    Notifying Party's view
(160)     The Notifying Party agrees that the geographic scope of trait-related markets is
          global, but notes that, with one exception, no GM traits are approved for
          cultivation in the EEA and it is unlikely that further GM traits will become
          available in the EEA in the foreseeable future.
                    Commission assessment
(161)     In light of its precedents and in the absence of new elements, the Commission
          considers that the relevant geographic markets for single trait licensing, stack
          licensing, as well as innovation in traits are global.
(162)     This conclusion is supported by the fact that activities associated with the trait
          value chain (from innovation to marketing and commercialisation) are
          conducted on a global level, and the sole activity that is narrower than global is
          the trait introgression process, which is a breeding process and, as such, is
          neither part of the innovation, nor of the development and licensing of traits.
70
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.1.4.9.
71
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.1.5.3 and
      recitals 836-844.
72
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 1024.
                                                   33
 ---pagebreak---                    Conclusion
(163)    The Commission confirms its findings in a previous case73 and considers that
         the relevant geographic markets for single trait licensing, stack licensing as well
         as innovation in traits (including traits discoveries licensing) are global.
4.2.4.   Competitive assessment: price/ product competition in HT traits
4.2.4.1. Notifying Party's view
(164)    The Notifying Party submits that the only overlap regarding the development
         and licensing of traits (i.e. of existing products) occurs in HT single traits for
         corn and OSR. More specifically, the licensing of BASF's Clearfield overlaps
         with that of the Bayer Divestment Business's Liberty Link in corn and in OSR.
         However, the Notifying Party's view is that the overlap does not raise
         competition concerns.
4.2.4.2. Commission assessment
(165)    The Commission agrees with the Notifying Party's view that existing product
         overlaps occur in the markets for the licensing of HT single traits for corn and
         OSR. In particular, the licensing of the Bayer Divestment Business's Liberty
         Link for corn overlaps with that of BASF's Clearfield for corn and Duo Maize
         System/ POAST Protected Corn. With respect to HT traits for OSR, BASF's
         Clearfield for OSR overlaps with the Bayer Divestment Business's Liberty Link
         for OSR.
                   BASF's HT single traits for corn are not close or important competitors
                   to Bayer's Divestment Business's HT single traits
(166)    In corn, BASF's Clearfield and Duo Maize System/ POAST Protected Corn
         have a very limited market presence and penetration rate. In 2016, Clearfield
         was present in corn varieties covering only […] hectares of land worldwide and
         Duo Maize System/ POAST Protected Corn were planted in […] hectares of
         land worldwide. BASF's HT traits for corn represent a […] share of the […]
         million hectares planted worldwide in 2016 with corn varieties carrying at least
         one HT trait. The Bayer Divestment Business's HT traits for corn are carried by
         crops planted on […] million hectares worldwide (2016). Monsanto's and
         DowDuPont's HT traits for corn are instead present in, respectively, more
         than 62.5 million hectares and more than 46.5 million hectares (2016) (Table 6).
73
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.1.5.4.
                                                   34
 ---pagebreak---  ---pagebreak---  ---pagebreak---            difficulties in monetizing its HT single traits and is in a significantly weaker
           competitive position than Bayer and Monsanto.
(174)      Indeed, BASF's HT single traits for OSR do not compete closely to Bayer
           Divestment Business's LibertyLink and Bayer does not appear to benchmark,
           compare or collect market intelligence to any material extent regarding BASF's
           HT traits in OSR. This indicates that BASF is not a close or important
           competitor to Bayer.
(175)      In addition to the limited impact on the market of BASF's HT traits in OSR,
           BASF is only active in non-GM traits, whereas the Bayer Divestment Business
           is active in GM traits. The Parties thus appear to serve, at least to some extent,
           two different types of customers. For this reason, the products of BASF and of
           the Bayer Divestment Business do not appear to compete closely with each
           other.
4.2.4.3. Conclusions on price/product competition in HT traits
(176)      Based on the above considerations, the Commission considers that the
           Transaction does not raise serious doubts as to its compatibility with the internal
           market with respect to HT traits for corn and HT traits for OSR, because the
           Parties' HT single traits do not compete closely and BASF's market presence is
           limited.
4.2.5.     Competitive assessment: innovation competition in GM HT traits
4.2.5.1. Notifying Party's view
(177)      The Notifying Party argues that there are no competition concerns associated
           with innovation for GM HT traits because there is no overlap or, in case of
           overlaps, because there is no close innovation competition.
4.2.5.2. Commission assessment
                      The Parties do not fully overlap in GM HT innovation because BASF is
                      not active in all phases of GM trait innovation
(178)      In Bayer/Monsanto, the Commission considered gene discovery and other early
           pipeline stage projects as part of the activities covered by HT trait innovation
           spaces.81 In that decision, both Bayer and Monsanto were considered as leading
           innovators because, among other reasons: i) their past innovation has led to a
           number of commercially successful products currently on the market; ii) they
           are both fully active in all trait innovation activities, and, with respect to their
           pipelines, in all phases of their projects; and iii) they are both integrated players
           with capabilities to develop single traits and stacks and introgress them into their
           own varieties or to out-license them to other seed companies.
81
       In Commission Decision in Case M.8084 – Bayer/Monsanto (2018), the Commission considered in
       early pipeline a trait project that is still in the discovery or pre-development stage, where most of the
       innovation costs have still not been incurred, and with a lower likelihood of success than products in
       a more advanced state of development. For both Bayer and Monsanto, this definition includes
       projects in phase 0 to phase 2. See recitals 1016 and 1020.
                                                               37
 ---pagebreak--- (179)     In Bayer/Monsanto, the Commission considered that BASF, contrary to Bayer
          and Monsanto, is a more limited player in HT trait innovation. As detailed in
          Section 4.2.2.1, […]82.
(180)     In the Form CO, BASF confirmed the limited range of its activities in HT trait
          innovation, and further explained that it does not commercialise any GM HT
          traits.83
(181)     The example of BASF's [NSH line of research 1] HT trait shows the limited
          extent of BASF's innovation activities in HT trait innovation. In that case, the
          […].
(182)     In view of the above, the Commission confirms its conclusion in
          Bayer/Monsanto that BASF cannot be considered a full innovator in GM HT
          traits, contrary to Bayer-Monsanto.
(183)     The Commission therefore considers that the Parties only partially overlap in
          GM HT trait innovation, since BASF is overall only partially active in such
          innovation (i.e. only in phase 0 and phase 1, and not in phase 2).
(184)     For completeness, the Commission nevertheless assesses below whether the
          Parties' activities in GM HT innovation would be close.
                     BASF's and the Bayer Divestment Business's activities in GM HT
                     innovation are not close
(185)     The analysis of the Parties' pipelines, research targets, lines of research as well
          as patent shares related to traits show that the Parties are both active in
          innovation for GM HT traits for cotton, soybean and OSR, although the range of
          their respective activities is different, as explained above.
(186)     With respect to innovation in GM HT traits for cotton, soybean and OSR,
          the Parties' activities do not overlap and are in any event not close to one
          another. As discussed above, BASF was active until […] in [NSH line of
          research 3 HT genes] research, and is currently conducting research for the
          development of traits conferring tolerance to [NSH line of research 1] and
          [herbicide line of research 4] herbicides.
(187)     With respect to [NSH line of research 3 HT genes], the Bayer Divestment
          Business is currently at an early-stage of its innovation process,84 whereas
          BASF discontinued its efforts […].85 BASF decided to discontinue its [NSH line
          of research 3 HT genes] innovation effort because […].86 BASF is now
          developing its [NSH line of research 3] chemistry for […] and does not have
82
      For the definition of the pipeline phases gene discovery and proof of concept, refer to Table 3.
83
      Form CO, chapter 6A.
84
      Bayer put on hold its effort in [NSH line of research 3] trait innovation when the associated
      herbicide candidate molecule […] was found to have toxicology issues. However, such an effort
      was recently resumed and planned to be continued (see Commission Decision in Case M.8084 –
      Bayer/Monsanto (2018), Section X.1.5.5.1). Details on the Bayer Divestment Business' efforts in
      [NSH line of research 3] herbicide are in Section 4.1.3.1.
85
      BASF's response to the Commission's request for information RFI 12, question 3; BASF's response
      to the Commission's request for information RFI 8, question 1.
86
      Form CO, chapter 6A, paragraph 355.
                                                        38
 ---pagebreak---          any plans to restart the effort to develop [NSH line of research 3] molecules
         suited for […]. Indeed, BASF considers 'unknown, but unlikely' to find [NSH
         line of research 3] chemical compounds for […], considering its available
         intellectual property space and therefore is unlikely to relaunch its research
         program to develop an [NSH line of research 3 HT trait] .87
(188)    In view of the fact that the innovation activity of BASF in [NSH line of
         research 3 HT traits] has stopped and it is unlikely to be re-started, it appears
         that there is no competition with the Bayer Divestment Business's [NSH line of
         research 3 HT trait] innovation effort.
(189)    In relation to [NSH line of research 1 HT innovation], the early stage innovation
         effort of the Bayer Divestment Business is based on genes which were licensed
         to Bayer by BASF under a Material Testing Agreement (MTA).88 Indeed, in line
         with BASF's strategy, once a gene for a GM trait is discovered and the
         feasibility of the GM HT trait technically validated, a partner with seed and trait
         development capabilities is required for bringing the eventual trait to the market.
         Bayer is one of the various potential partners to whom BASF licensed the gene
         for evaluation purposes.89
(190)    In view of the above, the Commission considers that the activities of the Parties
         appear to be complementary since the discovery of the [NSH line of research 1]
         GM HT genes was finalised by BASF, while the development of the
         corresponding traits is underway by the Bayer Divestment Business and other
         players. The Transaction would thus not adversely affect the development of the
         related [NSH line of research 1] GM HT trait, nor would it affect BASF's GM
         HT innovation activities since these activities have ended with the identification
         and licensing of the relevant genes. The Transaction would rather only move in-
         house to BASF the testing activities and, potentially, the development and
         commercialisation of the resulting trait.
(191)    The Commission also considered whether BASF's innovation effort in
         [herbicide line of research 4] traits competes with the innovation effort of the
         Bayer Divestment Business in [NSH line of research 3 HT traits]. The
         Commission concludes that there is very limited closeness in the Parties'
         innovation efforts because the two HT traits perform only with the associated
         herbicide (namely the [herbicide line of research 4] HT with the [herbicide line
         of research 4] chemistry and the [NSH line of research 3] HT with the [NSH line
         of research 3] chemistry). The related herbicides appear to be more
         complements than substitutes since BASF's [herbicide line of research 4]
         chemistry would be applied […], while the Bayer Divestment Business's [NSH
         line of research 3] chemistry would be applied […].90
(192)    The Commission further notes that BASF was pre-Transaction pursuing in
         parallel a [NSH line of research 3 HT traits] line of research, an [herbicide line
         of research 4] HT line of research and a [NSH line of research 1] HT line of
         research (although BASF discontinued its own [NSH line of research 3] in view
87
      […].
88
      Form CO, chapter 6A, paragraph 294.
89
      Form CO, chapter 6A, paragraph 290.
90
      BASF's response to the Commission's request for information RFI 10, question 3.
                                                     39
 ---pagebreak---           of […] and independently from the Transaction). This shows the likely incentive
          to pursue such lines of research in parallel rather than discontinue, delay or
          reorient them post-Transaction.
(193)     In the present case, one of the drivers for the incentives to develop in parallel
          [NSH line of research 3], [herbicide line of research 4] and [NSH line of
          research 1] HT innovation is likely the significant difference between the three
          projects. This derives from the fact that they relate to different chemical classes
          and act with different MoAs and, in some cases, target different application
          timings: the [herbicide line of research 4] chemistry has a […] MoA and would
          be used […] and the [NSH line of research 1] chemistry has a [NSH line of
          research 1] MoA, whereas the Bayer Divestment Business's [NSH line of
          research 3] project is an [NSH line of research 3] to be used […].
(194)     The Commission therefore considers that BASF would have every incentive to
          fully pursue both the Bayer Divestment Business's [NSH line of research 3] HT
          line of research and its own [herbicide line of research 4] HT and [NSH line of
          research 1] HT projects as they would have been separately pursued by the
          Parties in the absence of the Transaction. This would particularly be the case
          taking into account BASF's acquisition of the corresponding [NSH line of
          research 3] NSH research from the Bayer Divestment Business, which is
          tailored to the Bayer Divestment Business's [NSH line of research 3] HT line of
          research and would not work in combination with BASF's [herbicide line of
          research 4] HT traits.91
(195)     Finally, the Commission also considered potential closeness between the
          innovation effort of BASF in [NSH line of research 1] HT and the innovation
          effort of the Bayer Divestment business in [NSH line of research 3] HT. Also in
          this case, there is limited closeness in the Parties' innovation efforts because the
          two HT traits perform only with the associated herbicides (namely the [NSH
          line of research 1] HT with the [NSH line of research 1] chemistry and the [NSH
          line of research 3] HT with the [NSH line of research 3] chemistry). Moreover,
          the related herbicides appear to be sufficiently differentiated since they are from
          different chemical classes and act with different MoAs.
4.2.5.3. Conclusions on competition in GM HT trait innovation
(196)     Based on the above, the Commission considers that the Transaction does not
          raise serious doubts as to its compatibility with the internal market with respect
          to innovation in GM HT traits for cotton, soybean and OSR.
4.2.6.    Competitive assessment: innovation competition in GM DR traits
4.2.6.1. Notifying Party's view
(197)     The Notifying Party argues that there are no competition concerns associated
          with innovation for GM DR traits either because there is no overlap or, in case
          of overlaps, because there is no close innovation competition.
91
       Form CO, chapter 6B.1, paragraph 456.
                                                  40
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---            They secure themselves to the plant tissue and suck nutrition from it, which
           therefore negatively affects plant yield.92
(208)      Since most nematodes live in the soil, they represent one of the most difficult
           pest problems to identify and control. It has been estimated that some 10% of
           world crop production is lost because of plant nematode damage.93
(209)      Seed treatment formulations are based on the same active ingredients which are
           also used for the formulation of nematicides, insecticides and fungicides for
           foliar/soil crop protection. However, they contain additional specific inert
           ingredients such as additives, polymers, anti-freezing agents, dyes or pigments,
           in order to ensure that the dressed seeds are marked as such or the seed dressing
           sticks to the seeds. The active ingredients in seed treatments can be chemical or
           biological.
(210)      In the EEA, seed treatment producers sell their products mainly to seed
           companies but also – to a limited extent – to wholesalers, dealers/co-operatives
           or directly to large growers.94
4.3.2.     Market definition
4.3.2.1. Product Market Definition
                       Commission precedents
(211)      In previous cases,95 the Commission considered that seed treatment constitutes a
           separate product market rather than a particular type of application of crop
           protection products because they target different pests, and the customers and
           distribution channels are not identical as they are generally sold to seed
           companies whereas other crop protection products are sold to distributors and
           are applied by growers.
(212)      Seed treatment has been further divided by crop and by indication
           (e.g. fungicidal, insecticidal). Nematicidal seed treatments constitute an
           additional segment to fungicidal and insecticidal seed treatments.96
(213)      As regards the seeds market that is downstream to seed treatment, the
           Commission has referred in previous decisions to the existence of a separate
           product market for treated seeds, but did not ultimately reach a conclusion on
           the market definition of treated seeds.97
92
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2067.
93
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2068.
94
       Form CO, chapter 6B.3, paragraph 525.
95
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.1, and cases
       referred to in that decision.
96
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.1, and cases
       referred to in that decision, and cases referred to in that decision.
97
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.1.3.
                                                           44
 ---pagebreak---                       Notifying Party's views
(214)     In line with the Commission's precedents, the Notifying Party has submitted
          data on the basis of a seed treatment product market divided by indication and
          by crop.98
                      Commission assessment
(215)     In light of its precedents and in the absence of new elements,99 the Commission
          is of the view that seed treatments should be divided by crop and indication.
          Nematicidal seed treatments constitute an additional segment to fungicidal and
          insecticidal seed treatments.
(216)     The Commission does not consider that it is appropriate to further segment the
          nematicidal seed treatment market into biological and chemical nematicidal seed
          treatments because it is clear from the Parties' internal documents that chemical
          and biological nematicidal seed treatments compete with one another for the
          same end uses. For example, [extract from BASF internal document].100
(217)     As regards the seeds market that is downstream to seed treatment, the
          Commission considers, in line with its precedents101, that treated seeds
          constitute a separate market. However, for the purpose of this decision, it can be
          left open whether the product market includes also untreated seeds since the
          Transaction does not give rise to concerns about its compatibility with the
          internal market with respect to treated seeds under any plausible market
          definition.
                      Conclusion
(218)     As regards nematicidal seed treatment, the Commission concludes that the
          relevant product market to retain for the competitive analysis is seed treatment
          for nematode control on a crop by crop basis.
(219)     As regards insecticidal and fungicidal seed treatment, the Commission considers
          that separate product markets exist for insecticidal or fungicidal seed treatment
          market, which are both further segmented on a crop by crop and pest or disease
          basis.
(220)     As regards the downstream market to the seed treatment markets, for the
          purpose of this Decision, the Commission considers that treated seeds constitute
          a separate market but it can be left open whether this includes also untreated
          seeds since the Transaction does not give rise to concerns about its compatibility
          with the internal market under any plausible market definition.
98
      Form CO, chapter 6B.3, paragraphs 535-536.
99
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.1 and cases
      referred to in that decision.
100
      BASF's response to the M.8084 Commission's request for information to BASF RFI Q23,
      [Annex 8.z.1: […]].
101
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.1.3 and cases
      referred to in that decision.
                                                  45
 ---pagebreak--- 4.3.2.2. Geographic market definition
                       Commission precedents
(221)      In previous cases, the Commission considered that the relevant geographic
           market for seeds and seed treatment102 is national in scope.
                       Notifying Party's views
(222)      In line with the Commission's precedents, the Notifying Party has submitted
           data on the basis of a national segmentation of insecticidal and fungicidal seed
           treatment on a crop by crop basis.103
                       Commission assessment
(223)      In light of its precedents104 and in the absence of new elements, the Commission
           considers that seed treatment product markets and seeds markets are national in
           geographic scope.
                       Conclusion
(224)      In light of the above, the Commission concludes that seed treatment product
           markets and seeds markets are national in geographic scope.
4.3.3.     Activities of the Parties
(225)      BASF is active in insecticidal and fungicidal seed treatment and has a
           nematicidal seed treatment product in the pipeline. The Bayer Divestment
           Business includes a number of nematicidal seed treatment products, including
           nematicidal seed treatment pipeline products, an insecticidal seed treatment
           product, as well as seeds.
4.3.3.1. BASF's activities in seed treatment
(226)      BASF is active in insecticidal and fungicidal seed treatment. Its insecticidal seed
           treatment portfolio includes one product branded as MUNDIAL ([…]), sold
           only in the Netherlands for use on onions, garlic and vegetables.105 MUNDIAL's
           sales are due to cease in the EEA. BASF has chosen not to re-register the
           product in the Netherlands, as use of fipronil was restricted by EU authorities.106
(227)      BASF's portfolio of fungicidal seed treatments includes products for use on
           cereals commercialized in several EEA countries, as well as fungicidal seed
           treatment authorised for use on OSR in Germany (Acrobat WP (dimethomorph))
102
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.2 and cases
       referred to in that decision.
103
       Form CO, chapter 6B.3, paragraphs 535 – 536.
104
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), Section X.I.2.2.2, and cases
       referred to in that decision.

       Should read: “fipronil”.
105
       Form CO, chapter 6B.3, Table BASF EEA […] seed treatment portfolio, at paragraph 550.
106
       BASF 5(3) Submission, paragraph 45.
                                                    46
 ---pagebreak---          and fungicidal seed treatment products for use on ornamentals, onion/garlic, and
         vegetables in the Netherlands.107
(228)    BASF also has a pipeline biological nematicidal control product, Trunemco,
         whose two active components are bacillus amyloliquefaciens, and a semio
         chemical, cis-jasmone. In terms of nematode action, Trunemco primes plant
         physiology and stimulates the defence system of plants in order to protect the
         plant from nematodes, rather than killing the nematodes (as a chemical
         nematicide would do).108 Trunemco is expected to be launched in the US
         in 2019 and in the EEA around […].109 Globally, Trunemco's target crops are
         corn, soybean and cotton.110 In the EEA, BASF plans to first launch Trunemco
         on […].111
4.3.3.2. Bayer Divestment Business' activities in seed treatment
(229)    The Bayer Divestment Business includes the data, know-how, employees,
         intellectual property, registrations, sales and marketing assets, and contracts
         comprising Bayer's nematicidal/insecticidal seed treatment businesses Poncho,
         VOTiVO, Poncho/VOTiVO, Poncho/VOTiVO 2.0, ILeVO, COPeO and Bayer's
         nematicidal seed treatment pipeline products VOTiVO/Redigo M (Bacillus
         firmus/ prothioconazole/ metalaxyl) and […]. The Bayer Divestment Business
         seed treatment assets generated a turnover of EUR […] in 2017.
(230)    While the Bayer Divestment Business’ nematicide control seed treatments are
         not currently sold in the EEA, Bayer planned to launch its biological nematicidal
         seed treatment VOTiVO/Redigo M in the EEA in 2018 on corn and
         sugarbeet.112 The active ingredient in VOTiVO is a bacterium, bacillus firmus.
         Like Trunemco, VOTiVO/Redigo M is a biological nematicide which does not
         kill nematodes, but rather protects plants from attack by nematodes. Bacillus
         firmus has two major functions as an active ingredient: first, it protects against
         nematodes by perforating the outer-layer of the nematode egg and by
         minimizing the attractiveness of the roots for nematodes and second by
         strengthening the plant as such. Estimated peak sales of this product in the EEA
         are EUR […].113
(231)    The Bayer Divestment Business' nematicidal seed treatment products
         Poncho/VOTiVO, Poncho/VOTiVO 2.0, ILeVO, COPeO are not sold in the
         EEA and Bayer had no plans to do so in the future.114
(232)    The Bayer Divestment Business also includes two pipeline products which are
         likely to be launched in the EEA, [extract from Bayer internal
         document].115,116,117,118,119
107
      Form CO, chapter 6B.3, Table BASF EEA […] seed treatment portfolio, at paragraph 550.
108
      Form CO, chapter 6B.3, paragraph 585.
109
      BASF 5(3) Submission, paragraph 33, Form CO, Chapter 6B.3 at paragraphs 551 – 553.
110
      BASF's response to the Commission's request for information RFI2, [Annex Q1.1 […]], slide 5.
111
      Form CO, chapter 6B.3, Table BASF seed Treatment Pipeline, at paragraph 551.
112
      BASF 5(3) Submission, paragraph 36.
113
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 15.
114
      BASF 5(3) Submission, paragraph 36.
                                                     47
 ---pagebreak--- (233)      Fluopyram is a versatile active ingredient as a foliar fungicide120 and also as a
           seed treatment for broad acre crops and soil nematicides for all crops.121 It is
           currently sold in the US and other countries outside the EEA under the brand
           name ILeVO. Fluopyram is not currently sold as a nematicidal seed treatment in
           [extract from Bayer internal document].122
(234)      The Bayer Divestment Business seed treatment assets include two insecticidal
           seed treatment products, namely (i) Poncho 600 FS, which uses the active
           ingredient clothianidin FS 600 G Red and is applied in the EEA in corn and
           sunflower; and (ii) Deter, which uses clothianidin FS 250 G and is applied in
           the EEA in cereals. In 2017, the former was sold in Bulgaria, France, Germany,
           Hungary, Romania and Spain, while the latter was sold in the Czech Republic,
           Slovakia and the UK.123
(235)      The Bayer Divestment Business also includes activities which are downstream
           from seed treatment markets, namely vegetable and broad acre crops seeds in
           various EEA member states.
4.3.4.     Competitive assessment in nematicidal seed treatment
4.3.4.1. Notifying Party arguments
(236)      The Notifying Party's submission observes that the commitments submitted to
           the Commission, which includes the divestment of BASF's Trunemco, resolves
           any potential competition concerns by removing the horizontal overlap between
           Trunemco and the Bayer Divestment Business' seed treatment assets.124
4.3.4.2. Commission assessment
                      Competitive landscape in nematicidal seed treatment
(237)      Nematicidal seed treatment is an area where there are worldwide very few
           products available but where there is huge market potential. In the EEA, there
           are currently no nematicidal seed treatment products available at all.
           Consequently, the Commission considers that any products launching in the
115
       Bayer's internal document BI-EDISC-0141615 'Notes, Action & Decision Summary SPC, 21 &
       22 November 2016', page 11.
116
       BASF 5(3) Submission, paragraph 40.
117
       Bayer's internal document BI-EDISC-0141615 'Notes, Action & Decision Summary SPC, 21 &
       22 November 2016', page 9.
118
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2116.
119
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2117.
120
       The Bayer Divestment Business includes only fluopyram seed treatment applications, Bayer retains
       all other patents for use in non-seed treatment applications. This includes, for example, patents
       relating to fluopyram's use as a foliar fungicide.
121
       Bayer's internal document BI 10432 […].
122
       Bayer's internal document BI 10456 'Fluopyram, Maximum Use Rates, September 2017', slide 5.
123
       BASF 5(3) Submission, paragraph 36. The application of Poncho 600 FS in flowering crops
       including corn and sunflower is restricted pursuant to Commission Implementing Regulation
       No 485/2013, and sales of this product for use in corn and sunflower are possible in the EEA only
       subject to derogations from relevant national authorities, Bayer expects a complete ban of
       clothianidin covering all of the EU to be announced in June 2018.
124
       BASF 5(3) Submission, paragraph 47.
                                                          48
 ---pagebreak---           nematicidal seed treatment market are likely to have a significant competitive
          impact and this finding is supported by internal documents of the Parties.
(238)     For example, both Bayer125 and BASF126 have been working on making farmers
          aware of the significant damage caused by nematodes and on the detrimental
          impact that nematodes have on yield in order to promote their new nematicidal
          seed treatment products. Indeed, one BASF internal document refers to
          Trunemco […] and marketing of nematicidal seed treatment products tend to
          focus on improved yield provided to growers. […].127
Figure 17 – BASF document referring to key benefits of Trunemco and nematicides
[…]
(239)     The competitive landscape is limited. In the following internal document set out
          at Figure 18 below, BASF shows that there are [5-10] products globally (the
          Bayer Divestment Business' VOTiVO and ILeVO/COPeO, Syngenta's products
          Avicta and Clariva, Bayer/Monsanto's NemaStrike and Valent's Aveo) across all
          crops that compete with Trunemco, two of which are part of the Bayer
          Divestment Business (VOTiVO and ILeVO).
Figure 18 – [Extract from BASF internal document]
[…]
Source:   [BASF internal document].
(240)     Three of these products are based on chemical active ingredients (NemaStrike,
          Avicta and ILeVO/COPeO) and three are based on biological components
          (VOTiVO, Clariva and Aveo). […]. Bayer/Monsanto's NemaStrike will also
          launch in the EEA.128
(241)     Of the remaining three products, the two Syngenta products are either not able
          or not likely to launch in the EEA. First, Syngenta's Clariva is for use on
          soybean which is not a key crop in the EEA. Second, Syngenta's Avicta product
          is a much older product (its first launch took place in 2006129) and it is based on
          abamectin, which, as a nematicide is currently only approved in Italy and
          registered only for use on vegetable crops.130 This product cannot therefore be
          launched in the EEA as a nematicidal seed treatment for row crops. Finally,
          Valent's product Aveo is based on the same bacillus as Trunemco but on a
          different strain (Bacillus amyloliquefaciens, strain PTA-4838*) which targets
125
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 12.
126
      As can be seen from the Commission decision in Case M.8084 – Bayer/Monsanto,
      recital 2088-2098, Monsanto was also investing in the area of nematicidal seed treatment with
      NemaStrike […]. See also BASF's response to the M.8084 Commission request of information to
      BASF RFI Q23, [Annex Q8.z.5: […]].
127
      American Phytopathological Society and Kline Nematicide Market Study 2014, as cited by BASF
      in BASF's response to the M.8084 Commission request of information to BASF RFI Q23,
      [Annex Q8.z.5: […]].
128
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2098.
129
      https://www.syngentaseedcare.com/avicta.
130
      Regarding Abamectin see Commission Decision in Case M.7932 – Dow/DuPont (2017),
      recital 1602. Abamectin is registered as a nematicide only for the following vegetable crops:
      tomato, squash and eggplant.
                                                   49
 ---pagebreak---           soybean cyst nematodes131 and the main target crop is therefore soybean. It has
          just been launched in the US, but it is unclear when and if it would come to
          the EEA.
(242)     The Commission therefore considers that in the EEA there are likely to be either
          one (Bayer/Monsanto's NemaStrike), or at most two, competitors (including
          Valent's Aveo) to the merged entity.
                    The Parties are each planning to launch important nematicidal seed
                    treatment products in the EEA
          (B.i)     Bayer
(243)     As discussed above, the Bayer Divestment Business includes a biological
          nematicidal seed treatment product […] called VOTiVO. […].132 VOTiVO has
          however already been successfully sold in the US since 2011, together with an
          insecticide, under the product name 'Poncho/VOTiVO'.133 Bayer perceives its
          product Poncho/VOTiVO as a market-leading product in the US. For example,
          Bayer notes that the product has grown to become 'the most trusted and the most
          utilized seed treatment in the USA'134, which is applied yearly on over 45 million
          acres of corn and which provides efficacy against major corn pests.135
          Poncho/VOTiVO itself is now being enhanced by the addition of TWO.O in the
          USA (Poncho/VOTiVO 2.0), which has been introduced in August 2017.
(244)     [Extract from Bayer internal document].136,137,138
(245)     [Extract from Bayer internal document].139,140, […]if nematodes are of greater
          concern and we have data to show in a broad range of environments we provide
          benefit.'141
          (B.ii)    BASF
(246)     As discussed above, BASF also has a biological nematicidal seed treatment
          product in its pipeline, Trunemco. In trials BASF notes that it has outperformed
          rivals, by significantly reducing plant damage (from nematodes) and increasing
          yield: […]% yield increase over current standards in corn and cotton….
          Superior performance observed with [Trunemco] over competitors.'142 […].143
131
      https://www.valent.com/agriculture/products/aveoez/download-literature.cfm.
132
      BASF 5(3) Submission, paragraph 36, M.8084 BI 19366 'VOTiVO/Redigo M concept,
      15 September 2017', slide 9.
133
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2082.
134
      Bayer's internal document BI 08500 'SeedGrowth Biologics, Strategy Update', slide 11.
135
      Bayer's internal document BI 08500 'SeedGrowth Biologics, Strategy Update', slide 11.
136
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 9.
137
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 7.
138
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017'.
139
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 15.
140
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 14.
141
      Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 14.
142
      BASF's response to the M.8084 Commission request of information to BASF RFI Q23,
      [Annex Q8.z.5: – […] Nematode solution to the unseen yield robber].
143
      BASF's response to the M.8084 Commission request of information to BASF RFI Q23,
      [Annex Q8.z.5: – […] Nematode solution to the unseen yield robber].
                                                     50
 ---pagebreak--- (247)    Trunemco is expected to launch in […] in […] and to come to […] around
         […].144
                     The Transaction brings together two important and close potential
                     competitors on nematicidal seed treatment
(248)    The Transaction brings together the nematicidal seed treatment products of
         BASF and the Bayer Divestment Business, which will be competing in a market
         with very few competitors.
         (C.i)       […]
(249)    […]145 […].146 […].
Figure 19 – [Extract from BASF internal document]
[…]
Source:  [BASF internal document].
(250)    […].147
(251)    […].148
         (C.ii)      Both Trunemco and VOTiVO/RedigoM are biological products with
                     similar methods of nematode control
(252)    Both Trunemco and VOTiVO are biological products based on different types of
         bacteria (bacillus amyloliquefaciens (strain MBI 600) and bacillus firmus
         respectively). Rather than killing the nematodes outright, both products function
         in such a way as to repel the nematode, by protecting the plant. The Commission
         notes that while from a market definition perspective biological and chemical
         nematicidal seed treatments compete with one another for the same end uses, the
         biological seed treatments are likely to compete more closely with each other,
         than with chemical seed treatments.
         (C.iii)     […]
(253)    Potatoes and corn are the most important crops for nematicides, globally,
         accounting for the largest share of nematicide sales.149
144
      BASF Submission pursuant to Article 5(3) of Commission Regulation (EC) No 802/2004
      ('BASF 5(3) Submission'), Form CO, Chapter 6B.3 at paragraphs 551 – 553.
145
      BASF's response to the M.8084 Commission's request of information to BASF RFI Q23,
      [Annex 8.z.8 '[…] Virtual Global BVP Workshop'], slide 29.
146
      BASF's response to the M.8084 Commission's request of information to BASF RFI Q23,
      [Annex Q8.z.1 'FCC Project Review […]'], slide 9.
147
      BASF's response to the Commission request of information RFI 2, [Annex Q1.1 '[…] Project Board
      2017'], slide 15.
148
      BASF's response to the M.8084 Commission request of information to BASF RFI Q23,
      [Annex Q8.z.5: […] Nematode solution to the unseen yield robber].
149
      BASF's response to the M.8084 Commission's request for information to BASF RFIQ23,
      [Annex Q8.y.3 'Kline Nematicide Market Study'].
                                                     51
 ---pagebreak--- (254)      Globally, Trunemco's target crops are corn, soybean and cotton with an internal
           BASF document noting that it is: 'Driven by Seed Treatment in soybean, corn,
           and cotton.'150 These are the same main target crops as the Bayer Divestment
           Business portfolio.151 […].152
(255)      The Notifying Party submits that at present, […].153 However, the Commission
           considers it likely that BASF will register […].154
                     Limited competitive constraints from competitors
(256)      As noted at Section 4.3.4.2.A nematicidal seed treatment is an area in which
           there are very few products currently competing and this competitive landscape
           is not expected to change in the near future.155
(257)      The Commission therefore concludes that the competitive constraints on the
           merged entity are likely to be limited, since on the basis of the above assessment
           there appears to be just one (Bayer/Monsanto's NemaStrike), or at most two
           (Valent's Aveo) competitors to the merged entity.
4.3.4.3. Conclusion on nematicidal seed treatment
(258)      For the reasons set out above and based on the results of its investigation, the
           Commission considers that serious doubts arise regarding the compatibility of
           the Transaction with the internal market and the EEA Agreement in relation to
           potential competition for nematicidal seed treatment in corn and sugar beet. In
           particular, the Commission considers that the Transaction would likely eliminate
           an important and close competitive constraint, resulting in non-coordinated
           effects on competition and therefore leading to a significant impediment of
           effective competition.
4.3.5.     Insecticidal seed treatment
(259)      There is no horizontal overlap between BASF's insecticide seed treatment
           MUNDIAL and the Bayer Divestment Business' insecticide seed treatment
           products because the respective products do not compete in the same crops or
           geographic markets in the EEA.156
150
       BASF's response to the Commission's request for information RFI2, [Annex Q1.1: '[…] Project
       Board 2017'], slide 5.
151
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recital 2073.
152
       Bayer's internal document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 7.
153
       BASF's memorandum on nematicides, page 8.
154
       Form CO, chapter 6B.3, Table BASF seed Treatment Pipeline, at paragraph 551, Bayer's internal
       document BI 19366 'VOTiVO/Redigo M concept, 15 September 2017', slide 7.
155
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recitals 2141 to 2143.
156
       BASF 5(3) Submission, paragraph 36. The application of Poncho 600 FS in flowering crops
       including corn and sunflower is restricted pursuant to Commission Implementing Regulation
       No 485/2013, and sales of this product for use in corn and sunflower are possible in the EEA only
       subject to derogations from relevant national authorities, Bayer expects a complete ban of
       clothianidin covering all of the EU to be announced in June 2018.
                                                        52
 ---pagebreak--- 4.3.6.     Vertical links between seed treatment (up-stream) and (treated) seeds (down-
           stream)
(260)      According to the information provided by the Notifying Party,157 the
           Transaction gives rise to a vertical relationship between the upstream supply of
           seed treatment products by BASF, on the one hand, and the downstream market
           for commercialisation of seeds by the Bayer Divestment Business, on the other,
           only as regards fungicidal seed treatment and OSR treated seeds in Germany.
           However, these markets will not be affected as a result of the Transaction.
           BASF has estimated market share on the upstream market of [20-30]%158 and on
           the downstream market both for OSR seeds and OSR treated seeds the Bayer
           Divestment Business has a negligible market share ([5-10]%).159
(261)      On the basis of the above, the Transaction does not raise serious doubts as
           regards its impact on the fungicidal seed treatment market and OSR treated
           seeds in Germany.
4.3.7.     Conclusion on seed treatment
(262)      The Commission considers that serious doubts arise regarding the compatibility
           of the Transaction with the internal market and the EEA Agreement in relation
           to potential competition for nematicidal seed treatment in corn and sugar beet,
           because it is likely that the Transaction would eliminate an important and close
           competitive constraint, resulting in non-coordinated effects on competition and
           therefore leading to a significant impediment of effective competition.
(263)      The Commission does not consider that serious doubts arise regarding the
           compatibility of the Transaction with the internal market and the EEA
           Agreement in relation to insecticidal seed treatment and vertical links between
           seed treatment (up-stream) and (treated) seeds (down-stream).
4.4.       Digital Agriculture
4.4.1.     Overview of the digital agriculture sector
(264)      Digital agriculture (or digital farming) refers to the collection of data and
           information about fields, crop and farms with the aim of providing tailored
           advice or aggregated data to farmers. Digital agriculture makes use of precision
           farming160 technology. In addition, it also takes recourse to intelligent networks
           and data management tools. Digital agriculture enables the provision of a range
           of measurement and advisory services, including in relation to weather, yield,
157
       Form CO, chapter 6B.3., paragraph 568 and BASF's response to the Commission's request for
       information RFI 2, question 2.
158
       BASF's response to the Commission's request for information RFI 2, question 2.
159
       Parties' response to the M.8084 Commission's request for information RFI 30, [Annex 30.2]. The
       market share concerns treated seeds, but also all seeds given that basically all OSR seeds are treated
       with a fungicide.
160
       Precision agriculture refers to hardware and equipment (e.g. planters, sensors, robotics) that can
       execute farming tasks more efficiently and precisely. Precision agriculture hardware devices
       provide a potential source of data for digital agriculture and potentially enable better
       implementation of digital agriculture insights; however, precision agriculture is not digital
       agriculture.
                                                         53
 ---pagebreak---            farm management or prescriptions and recommendations of fertility, seeds, and
           crop protection products, with the aim of increasing farm productivity.
(265)      According to the Notifying Party, digital agriculture is currently in its infancy.
           However, globally countries are adopting digital agriculture at a significant
           pace. Digital agriculture is of particular importance given that by 2025 the
           global population is expected to reach 8 billion people (9.6 billion by 2050),161
           and the overall food production will need to significantly increase (by ~70%) in
           a relatively short period to meet the demand.
(266)      The drive to improve agricultural productivity and increase profits is enhancing
           the adoption of digital agriculture.162 For instance, digital farm management
           services are expected to grow worldwide from USD 1.6 billion in 2017 to
           USD 4.1 billion by 2022; and in Europe, they are expected to reach
           USD 1.3 billion by 2022.163
(267)      Digital technologies and analytics are transforming agriculture, making a farm's
           field operations more insight driven and efficient. Digital agriculture is generally
           expected to be the main new trend for farming in the coming years and a key
           source of information and recommendations for farmers. Bayer considers that
           '[d]igital farming is about to revolutionise agriculture, not only in Europe, but
           worldwide' and that it offers 'the biggest game changing potential.'164
4.4.2.     Activities of the Parties in digital agriculture
(268)      BASF is active in the provision of digital agriculture services.
(269)      The Bayer Divestment Business' digital agriculture activities (the 'Bayer Digital
           Agriculture Assets') will be transferred to BASF in their entirety. Bayer will
           receive a non-exclusive licence back to use certain technology needed for Bayer
           to sell certain of the digital agriculture products outside North America.
4.4.2.1. BASF's activities in digital agriculture
(270)      BASF has a limited suite of digital farming application tools including Maglis,
           which has not yet been fully launched in the EEA, and several small local digital
           offerings in selected EEA countries.
161
       CEMA's website regarding 'The Global Food Challenge' at: http://www.cema-agri.org/page/global-
       food-challenge (ID11912).
162
       M.8084 Form CO, part 5, Annex 5.1, MarketsandMarkets Report: 'Farm Management Software
       Market – Global Forecast to 2022' (2017).
163
       M.8084 Form CO, part 5, Annex 5.1, MarketsandMarkets Report: 'Farm Management Software
       Market – Global Forecast to 2022' (2017).
164
       Press release entitled 'Digital Farming set to revolutionize agriculture', 7 June 2017, available at:
       http://www.politico.eu/sponsored-content/digital-farming-set-to-revolutionize-agriculture/.
                                                        54
 ---pagebreak---                     Existing products
(271)    BASF currently provides small local digital offerings in selected EEA countries,
         including in Germany, France, UK, Austria, and Belgium, to support customers
         in their activities.
         (i)    Weather tools: a standard online weather forecast programme featuring
         forecasts at postal code level in Germany, France, UK, Austria, Belgium, among
         other countries. […]. BASF's main weather tool is BASF Weather.
         (ii) Field insight tool, named Observ'Online, an online tool to which BASF's
         distributors can upload their observations on disease occurrences on the plots of
         land they visit. This tool is only available in France.
         (iii) Farm management tool named BASF Schlagkartei, a tool meant for use
         by farmers to record their business transactions. It is only available in Germany
         and is known as.
         (iv) Crop protection solution tools: BASF provides a number of localised,
         non-automated crop protection solutions. In Germany, this consists of an online
         product catalogue (PIA, regional advice). In the UK (Weed ID App, Cereals
         Disease ID App, Total Oilseeds App), France (Atlas), and Austria (regional
         advice), this consists of levelled flowcharts which farmers can follow to come to
         a diagnosis on what is plaguing a crop.
(272)    Nutrient application tools: in the UK (The CAT app, OSR GAI app), BASF
         provides a biomass indicator which helps assess a crop's physiology based off a
         picture of it.
(273)    The above tools have a very limited scope and user group. They are not part of
         Maglis, and aside from BASF Schlagkartei (see paragraph […]), generate no
         income.
(274)    Additionally, one of Maglis tools, the Maglis Customer Navigator has been
         launched as a pilot in the Czech Republic (see Section 4.4.2.1 (B))
                    Pipeline products
(275)    Maglis is a modular system comprised of several BASF's digital application
         tools. These tools offer a variety of different functionalities, but are independent
         of each other, must be downloaded separately and do not provide for the
         systematic exchange of data between them.
         (i)    Maglis Customer Navigator. This is an application tool that is used by the
         BASF sales organisation to work with farmers in order to address their needs
         and growing priorities. Based on information shared with BASF by farmers, the
         BASF sales organisation uses the Maglis Customer Navigator to recommend the
         relevant crop protection products that would be suitable for farmers' individual
         farm and field-specific needs. The level of detail of the recommendation is
         dependent on the level of information shared by the farmer (e.g. crop type, area

      Should read: “271”.
                                                  55
 ---pagebreak---       planted, farming preference). The product recommendation also contains the
      label instruction on how to use the product, with an understanding of the
      farmer's preferences. The Maglis Customer Navigator is not linked to so-called
      'big data' and any advice is 'manual' rather than generated by an agronomic
      engine. Maglis Customer Navigator is currently available in the United States.
      In the EEA, it has been launched as a pilot product in the Czech Republic.
      (ii) Maglis Crop Plan. This tool offers a convenient and efficient way for
      farmers to monitor and manage field activities in-season. As soon as the planned
      seeding date has been decided, Maglis Crop Plan oversees and connects
      information about local weather, soil conditions and weed, disease and pest
      warnings for farmers' individual plans. With this information at hand, farmers
      can proactively manage their fields, as well as record and assign tasks to their
      farm team. The Maglis Crop Plan is mainly based on publicly available data and
      basic information provided by the farmer (e.g. location and seed type) as
      opposed to proprietary field trial data etc. Based on the information entered into
      it, the Maglis Crop Plan generates an alert to a farmer regarding when to use a
      crop protection product on a field-specific level (no variable-rate capabilities).
      The product also uses algorithms to make predictions on the likelihood of a
      negative event (e.g. disease occurrence) based on the information put into the
      application tool by the farmer. The Maglis Crop Plan has been launched as a
      pilot in Canada. It has not yet been launched at all in the EEA.
      (iii) Maglis Sustainability Assessment. This application is a post-season tool
      used to evaluate farm efficiency (e.g. fuel and water usage) so as to increase
      profitability. With the goal of helping farmers becoming more resource efficient,
      this tool demonstrates the impact of different agricultural practices on main
      sustainability factors, such as business profitability, soil health, biodiversity, etc.
      Maglis Sustainability Assessment has been launched as a pilot in Canada. It has
      not yet been launched at all in the EEA. ·
      (iv) Maglis Agronomic Advice. This is an application tool to provide
      information on the likelihood of a disease occurrence. The tool generates a
      recommendation based on weather data and geographic location. The current
      intention is that the tool would be used by the BASF sales organisation,
      although usage by farmers is also possible. Maglis Agronomic Advice is still in
      development.
      (v) Maglis Leaf Analysis. This is an application to give the farmer feedback
      on which disease he/she has on his/her field based on a picture the farmer takes
      of a part of the field and then sends to the app. The tool analyses the photo and,
      if possible, identifies the disease and recommends a corresponding BASF crop
      protection product that could be used to treat the disease. This tool is still in
      development, but was beta-tested in Germany in 2017.
(276) BASF considers Maglis as a tool to interact with its customers/farmers in order
      to sell BASF crop protection products. Maglis does not host third party tools,
      nor does BASF charge its customers a fee for use of Maglis apps.
(277) BASF plans to merge Maglis Crop Plan and Maglis Sustainability Assessment
      into a single tool named Maglis Farm Navigator in the near future. The stand-
      alone tools of Maglis Crop Plan and Maglis Sustainability will then be
      discontinued, likely still in 2018. BASF has already done so from 1 January 2018
                                              56
 ---pagebreak---          in Canada. Maglis Farm Navigator will combine the functionalities of Maglis
         Crop Plan and Maglis Sustainability Assessment, enabling farmers to optimise
         their farm operations on a continuous basis by way of analyses of field forecasts
         and practices.
(278)    […].165
4.4.2.2. The Bayer Digital Agriculture Assets
(279)    The Bayer Digital Agriculture Assets includes in particular Bayer's entire digital
         agriculture business worldwide, including all employees (with the exception of
         six employees to be retained by Bayer), all tangible and intangible assets, all
         intellectual property rights, brands, source code, data and algorithms, and
         supporting materials for the entirety of Bayer Digital Farming's global product
         portfolio, and all literature, documentation, milestone reports, algorithms, data,
         architecture and source code pertaining to Bayer's digital agriculture research
         and development pipeline at all stages of development.166
                     Existing products
(280)    The Bayer Digital Agriculture Assets include the following existing products:
         (i)     Expert.com is an analytics tool for the evolvement of certain fungal
         diseases in agricultural crops. The analytics provide information for a farmer to
         consider when determining the volume and frequency of fungicide applications
         and certain insecticide applications. expert.com is able to analyse the infection
         process of a number of fungal diseases in wheat, barley, rye, triticale, oil seed
         rape, potatoes and sugar beets. expert.com is also able to analyse the
         development and migration of certain pests and the duration of effectiveness of
         insecticides. expert.com produces for the farmer a list of crop protection
         products (not limited to Bayer products exclusively) which will be effective
         against the relevant pest or fungal diseases detected. expert.com gives a high
         level recommendation of base dosage for a predefined restricted set of market
         products or product combinations.
         (ii) Zoner is a mapping tool that provides graphic representations of satellite
         or aerial imagery of fields, enabling the farmer to identify heterogonous zones of
         field fertility or plant stress. Zoner is designed to assist farmers, agricultural
         consultants or governments decide how best to optimise management decisions
         on a localised field or regional scale, but does not provide recommendations like
         xarvio Field Manager (see below). Zoner is currently being beta tested in Spain
         (mostly by Bayer internal users, although some external users are beta testing
         Zoner in Spain).
         (iii) Climate.center is an online database which stores and manages weather
         data from different sources in a standardised, user-friendly format. Bayer
         purchases the weather data from third-party suppliers and resells the data
         through access to the programme. Bayer purchases weather data from several
165
      Form CO, Annex 6C.1.
166
      For the full list of the Bayer Digital Agriculture Assets, see paragraph 50 of the Schedule to the
      Commitments in Case M.8084 – Bayer/Monsanto (2018).
                                                       57
 ---pagebreak---       companies including: Deutscher Wetterdienst (DWD) Germany; Meteogroup
      Germany; Wetter Online Germany; Ubimet Austria; Geosys; and several local
      organisations with a local weather station network (for example, the Agricultural
      Chambers in Germany).
      (iv) Weedscout is Bayer's smartphone app used for the identification of weeds
      from smartphone camera images taken by the farmer as he scouts his field. The
      app analyses the image taken by the farmer to identify the type of weed.
      Weedscout is still in use, although is being superseded by xarvio Scouting (see
      recital (vii) below).
      (v) Alertas is an analytics tool for the evolvement of certain fungal diseases
      and pests in agricultural crops on regional basis. It consists of a web interface to
      provide risk and weather prediction to farmers based on predefined city
      locations. The tool also offers an application-programming interface ('API') to
      provide risk and weather prediction to TV screens at sales outlets.
      (vi) FTpro is a solution for the management of industry development pilot
      protocols based on information from external partners including: (i) the
      capability to collect field level data for the pilots and associate it with protocol
      job steps; and (ii) the capability to monitor the progress of all protocols down to
      the individual job step. FTpro is a solution to automate the assembly and
      gridding of data sets relevant to a field trial into an analyst specified grid shape
      and dimension. The web application allows to view services, vectors
      (i.e., polygons and points) and imagery, view maps, turn layers on and off with
      definition query for dynamic map services or query for feature layers. FTpro
      allows the user to upload and process vector/raster data.
      (vii) xarvio Scouting is a mobile smartphone app for identifying weeds, insects,
      diseases, nitrogen stress and leaf damage through an image taken by the farmer
      on a smartphone camera. The image is analysed by the image recognition
      algorithm in the app to identify the weed, insect, disease, nitrogen level or leaf
      damage in the crop. xarvio Scouting was launched in November 2017. The
      recognition algorithm in the app is a self-learning algorithm, that relies on a
      large database of images in order for the software to accurately identify weeds,
      insects, diseases, nitrogen stress and leaf damage.
      (viii) xarvio Field Manager is a web-based software designed as a hyper-
      localised field management tool for farmers to gain maximum efficiency out of
      their use of crop protection products. xarvio Field Manager provides an
      assessment on the risk of diseases, and advises on: (i) the timing for the
      application of fungicides (and herbicides currently outside EEA) to a given crop
      (Spray Timer); and (ii) the localised field-zone where the crop protection
      product needs to be applied at variable dosage rates. The advice is contained in a
      prescription (i.e. the file for the implementation of the prescription by the
      farmer's agronomic equipment) (Zone Spray).
(281) xarvio Field Manager is designed to augment the performance and customer
      experience of Bayer's portfolio of crop protection products. It will achieve
      optimum performance with Bayer's own product portfolio as the software can
      access all internal product information as a data input. However, xarvio Field
      Manager does not operate exclusively with Bayer's range of crop protection
                                              58
 ---pagebreak---          products. xarvio Field Manager is also able to advise on the most efficient usage
         of crop protection products from other suppliers.
(282)    Xarvio Field Manager has three core functionalities:
         –      Spray Timer. This function automatically notifies the farmer of the
         optimal time to spray fungicides on his fields for one out of four applications per
         growing season. The prescription is generated by an agronomic engine using a
         disease risk model as a basis, and is provided for a given crop at field level.
         Spray Timer provides a prescription for spraying of fungicides, while the
         functionality for herbicides is in early development outside the EEA. Spray
         Timer does not generate a file for the implementation of the prescription by the
         farmer's agronomic equipment.
         –      Zone Spray uses satellite imagery (and additional data sourced either from
         third parties) to identify variations in biomass across a farmer's field. Based on
         these differences in biomass measurements, and the input from growth stage
         models, xarvio Field Manager is able to generate a variable crop protection
         application map, also referred to as a crop protection application 'prescription'.
         The map, which can be used directly with the farmer's spraying machinery,
         illustrates to the farmer the localised areas of the field where s/he needs to apply
         a greater or smaller amount of a crop protection product, or none at all.
         –      Autopilot Beta is capable of automatically planning and performing an
         entire fungicide strategy working with data from Spray Timer and Zone Spray.
         The Autopilot Beta is currently a pipeline project, it is in the testing stage and is
         not yet finalised.
                   Pipeline projects
(283)    The Bayer Digital Agriculture Assets include pipeline projects, as specified in
         Annex RC.2 to the commitments in Bayer/Monsanto, that are planned to
         become new products or enhancements of existing products. As part of the
         divestment, BASF will acquire all literature, documentation, milestone reports,
         IP, algorithms, source code and data sets related to those pipeline projects.
4.4.3.   Market definition
4.4.3.1. Product market definition
                   Commission precedents
(284)    In Bayer/Monsanto,167 the Commission assessed the digital agriculture sector, in
         particular, the provision of digitally-enabled agronomic prescriptions, which
         was considered a differentiated product market that could be further segmented
         by input product (e.g. fungicides, herbicides, insecticides, fertilizers, seeds, etc.)
         and by crop groupings (e.g. broad acre crops).
167
       Commission Decision in Case M.8084 – Bayer /Monsanto (2018), recitals 2562 to 2578.
                                                   59
 ---pagebreak---                    Notifying Party's views
(285)    According to the Notifying Party,168 distinguishing a product/application as a
         digitally-enabled prescription or a more general digital farming application is
         not always evident since digital agriculture is still in its infancy. BASF considers
         a qualitative competitive assessment of digital agriculture products a more
         adequate approach.
                   Commission assessment
(286)    Digital agriculture services are highly differentiated and still evolving. As
         mentioned in Section 4.4.2, the Parties are offering or developing a diverse
         range of digital agriculture services.
(287)    In particular, digital agriculture includes, among others, the provision of
         digitally-enabled agronomic prescriptions ('digitally-enabled prescriptions').
         These are recommendations or advice provided to growers on the selection and
         application (e.g. dosage, timing, etc.) of agronomic inputs (e.g. seeds, crop
         protection products such as herbicides, insecticides and fungicides, fertilisers,
         etc.) provided at a geographically increasingly granular level (e.g. field, field-
         zone, eventually by square meter) for a grower to implement. These
         recommendations are generated by an analytics agronomic engine based on
         large sets of public and proprietary data.
(288)    For the purposes of this decision, the Commission focusses on the provision of
         digitally-enabled prescriptions within the broad sector of digital agriculture.
         This is because, in other area, based on the available evidence, the results of the
         investigation and taking into account the stage of the development and current
         features of digital agriculture as a whole, the Parties' activities do not seem to
         overlap and/or sufficient competition would likely remain post-Transaction.
4.4.3.2. Geographic market definition
                   Commission precedents
(289)    In Bayer/Monsanto,169 the Commission assessed the digital agriculture sector, in
         particular, the provision of digitally-enabled prescriptions, which was
         considered to be a national market. However, the Commission also took into
         account the broader regional geographic context where relevant.
                   Notifying Party's views
(290)    The Notifying Party has not contested the definition of the geographic market
         applied by the Commission for the purposes of competitive assessment in
         Bayer/Monsanto.170
168
      Form CO, chapter 6C, paragraph 610.
169
      Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recitals 2583 to 2593.
170
      Form CO, chapter 6.C, paragraph 610.
                                                  60
 ---pagebreak---                     Commission assessment
(291)     There are strong indications that the markets for the provision of digitally-
          enabled prescriptions are national in scope.
(292)     The market investigation conducted in the recent Bayer/Monsanto decision
          indicated that the majority of competitors and customers understand that digital
          agriculture services are developed centrally but they are tweaked and adapted
          for deployment in individual countries even if their core characteristics and
          functionalities do not change.171
(293)     Additionally, factors such as farming practices, language, government
          regulations and specific local laws would need to be taken into account to be
          able to provide digital agriculture services.
(294)     The Commission considers the relevant geographic market for the provision of
          digitally-enabled prescriptions can be left open. However, in its assessment, the
          Commission will take into account the national market as well as the broader
          regional geographic context where relevant.
4.4.4.    Competitive assessment: Digital agriculture
4.4.4.1. Notifying Party's views172
(295)     First, the Notifying Party argues that the Transaction does not give rise to any
          concerns in a market for digitally-enabled prescriptions, or in digital agriculture
          in general.
(296)     BASF claims that: (i) the Bayer Digital Agriculture Assets will allow BASF to
          become an effective competitor to Bayer/Monsanto and other players;
          (ii) BASF's current geographic footprint is different from Bayer's; (iii) the
          acquisition of the Bayer Digital Agriculture Assets will not incentivise BASF to
          limit or discontinue investment in its current portfolio; and importantly (iv) the
          Parties' digital farming portfolios are to a large extent not comparable from a
          user perspective.
(297)     Additionally, BASF indicates that there is currently a vast range of players
          active in digital farming. Every company in the digital farming space is
          developing one or more products which differ in various ways in terms of data
          input, technology, functionality or focus.173
4.4.4.2. Commission assessment
(298)     For the reasons set out below, the Commission considers that the Transaction
          would not give rise to serious doubts in relation to digitally-enabled
          prescriptions.
171
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recitals 2584 to 2590.
172
       Form CO, chapter 6C, paragraphs 636-637.
173
       Form CO, chapter 6C, paragraph 612.
                                                   61
 ---pagebreak--- (299)    First, the Parties do not overlap in digitally-enabled prescriptions functionalities.
         As described above, BASF's Maglis suite of products is being developed mainly
         as a marketing tool enabling BASF to better interact with distributors and
         farmers. In the future, Maglis will provide general recommendations to farmers
         to help them use information collected from various sources to facilitate the
         taking of crop management decisions. The Commission considers that Maglis is
         not currently and appears unlikely to be in the foreseeable future a tool
         providing digitally-enabled prescriptions of a type enabled by the Bayer Digital
         Agriculture Assets. In contrast to BASF’s Maglis general recommendations and
         as detailed in the Bayer/Monsanto decision174, Bayer's digital agriculture efforts
         include the development and the offering of digitally-enabled prescriptions
         based on algorithms and data at a granular level and oriented towards achieving
         specific results. Bayer is about to start commercialising its digitally-enabled
         prescriptions of fungicides for broad acre crops in the EEA and is likely to
         further expand its offering in terms of crop protection products and crops
         covered.
(300)    Second, the divestment of the Bayer Digital Agriculture Assets will be
         accompanied by a worldwide (excluding North America) licence back to Bayer
         that will allow Bayer to continue developing and offering digital agriculture
         products based on the technologies it is divesting to BASF. Therefore, the
         Transaction will not only preserve the existing number of competitors offering
         digitally enabled prescriptions present in the EEA but will actually increase the
         number of active players. Indeed, the Transaction will transfer to BASF Bayer's
         current and pipeline digitally-enabled prescription assets and products in the
         EEA, creating a new competitor in this market without removing Bayer's ability
         to offer such prescriptions on the basis of the transferred technologies.
4.4.5.   Conclusion on digital agriculture
(301)    On the basis of the available evidence and the results of the investigation, the
         Commission considers that the Transaction does not give rise to serious doubts
         as to its compatibility with the internal market in relation digitally enabled
         prescriptions.
5.       PROPOSED REMEDIES
5.1.     Framework of the assessment of the commitments
(302)    Where, as in this case, a notified concentration raises serious doubts as to its
         compatibility with the internal market, the Parties may modify the notified
         concentration so as to remove the grounds for the serious doubts identified by
         the Commission with a view to having it declared compatible with the internal
         market pursuant to Article 6(1)(b) in conjunction with Article 6(2) of the Merger
         Regulation.
(303)    As set out in the Commission Notice on Remedies, commitments have to
         eliminate the Commission's serious doubts entirely and they have to be
         comprehensive and effective from all points of view.
174
       Commission Decision in Case M.8084 – Bayer/Monsanto (2018), recitals 2614 to 2629.
                                                   62
 ---pagebreak--- (304) In assessing whether or not commitments will restore effective competition, the
      Commission considers all relevant factors, including the type, scale and scope of
      the proposed commitments, with reference to the structure and particular
      characteristics of the market in which the Commission has identified serious
      doubts, including the position of the Parties and other participants on the market.
5.2.  Commitments submitted by the Notifying Party
(305) In order to address the serious doubts raised by the Transaction with a view to
      rendering the concentration compatible with the internal market, the Notifying
      Party has modified the notified concentration by submitting to the Commission
      proposed commitments.
(306) The Notifying Party submitted two sets of commitments. Notably, the Notifying
      Party formally submitted a remedy proposal on 9 April 2018 and a revised
      remedy proposal on 10 April 2018 (the 'Initial Commitments'). After the
      Commission gathered the views of market participants on the Initial
      Commitments (the 'market test'), and informed the Notifying Party of the
      remaining serious doubts raised by the Transaction, the Notifying Party
      submitted a revised remedy proposal on 20 April 2018 (the 'Final
      Commitments').
(307) The Commission considers that the Final Commitments are sufficient to ensure
      that, if implemented, the Transaction no longer raises serious doubts as to its
      compatibility with the internal market. The Final Commitments are annexed to
      this Decision and form an integral part of the Decision.
5.3.  Initial Commitments
(308) Initially, the Notifying Party proposed the divestment of two separate
      divestment packages, to be purchased by either separate purchasers or by one
      single purchaser (the 'Purchaser' or 'Purchasers'): BASF's Trunemco assets (the
      'Nematicidal Seed Treatment Assets') and a licence to Bayer's [NSH line of
      research 1] for NSH (the '[NSH line of research 1] Data Transfer and Licence'
      and, together with the Nematicidal Seed Treatment Assets, the 'Divestment
      Businesses').
(309) The Nematicidal Seed Treatment Assets consist of the assets comprising BASF's
      global nematode control seed treatment pipeline project, known as 'Trunemco'
      and which consists of a combination of a biological (a type of bacillus (bacteria)
      that colonises plant roots and excludes pathogens) and a semio-chemical. As
      described in the Initial Commitments, the Nematicidal Seed Treatment Assets
      consisted of:
      (a)    all intellectual property related to Trunemco, including but not limited to
             worldwide patents, trademarks, and copyrights;
      (b)    all product registrations and pending regulatory submissions related to
             Trunemco;
      (c)    all current formulations and those in development, as well as inter alia all
             developed processes, procedures, recipes, manuals, and quality control
                                               63
 ---pagebreak---             measures for the manufacture and formulation of Trunemco, including but
            not limited to protectable trade secrets;
      (d)   all data and analyses from Trunemco field trials, including ongoing trials,
            protocols, and studies and summaries of such studies;
      (e)   all sales and marketing assets, including BASF's marketing and
            distribution plans, all market research conducted to date on Trunemco, the
            Trunemco website and domains, and Trunemco social media sites (to the
            extent that such websites, domains or social media sites are in existence);
      (f)   a transitional supply agreement for the biological (bacillus) component of
            Trunemco, at variable cost for an initial period of one year, which can be
            extended at the option of the purchaser for up to two further periods (up to
            a total of three years); and
      (g)   a number of transitional services including: sales and marketing training;
            assistance regarding regulatory approvals; support regarding the
            completion of ongoing regulatory studies; consulting support regarding
            supply chain processes.
(310) The [NSH line of research 1] Data Transfer and Licence consisted of the transfer
      of data and know-how from field trials and an exclusive licence to the IP rights
      and know-how relating to such line of research for all non-commercial and
      commercial applications in the field of non-selective uses. The [NSH line of
      research 1] Data Transfer and Licence also included the transfer of two key
      personnel. Moreover, as described in the Initial Commitments, the [NSH line of
      research 1] Data Transfer and Licence included a material testing agreement for
      BASF's [NSH line of research 1]-tolerance genes and an option for the
      Purchaser to use these genes in developing [NSH line of research 1]-tolerant
      […] through a development and commercial licence (with a cross-licence giving
      BASF's [NSH line of research 1] chemistry access to the Purchaser's traited
      acres).
(311) In addition, the Notifying Party proposed to enter into related commitments,
      including the separation of the divested businesses from their retained
      businesses, the preservation of the viability, marketability and competitiveness
      of the divested businesses, including the appointment of a monitoring trustee
      and, if necessary, a divestiture trustee.
(312) The Commission assessed the appropriateness of the Initial Commitments and
      carried out a market test.
5.4.  The Commission's market test
(313) The Commission launched a market test of the Initial Commitments on
      11 April 2018.
(314) In general, the view of the market test respondents was that the Initial
      Commitments could remedy the serious doubts identified by the Commission,
      subject to the modification of a number of specific elements of the Initial
      Commitments.
                                               64
 ---pagebreak--- (315)    In particular, a majority of respondents indicated that it was important for the
         Purchaser of the Nematicidal Seed Treatment Assets to obtain personnel in order
         to ensure the viability and competitiveness of the Nematicidal Seed Treatment
         Assets. A majority of respondents also indicated that the transitional supply
         arrangements (at variable cost) for the biological (bacillus) component of
         Trunemco should be of a longer duration than foreseen in the Initial
         Commitments.175
(316)    A number of respondents also indicated that the IP licence provisions were too
         restrictive. In the Initial Comments, the Purchaser was granted a licence of IP
         based on the original two-component formulation of Trunemco only. These
         respondents indicated that the Purchaser should be free to create additional
         mixtures using the two components of Trunemco, for example by adding an
         additional active ingredient.176 A number of respondents further identified that
         due to BASF retaining certain IP rights regarding the mixture components, it
         was not excluded that BASF could re-enter the nematicidal seed treatment
         market with a product consisting of the same or similar components of
         Trunemco.177
(317)    Regarding the [NSH line of research 1] Data Transfer and Licence, half of the
         respondents expressing a view explained that the ancillary cross-licensing
         obligation would have an adverse effect on the Purchaser's incentives to fully
         develop the [NSH line of research 1] line of research globally, as well as more
         generally on the viability and competitiveness of the [NSH line of research 1]
         Data Transfer and Licence.178 This obligation would require the Purchaser and
         BASF to enter into an additional cross-licensing agreement giving BASF access
         to the Purchaser's [NSH line of research 1] traited acres, if the Purchaser made
         use of the option to a non-exclusive development and commercial licence to
         BASF's [NSH line of research 1] tolerance genes. Such option would enable the
         Purchaser to develop [NSH line of research 1]-tolerance traits based on these
         BASF genes to be used with the products developed through the [NSH line of
         research 1] line of research.
(318)    In all other respects, respondents generally considered that the Divested
         Businesses include all necessary assets and would be able to compete effectively
         with the merged entity.179
175
      See responses to the Questionnaire on Commitments offered by BASF and to the Questionnaire on
      Commitments offered by BASF
176
      See responses to the Questionnaire on Commitments offered by BASF and to the Questionnaire on
      Commitments offered by BASF
177
      See responses to the Questionnaire on Commitments offered by BASF and to the Questionnaire on
      Commitments offered by BASF
178
      See responses to the Questionnaire on Commitments offered by BASF and to the Questionnaire on
      Commitments offered by BASF.
179
      See responses to the Questionnaire on Commitments offered by BASF and to the Questionnaire on
      Commitments offered by BASF.
                                                   65
 ---pagebreak--- 5.5.   Final Commitments submitted by the Notifying Party
5.5.1. Description of the Final Commitments
(319)  As explained above, the Notifying Party submitted the Final Commitments on
       20 April 2018. The full text of the Final Commitments is attached as the Annex
       to this Decision.
(320)  The Final Commitments have been modified vis-à-vis the Initial Commitments
       as described in Section 5.3 as follows:
       (a)    at the option of the Purchaser, up to […] employees […] are included in
              the Nematicidal Seed Treatment Assets to ensure their viability and
              competitiveness;
       (b)    transitional supply of the biological (bacillus) component of Trunemco at
              variable cost was modified from a total maximum period of […] years to
              an initial period of […] years, extendable up to a total of […] years;
       (c)    BASF commits not to assert its rights under any patents to restrict the use
              of the Nematicidal Seed Treatment Assets in mixtures with any other
              active ingredients;
       (d)    BASF shall not develop or commercialise a nematicidal seed treatment
              based on the two Trunemco components, for a period of […] years
              following the sale of the Nematicidal Seed Treatment Assets (or the
              lifetime of the patent rights, whichever is longer); and
       (e)    […].
(321)  The Final Commitments also clarify some language to ensure that all necessary
       rights and assets transfer to the Purchasers.
5.5.2. Assessment of the Final Commitments
(322)  The Commission considers that the Final Commitments set aside the serious
       doubts raised by the Transaction entirely because they remove the entire overlap
       between the Parties in nematicidal seed treatment in the EEA and NSH
       innovation in which serious doubts were raised. The Commission also finds that
       the modifications contained in the Final Commitments and described at
       Section 5.5.1 above address the outstanding issues, as identified in the course of
       the market investigation, related to the viability and competitiveness of the
       Divestment Businesses.
5.5.3. Conclusion on the Final Commitments
(323)  For the reasons outlined above, the Commission considers that the commitments
       entered into by the undertakings concerned are sufficient and appropriate to
       eliminate the serious doubts as to the compatibility of the Transaction with the
       internal market with respect to (i) the sale of nematicidal seed treatment in
       the EEA and (ii) NSH innovation.
(324)  Under the first sentence of the second subparagraph of Article 6(2) of the
       Merger Regulation, the Commission may attach to its decision conditions and
                                                66
 ---pagebreak---       obligations intended to ensure that the undertakings concerned comply with the
      commitments they have entered into vis-à-vis the Commission with a view to
      rendering the concentration compatible with the internal market.
(325) The fulfilment of the measures that gives rise to the structural change of the
      market is a condition, whereas the implementing steps that are necessary to
      achieve this result are generally obligations on the Parties. Where a condition is
      not fulfilled, the Commission's decision declaring the concentration compatible
      with the internal market and the EEA Agreement is no longer applicable. Where
      the undertakings concerned commit a breach of an obligation, the Commission
      may revoke the clearance decision in accordance with Article 6(3) of the Merger
      Regulation. The undertakings concerned may also be subject to fines and
      periodic penalty payments under Articles 14(2) and 15(1) of the Merger
      Regulation.
(326) In accordance with the basic distinction between conditions and obligations, the
      commitments in Sections B and C as well as the Schedule of the Final
      Commitments set out in the Annex constitute conditions attached to this
      decision, as only through full compliance therewith can the structural changes in
      the relevant markets be achieved. The other commitments set out in the Annex
      constitute obligations, as they concern the implementing steps that are necessary
      to achieve the modifications sought in a manner compatible with the internal
      market.
(327) The full text of the Final Commitments is attached to this Decision as the Annex
      and forms an integral part thereof.
6.    CONCLUSION
(328) For the above reasons, the Commission has decided not to oppose the proposed
      concentration notified on 7 March 2018, as modified by the commitments
      presented on 20 April 2018, and to declare it compatible with the internal
      market and with the functioning of the EEA Agreement, subject to full
      compliance with the conditions in Sections B and C as well as the Schedule of
      the commitments annexed to the present decision and with the obligations
      contained in the other sections of the said commitments. This decision is
      adopted in application of Article 6(1)(b) in conjunction with Article 6(2) of the
      Merger Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (Signed)
                                                    Phil HOGAN
                                                    Member of the Commission
                                             67
 ---pagebreak---                                                Annex
                                                                                 20 April 2018
                Case M.8851 – BASF / BAYER DIVESTMENT BUSINESS
                 COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the Merger Regulation),
BASF SE (BASF) hereby enter into the following Commitments (the Commitments) vis-à-vis
the European Commission (the Commission) with a view to rendering its proposed
acquisition of the Bayer Divestment Business (the Concentration) compatible with the
internal market and the functioning of the EEA Agreement.
This text shall be interpreted in light of the Commission’s decision pursuant to Article 6(1)(b)
of the Merger Regulation to declare the Concentration compatible with the internal market
and the functioning of the EEA Agreement (the Decision), in the general framework of
European Union law, in particular in light of the Merger Regulation, and by reference to the
Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and
under Commission Regulation (EC) No 802/2004 (the Remedies Notice).
Section A.       Definitions
1. For the purpose of the Commitments, the following terms shall have the following
    meaning:
    Affiliated Undertakings: undertakings controlled by the Parties and/or by the ultimate
    parents of the Parties, whereby the notion of control shall be interpreted pursuant to
    Article 3 of the Merger Regulation and in light of the Commission Consolidated
    Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of
    concentrations between undertakings (the Consolidated Jurisdictional Notice).
    Assets: the assets that contribute to the current operation or are necessary to ensure the
    viability and competitiveness of the Divestment Businesses as indicated in Section B and
    Section C and described more in detail in the Schedule.
    BASF: BASF SE, a stock corporation incorporated under the laws of the Federal Republic
    of Germany, with its registered office at G-FLL/S-D100, Ludwigshafen am Rhein, 67056,
    and registered with the local court (Amtsgericht) Ludwigshafen am Rhein under
    Handelsregister (commercial register) number HRB 6000.
    Bayer: Bayer Aktiengesellschaft, a stock corporation incorporated under the laws of the
    Federal Republic of Germany, with its registered office at Kaiser-Wilhelm-Allee 1, 51373
 ---pagebreak--- Leverkusen, Germany, and registered with the local court (Amtsgericht) Cologne under
Handelsregister number 48248.
Bayer Divestment Business: the businesses to be acquired by BASF from Bayer pursuant
to the commitments given by Bayer to the European Commission in case M.8084 –
Bayer/Monsanto.
Confidential Information: any business secrets, know-how, commercial information, or
any other information of a proprietary nature that is not in the public domain.
Conflict of Interest: any conflict of interest that impairs the Trustee's objectivity and
independence in discharging its duties under the Commitments.
Divestment Businesses: the Trunemco Assets and the [NSH line of research 1] Data
Transfer and Licence.
Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by BASF and who has/have received from BASF the
exclusive Trustee Mandate to sell the Divestment Businesses to one or more Purchasers at
no minimum price.
Effective Date: the date of adoption of the Decision.
Hold Separate Managers: the persons appointed by BASF for the Divestment
Businesses to manage the day-to-day businesses under the supervision of the Monitoring
Trustee.
Key Personnel: all personnel necessary to maintain the viability and competitiveness of
the Divestment Businesses, as listed in the Schedule, including the Hold Separate
Managers (as applicable).
Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by BASF, and who has/have the duty to monitor BASF’s
compliance with the conditions and obligations attached to the Decision.
Monsanto: Monsanto Company, a corporation incorporated under the laws of the State of
Delaware, United States of America, with its registered office at 800 North Lindbergh
Boulevard, St Louis, Missouri, 63167, United States of America, and registered with the
Secretary of State of the State of Delaware under File Number 3174788.
Parties: BASF and Bayer.
Purchaser: the entity or entities approved by the Commission as acquirer or acquirers of
the Divestment Businesses in accordance with the criteria set out in Section E.
Purchaser Criteria: the criteria laid down in paragraph 18 and paragraph 19 of these
Commitments that Purchasers of the Divestment Businesses must fulfil in order to be
approved by the Commission.
                                               2
 ---pagebreak--- Schedule(s): the schedule(s) to these Commitments describing more in detail the
Divestment Businesses.
[NSH line of research 1] Data Transfer and Licence: the package of intellectual
property rights relating to [NSH line of research 1h] class herbicide chemistry type [mode
of action for NSH line of research 1] inhibitor described in part II of the Schedule to
which BASF commits to give the Purchaser exclusive rights for non-selective uses. This
in addition includes: (i) a material transfer agreement on terms substantially similar to
those granted by BASF to […] (as per the […], attached as Annex I), which includes a
research license for the Purchaser […]; and (ii) an option to a non-exclusive development
and commercial license, on commercially reasonable terms, to […] that will be
exercisable if the Purchaser develops a registrable [NSH line of research 1] class herbicide
chemistry type [mode of action for NSH line of research 1] inhibitor as defined in the
[NSH line of research 1] Data Transfer and License. The non-exclusive development and
commercial license would permit the Purchaser to develop a [mode of action for NSH
line of research 1] HT trait in […].
[NSH line of research 1] Data Transfer and Licence Closing: the transfer to the
Purchaser of the [NSH line of research 1] Data Transfer and Licence.
[NSH line of research 1] Data Transfer and Licence Closing Period: the period of […]
from the approval of the Purchaser and the terms of sale by the Commission.
[NSH line of research 1] Data Transfer and Licence First Divestiture Period: the
period of […] from the date of the closing of the Bayer / Monsanto transaction.
[NSH line of research 1] Data Transfer and Licence Samples: samples of up to
100 milligrams of chemical structures where such samples are still available to BASF and
have not degraded in storage. BASF will not re-synthesise samples of chemical structures
if it no longer has sufficient volumes, or quality, of the relevant samples.
Trunemco Assets: the assets comprising BASF’s global nematode control seed treatment
pipeline project, known as ‘Trunemco’, described in part I of the Schedule, and defined by
the nematode repellent combination of MBI 600 and cis-Jasmone.
Trunemco Assets Closing: the transfer to the Purchaser of the Trunemco Assets.
Trunemco Assets Closing Period: the period of […] months from the approval of the
Purchaser and the terms of sale by the Commission.
Trunemco Assets First Divestiture Period: the period of […] months from the date of
the closing of the Bayer / Monsanto transaction.
Trunemco Patent Rights: the patents cited in paragraph 3(a)(i)-(iii) of part I of the
Schedule.
Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.
                                                3
 ---pagebreak---    Trustee Divestiture Period: the period of […] months from the end of the Trunemco
   Assets First Divestiture Period and/or [NSH line of research 1] Data Transfer and Licence
   First Divestiture Period (as applicable).
Section B.      The commitment to divest the Trunemco Assets
      Commitment to divest
2. In order to maintain effective competition, BASF commits to divest, or procure the
   divestiture of, the Trunemco Assets by the end of the Trustee Divestiture Period as a
   going concern to a Purchaser and on terms of sale approved by the Commission in
   accordance with the procedure described in paragraph 18 of these Commitments. To
   carry out the divestiture, BASF commits to find a Purchaser and to enter into a final
   binding sale and purchase agreement for the sale of the Trunemco Assets within the
   Trunemco Assets First Divestiture Period. If BASF has not entered into such an
   agreement at the end of the Trunemco Assets First Divestiture Period, BASF shall grant
   the Divestiture Trustee an exclusive mandate to sell the Trunemco Assets in accordance
   with the procedure described in paragraph 32 in the Trustee Divestiture Period.
3. BASF shall be deemed to have complied with this commitment if:
      (a)      by the end of the Trustee Divestiture Period, BASF or the Divestiture Trustee
               has entered into a final binding sale and purchase agreement for the Trunemco
               Assets and the Commission approves the proposed Purchaser and the terms of
               sale as being consistent with the Commitments in accordance with the
               procedure described in paragraph 18; and
      (b)      the Trunemco Assets Closing takes place within the Trunemco Assets Closing
               Period.
4. In order to maintain the structural effect of the Commitments, BASF shall, for a period of
   10 years after the Trunemco Assets Closing or the lifetime of the Trunemco Patent Rights
   (whichever is longer), not acquire, whether directly or indirectly, the possibility of
   exercising influence (as defined in paragraph 43 of the Remedies Notice, footnote 3) over
   the whole or part of the Trunemco Assets, or develop and/or commercialise any seed
   treatment with nematicidal action that uses the nematode repellent combination of
   MBI 600 and cis-Jasmone in any form (including in a mixture of Trunemco with other
   components), unless, following the submission of a reasoned request from BASF showing
   good cause and accompanied by a report from the Monitoring Trustee (as provided in
   paragraph 46 of these Commitments), the Commission finds that the structure of the
   market has changed to such an extent that the absence of influence over the Trunemco
   Assets is no longer necessary to render the proposed concentration compatible with the
   internal market.
                                                   4
 ---pagebreak---       Structure and definition of the Divestment Business
5. The Trunemco Assets consists of the assets comprising BASF’s global nematode control
   seed treatment pipeline project, known as ‘Trunemco’, described in part I of the Schedule,
   and defined by the nematode repellent combination of MBI 600 and cis-Jasmone.
Section C.      The commitment to divest the [NSH line of research 1] Data Transfer and
Licence
      Commitment to divest
6. In order to maintain effective competition, BASF commits to divest, or procure the
   divestiture of, the [NSH line of research 1] Data Transfer and Licence by the end of the
   Trustee Divestiture Period as a going concern to a Purchaser and on terms of sale
   approved by the Commission in accordance with the procedure described in paragraph 19
   of these Commitments. To carry out the divestiture, BASF commits to find a Purchaser
   and to enter into a final binding sale and purchase agreement for the sale of the [NSH line
   of research 1] Data Transfer and Licence within the [NSH line of research 1] Data
   Transfer and Licence First Divestiture Period. If BASF has not entered into such an
   agreement at the end of the [NSH line of research 1] Data Transfer and Licence First
   Divestiture Period, BASF shall grant the Divestiture Trustee an exclusive mandate to sell
   the [NSH line of research 1] Data Transfer and Licence in accordance with the procedure
   described in paragraph 32 in the Trustee Divestiture Period.
7. BASF shall be deemed to have complied with this commitment if:
      (a)      by the end of the Trustee Divestiture Period, BASF or the Divestiture Trustee
               has entered into a final binding sale and purchase agreement for the [NSH line
               of research 1] Data Transfer and Licence and the Commission approves the
               proposed Purchaser and the terms of sale as being consistent with the
               Commitments in accordance with the procedure described in paragraph 19; and
      (b)      the [NSH line of research 1] Data Transfer and Licence Closing takes place
               within the [NSH line of research 1] Data Transfer and Licence Closing Period.
8. In order to maintain the structural effect of the Commitments, BASF shall, for a period of
   […] after the [NSH line of research 1] Data Transfer and Licence Closing, not acquire,
   whether directly or indirectly, the possibility of exercising influence (as defined in
   paragraph 43 of the Remedies Notice, footnote 3) over the whole or part of the [NSH line
   of research 1] Data Transfer and Licence, unless, following the submission of a reasoned
   request from BASF showing good cause and accompanied by a report from the
   Monitoring Trustee (as provided in paragraph 46 of these Commitments), the Commission
   finds that the structure of the market has changed to such an extent that the absence of
   influence over the [NSH line of research 1] Data Transfer and Licence is no longer
   necessary to render the proposed concentration compatible with the internal market.
                                                   5
 ---pagebreak---        Structure and definition of the Divestment Business
9. The [NSH line of research 1] Data Transfer and Licence comprises the package of
    intellectual property rights relating to [NSH line of research 1] class herbicide chemistry
    type [mode of action for NSH line of research 1] inhibitor described in part II of the
    Schedule to which BASF commits to give the Purchaser exclusive rights for non-selective
    uses.
 Section D.       Related commitments
       Preservation of viability, marketability and competitiveness
10. From the Effective Date until the Trunemco Assets Closing and [NSH line of research 1]
    Data Transfer and Licence Closing (as applicable), BASF shall preserve or procure the
    preservation of the economic viability, marketability and competitiveness of the
    Divestment Businesses, in accordance with good business practice, and shall minimise as
    far as possible any risk of loss of competitive potential of the Divestment Businesses. In
    particular BASF undertakes:
       (a)      not to carry out any action that might have a significant adverse impact on the
                value, management or competitiveness of the Divestment Businesses or that
                might alter the nature and scope of activity, or the industrial or commercial
                strategy or the investment policy of the Divestment Businesses;
       (b)      to make available, or procure to make available, sufficient resources for the
                development of the Divestment Businesses, on the basis and continuation of
                the existing business plans;
       (c)      to take all reasonable steps, or procure that all reasonable steps are being taken,
                including appropriate incentive schemes (based on industry practice), to
                encourage all Key Personnel to remain with the Divestment Businesses.
                Where, nevertheless, individual members of the Key Personnel exceptionally
                leave the Divestment Businesses, BASF, with the assistance of Bayer, shall
                provide a reasoned proposal to replace the person or persons concerned to the
                Commission and the Monitoring Trustee. BASF must be able to demonstrate to
                the Commission that the replacement is well suited to carry out the functions
                exercised by those individual members of the Key Personnel. The replacement
                shall take place under the supervision of the Monitoring Trustee, who shall
                report to the Commission.
       Hold-separate obligations
11. BASF commits, from the Effective Date until the Trunemco Assets Closing and the [NSH
    line of research 1] Data Transfer and Licence Closing (as applicable), to keep, or procure
    the keeping of, the Divestment Businesses separate from the businesses it is retaining and
    to ensure that unless explicitly permitted under these Commitments: (i) management and
    staff of the businesses retained by BASF have no involvement in the Divestment
    Businesses; and (ii) the Key Personnel have no involvement in any business retained by
                                                     6
 ---pagebreak---     BASF and do not report to any individual outside the Divestment Businesses. For the
    avoidance of doubt, BASF also commits to […].
12. Until the Trunemco Asset Closing and [NSH line of research 1] Data Transfer and
    Licence Closing (as applicable), BASF shall assist the Monitoring Trustee in ensuring that
    the Divestment Businesses are managed as distinct and saleable entities separate from the
    businesses which BASF is retaining. Immediately after the adoption of the Decision,
    BASF shall appoint a Hold Separate Manager for each of the Trunemco Assets and [NSH
    line of research 1] Data Transfer and Licence respectively. […]. The Hold Separate
    Managers shall manage the Divestment Businesses independently and in the best interest
    of the businesses with a view to ensuring their continued economic viability, marketability
    and competitiveness and their independence from the businesses retained by BASF. The
    Hold Separate Managers shall closely cooperate with and report to the Monitoring Trustee
    and, if applicable, the Divestiture Trustee. Any replacement of either or both Hold
    Separate Managers shall be subject to the procedure laid down in paragraph 10(c) of these
    Commitments. The Commission may, after having heard BASF, require BASF to replace
    either or both Hold Separate Managers.
       Ring-fencing
13. BASF shall implement, or procure to implement, all necessary measures to ensure that it
    does not, after the Effective Date, obtain any Confidential Information relating to the
    Divestment Businesses and that any such Confidential Information obtained by BASF
    before the Effective Date will be eliminated and not be used by BASF. In particular, the
    [NSH line of research 1] Data Transfer and Licence shall not be incorporated into any
    central information technology network held by BASF. BASF shall implement
    appropriate ring-fencing measures in respect of the way in which information related to
    the Trunemco Assets is stored on its central information technology network until such
    time as the participation of the Trunemco Assets in the central information technology
    network can be severed. BASF may obtain or keep information relating to the Divestment
    Businesses which is reasonably necessary for the divestiture of the Divestment Businesses
    or the disclosure of which to BASF is required by law. […].
       Non-solicitation clause
14. BASF undertakes, subject to customary limitations, not to solicit, and to procure that
    Affiliated Undertakings do not solicit, the Key Personnel transferred with the Divestment
    Businesses for a period of […] after the [NSH line of research 1] Data Transfer and
    Licence Closing.
                                                   7
 ---pagebreak---       Due diligence
15. In order to enable potential purchasers to carry out a reasonable due diligence of the
    Divestment Businesses, BASF shall, subject to customary confidentiality assurances and
    dependent on the stage of the divestiture process:
      (a)       provide, or procure to provide, to potential purchasers sufficient information as
                regards the Divestment Businesses;
      (b)       provide, or procure to provide, to potential purchasers sufficient information
                relating to the Key Personnel and allow them reasonable access to the Key
                Personnel.
       Reporting
16. BASF shall submit written reports in English on potential purchasers of the Divestment
    Businesses and developments in the negotiations with such potential purchasers to the
    Commission and the Monitoring Trustee no later than 10 days after the end of every
    month following the Effective Date (or otherwise at the Commission’s request). BASF
    shall submit a list of all potential purchasers having expressed interest in acquiring the
    Divestment Businesses to the Commission at each and every stage of the divestiture
    process, as well as a copy of all the offers made by potential purchasers within five days
    of their receipt.
17. BASF shall inform the Commission and the Monitoring Trustee on the preparation of the
    data room documentation and the due diligence procedure and shall submit a copy of any
    information memorandum to the Commission and the Monitoring Trustee before sending
    the memorandum out to potential purchasers.
Section E.       The Purchaser
18. In order to be approved by the Commission as the Purchaser of the Trunemco Assets, the
    Purchaser must fulfil the following criteria:
      (a) The Purchaser shall be independent of and unconnected to each of BASF and Bayer
      and their respective Affiliated Undertakings (this being assessed having regard to the
      situation following the divestiture);
      (b) The Purchaser shall have the financial resources, proven expertise and incentive to
      maintain and develop the Trunemco Assets as a viable and active competitive force in
      competition with BASF and other competitors;
      (c) The acquisition of the Trunemco Assets by the Purchaser must neither be likely to
      create, in light of the information available to the Commission, prima facie competition
      concerns nor give rise to a risk that the implementation of the Commitments will be
      delayed. In particular, the Purchaser must reasonably be expected to obtain all necessary
                                                    8
 ---pagebreak---        approvals from the relevant regulatory authorities for the acquisition of Trunemco
       Assets; and
       (d) The Purchaser shall have relevant industry experience.
19. In order to be approved by the Commission as the Purchaser of the [NSH line of
    research 1] Data Transfer and Licence, the Purchaser - who can be (but does not need to
    be) the same Purchaser as the Purchaser of the Trunemco Assets - must fulfil the
    following criteria:
       (a) The Purchaser shall be independent of and unconnected to each of BASF and Bayer
       and their respective Affiliated Undertakings (this being assessed having regard to the
       situation following the divestiture);
       (b) The Purchaser shall have the financial resources, proven expertise and incentive to
       maintain and develop the [NSH line of research 1] Data Transfer and Licence as a
       viable and active competitive force in competition with BASF and other competitors.
       […]; and
       (c) The acquisition of the [NSH line of research 1] Data Transfer and Licence by the
       Purchaser must neither be likely to create, in light of the information available to the
       Commission, prima facie competition concerns nor give rise to a risk that the
       implementation of the Commitments will be delayed. In particular, the Purchaser must
       reasonably be expected to obtain all necessary approvals from the relevant regulatory
       authorities for the acquisition of the [NSH line of research 1] Data Transfer and
       Licence.
20. The final binding sale and purchase agreements (as well as ancillary agreements) relating
    to the divestment of the Divestment Businesses shall be conditional on the Commission’s
    approval. When BASF has reached agreement with each Purchaser, it shall submit a fully
    documented and reasoned proposal, including a copy of the final agreement, within one
    week to the Commission and the Monitoring Trustee. BASF must be able to demonstrate
    to the Commission that each Purchaser fulfils the Purchaser Criteria and that the
    Divestment Businesses are being sold in a manner consistent with the Commission's
    Decision and the Commitments. For the approval, the Commission shall verify that each
    Purchaser fulfils the Purchaser Criteria and that Divestment Businesses are being sold in a
    manner consistent with the Commitments including their objective to bring about a lasting
    structural change in the market. The Commission may approve the sale of the Divestment
    Businesses without one or more Assets or parts of the personnel, or by substituting one or
    more Assets or parts of the personnel with one or more different assets or different
    personnel, if this does not affect the viability and competitiveness of the Divestment
    Businesses after the sale, taking account of the proposed Purchaser.
                                                   9
 ---pagebreak--- Section F.        Trustee
       I.         Appointment procedure
21. BASF shall appoint a Monitoring Trustee to carry out the functions specified in these
    Commitments for a Monitoring Trustee. BASF commits not to close the Concentration
    before the appointment of a Monitoring Trustee.
22. If BASF has not entered into binding sale and purchase agreement (or agreements)
    regarding the Divestment Businesses one month before the end of the Trunemco Assets
    First Divestiture Period and/or [NSH line of research 1] Data Transfer and Licence First
    Divestiture Period (as applicable) or if the Commission has rejected a purchaser proposed
    by BASF at that time or thereafter, BASF shall appoint a Divestiture Trustee for the part
    of the Divestment Businesses (i.e. the Trunemco Assets and/or the [NSH line of
    research 1] Data Transfer and Licence as applicable) for which either BASF has not
    entered into a binding sale and purchase agreement, or the Commission has rejected a
    purchaser. The appointment of the Divestiture Trustee shall take effect upon the
    commencement of the Trustee Divestiture Period.
23. The Trustee shall:
      (i) at the time of appointment, be independent of BASF and its Affiliated Undertakings;
      (ii) possess the necessary qualifications to carry out its mandate, for example have
      sufficient relevant experience as an investment banker or consultant or auditor; and
      (iii) neither have nor become exposed to a Conflict of Interest.
24. The Trustee shall be remunerated by BASF in a way that does not impede the independent
    and effective fulfilment of its mandate. In particular, where the remuneration package of
    a Divestiture Trustee includes a success premium linked to the final sale value of the
    Divestment Business, such success premium may only be earned if the divestiture takes
    place within the Trustee Divestiture Period.
                  Proposal by BASF
25. No later than two weeks after the Effective Date, BASF shall submit the name or names of
    one or more natural or legal persons whom BASF proposes to appoint as the Monitoring
    Trustee to the Commission for approval. No later than one month before the end of the
    Trunemco Assets First Divestiture Period and/or [NSH line of research 1] Data Transfer
    and Licence First Divestiture Period (as applicable), or on request by the Commission,
    BASF shall submit a list of one or more persons whom BASF proposes to appoint as
    Divestiture Trustee to the Commission for approval. The proposal shall contain sufficient
    information for the Commission to verify that the person or persons proposed as Trustee
    fulfil the requirements set out in paragraph 23 and shall include:
      (a)        the full terms of the proposed mandate, which shall include all provisions
                 necessary to enable the Trustee to fulfil its duties under these Commitments;
                                                    10
 ---pagebreak---        (b)       the outline of a work plan which describes how the Trustee intends to carry out
                 its assigned tasks;
       (c)       an indication whether the proposed Trustee is to act as both Monitoring Trustee
                 and Divestiture Trustee or whether different trustees are proposed for the two
                 functions.
                  Approval or rejection by the Commission
26. The Commission shall have the discretion to approve or reject the proposed Trustee(s) and
    to approve the proposed mandate subject to any modifications it deems necessary for the
    Trustee to fulfil its obligations. If only one name is approved, BASF shall appoint or cause
    to be appointed the person or persons concerned as Trustee, in accordance with the
    mandate approved by the Commission. If more than one name is approved, BASF shall be
    free to choose the Trustee to be appointed from among the names approved. The Trustee
    shall be appointed within one week of the Commission’s approval, in accordance with the
    mandate approved by the Commission.
                  New proposal by the BASF
27. If all the proposed Trustees are rejected, BASF shall submit the names of at least two
    more natural or legal persons within one week of being informed of the rejection, in
    accordance with paragraphs 21 and 26 of these Commitments.
                  Trustee nominated by the Commission
28. If all further proposed Trustees are rejected by the Commission, the Commission shall
    nominate a Trustee, whom BASF shall appoint, or cause to be appointed, in accordance
    with a trustee mandate approved by the Commission.
        II.       Functions of the Trustee
29. The Trustee shall assume its specified duties and obligations in order to ensure
    compliance with the Commitments. The Commission may, on its own initiative or at the
    request of the Trustee or BASF, give any orders or instructions to the Trustee in order to
    ensure compliance with the conditions and obligations attached to the Decision.
                  Duties and obligations of the Monitoring Trustee
30. The Monitoring Trustee shall:
    (i)      propose in its first report to the Commission a detailed work plan describing how it
             intends to monitor compliance with the obligations and conditions attached to the
             Decision.
                                                     11
 ---pagebreak--- (ii)  oversee, in close co-operation with the Hold Separate Managers, the on-going
      management of the Divestment Businesses with a view to ensuring its continued
      economic viability, marketability and competitiveness and monitor compliance by
      BASF with the conditions and obligations attached to the Decision. To that end the
      Monitoring Trustee shall:
        (a) monitor the preservation of the economic viability, marketability and
             competitiveness of the Divestment Businesses, and the keeping separate of
             the Divestment Businesses from the business retained by the Parties, in
             accordance with paragraphs 10 and 11 of these Commitments;
        (b) supervise the management of the Divestment Businesses as a distinct and
             saleable entity, in accordance with paragraph 12 of these Commitments;
        (c) with respect to Confidential Information:
                determine all necessary measures to ensure that BASF does not after
                   the Effective Date obtain any Confidential Information relating to the
                   Divestment Businesses;
                in particular strive for the severing of the Divestment Businesses’
                   participation in a central information technology network to the extent
                   possible, without compromising the viability of the Divestment
                   Businesses;
                make sure that any Confidential Information relating to the Divestment
                   Businesses obtained by BASF before the Effective Date is eliminated
                   and will not be used by BASF;
                decide whether such information may be disclosed to or kept by BASF
                   as the disclosure is reasonably necessary to allow BASF to carry out
                   the divestiture or as the disclosure is required by law; and
        (d) monitor the splitting of assets and the allocation of Key Personnel between
             the Divestment Businesses and BASF or Affiliated Undertakings;
(iii) propose to BASF such measures as the Monitoring Trustee considers necessary to
      ensure BASF’s compliance with the conditions and obligations attached to the
      Decision, in particular the maintenance of the full economic viability,
      marketability or competitiveness of the Divestment Businesses, the holding
      separate of the Divestment Businesses and the non-disclosure of competitively
      sensitive information;
(iv)  review and assess potential Purchasers as well as the progress of the divestiture
      process and verify that, dependent on the stage of the divestiture process:
        (a) potential Purchasers receive sufficient and correct information relating to
             the Divestment Businesses and the Key Personnel in particular by
                                               12
 ---pagebreak---                      reviewing, if available, the data room documentation, the information
                     memorandum and the due diligence process, and
               (b) potential Purchasers are granted reasonable access to the Key Personnel;
    (v)      act as a contact point for any requests by third parties, in particular potential
             purchasers, in relation to the Commitments;
    (vi)     provide to the Commission, sending BASF a non-confidential copy at the same
             time, a written report within 15 days after the end of every month that shall cover
             the operation and management of the Divestment Businesses as well as the
             splitting of assets and the allocation of [NSH line of research 1] Data Transfer and
             Licence Personnel so that the Commission can assess whether the business is held
             in a manner consistent with the Commitments and the progress of the divestiture
             process as well as potential Purchasers;
    (vii)    promptly report in writing to the Commission, sending BASF a non-confidential
             copy at the same time, if it concludes on reasonable grounds that BASF is failing
             to comply with these Commitments;
    (viii) within one week after receipt of the documented proposal referred to in
             paragraph 18 and paragraph 19 of these Commitments (as applicable), submit to
             the Commission, sending BASF a non-confidential copy at the same time, a
             reasoned opinion as to the suitability and independence of the proposed Purchasers
             and the viability of the Divestment Businesses after the Sale and as to whether the
             Divestment Businesses are sold in a manner consistent with the conditions and
             obligations attached to the Decision, in particular, if relevant, whether the Sale of
             the Divestment Businesses without one or more Assets or not all of the Key
             Personnel affects the viability of the Divestment Businesses after the sale, taking
             account of the proposed purchaser;
    (ix)     assume the other functions assigned to the Monitoring Trustee under the
             conditions and obligations attached to the Decision.
31. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the
    Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each other
    during and for the purpose of the preparation of the Trustee Divestiture Period in order to
    facilitate each other's tasks.
                  Duties and obligations of the Divestiture Trustee
32. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no minimum
    price the Divestment Businesses to a purchaser, provided that the Commission has
    approved both the purchaser and the final binding sale and purchase agreement (and
    ancillary agreements) as in line with the Commission's Decision and the Commitments in
    accordance with paragraphs 18 and 20 of these Commitments. The Divestiture Trustee
    shall include in the sale and purchase agreement (as well as in any ancillary agreements)
    such terms and conditions as it considers appropriate for an expedient sale in the Trustee
                                                     13
 ---pagebreak---     Divestiture Period. In particular, the Divestiture Trustee may include in the sale and
    purchase agreement such customary representations and warranties and indemnities as are
    reasonably required to effect the sale. The Divestiture Trustee shall protect the legitimate
    financial interests of BASF, subject to BASF’s unconditional obligation to divest at no
    minimum price in the Trustee Divestiture Period.
33. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the
    Divestiture Trustee shall provide the Commission with a comprehensive monthly report
    written in English on the progress of the divestiture process. Such reports shall be
    submitted within 15 days after the end of every month with a simultaneous copy to the
    Monitoring Trustee and a non-confidential copy to BASF.
       III.       Duties and obligations of the Parties
34. BASF shall provide and shall cause its advisors to provide the Trustee with all such co-
    operation, assistance and information as the Trustee may reasonably require to perform its
    tasks. The Trustee shall have full and complete access to any of BASF’s or the
    Divestment Businesses’ books, records, documents, management or other personnel,
    facilities, sites and technical information necessary for fulfilling its duties under the
    Commitments and BASF and the Divestment Businesses shall provide the Trustee upon
    request with copies of any document. BASF and the Divestment Businesses shall make
    available to the Trustee one or more offices on their premises and shall be available for
    meetings in order to provide the Trustee with all information necessary for the
    performance of its tasks.
35. BASF shall provide the Monitoring Trustee with all managerial and administrative
    support that it may reasonably request on behalf of the management of the Divestment
    Businesses. This shall include all administrative support functions relating to the
    Divestment Businesses which are currently carried out at headquarters level. BASF shall
    provide and shall cause its advisors to provide the Monitoring Trustee, on request, with
    the information submitted to potential purchasers, in particular give the Monitoring
    Trustee access to the data room documentation and all other information granted to
    potential Purchasers in the due diligence procedure. BASF shall inform the Monitoring
    Trustee on possible purchasers, submit lists of potential Purchasers at each stage of the
    selection process, including the offers made by potential Purchasers at those stages, and
    keep the Monitoring Trustee informed of all developments in the divestiture process.
36. BASF shall grant or procure Affiliated Undertakings to grant comprehensive powers of
    attorney, duly executed, to the Divestiture Trustee to effect the sale (including ancillary
    agreements), the Trunemco Assets Closing and the [NSH line of research 1] Data Transfer
    and Licence Closing (as applicable) and all actions and declarations which the Divestiture
    Trustee considers necessary or appropriate to achieve the sale and the Trunemco Assets
    Closing and the [NSH line of research 1] Data Transfer and Licence Closing (as
    applicable), including the appointment of advisors to assist with the sale process. Upon
    request of the Divestiture Trustee, BASF shall cause the documents required for effecting
    the sale and the Trunemco Assets Closing and the [NSH line of research 1] Data Transfer
    and Licence Closing (as applicable) to be duly executed.
                                                    14
 ---pagebreak--- 37. BASF shall indemnify the Trustee and its employees and agents (each an Indemnified
    Party) and hold each Indemnified Party harmless against, and hereby agrees that an
    Indemnified Party shall have no liability to BASF for, any liabilities arising out of the
    performance of the Trustee’s duties under the Commitments, except to the extent that such
    liabilities result from the wilful default, recklessness, gross negligence or bad faith of the
    Trustee, its employees, agents or advisors.
38. At the expense of BASF, the Trustee may appoint advisors (in particular for corporate
    finance or legal advice), subject to BASF’s approval (this approval not to be unreasonably
    withheld or delayed) if the Trustee considers the appointment of such advisors necessary
    or appropriate for the performance of its duties and obligations under the Mandate,
    provided that any fees and other expenses incurred by the Trustee are reasonable. Should
    BASF refuse to approve the advisors proposed by the Trustee the Commission may
    approve the appointment of such advisors instead, after having heard BASF. Only the
    Trustee shall be entitled to issue instructions to the advisors. Paragraph 37 of these
    Commitments shall apply mutatis mutandis. In the Trustee Divestiture Period, the
    Divestiture Trustee may use advisors who served BASF during the Divestiture Period if
    the Divestiture Trustee considers this in the best interest of an expedient sale.
39. BASF agrees that the Commission may share Confidential Information proprietary to
    BASF with the Trustee. The Trustee shall not disclose such information and the
    principles contained in Article 17 (1) and (2) of the Merger Regulation apply mutatis
    mutandis.
40. BASF agree that the contact details of the Monitoring Trustee are published on the
    website of the Commission's Directorate-General for Competition and they shall inform
    interested third parties, in particular any potential Purchasers, of the identity and the tasks
    of the Monitoring Trustee.
41. For a period of 10 years from the Effective Date the Commission may request all
    information from the Parties that is reasonably necessary to monitor the effective
    implementation of these Commitments.
       IV.        Replacement, discharge and reappointment of the Trustee
42. If the Trustee ceases to perform its functions under the Commitments or for any other
    good cause, including the exposure of the Trustee to a Conflict of Interest:
    (a) the Commission may, after hearing the Trustee and BASF, require BASF to replace
    the Trustee; or
    (b) BASF may, with the prior approval of the Commission, replace the Trustee.
43. If the Trustee is removed according to paragraph 42 of these Commitments, the Trustee
    may be required to continue in its function until a new Trustee is in place to whom the
    Trustee has effected a full hand over of all relevant information. The new Trustee shall be
    appointed in accordance with the procedure referred to in paragraphs 21-28 of these
    Commitments.
                                                     15
 ---pagebreak--- 44. Unless removed according to paragraph 42 of these Commitments, the Trustee shall cease
    to act as Trustee only after the Commission has discharged it from its duties after all the
    Commitments with which the Trustee has been entrusted have been implemented.
    However, the Commission may at any time require the reappointment of the Monitoring
    Trustee if it subsequently appears that the relevant remedies might not have been fully and
    properly implemented.
Section G.       The review clause
45. The Commission may extend the time periods foreseen in the Commitments in response
    to a request from BASF or, in appropriate cases, on its own initiative. Where BASF
    requests an extension of a time period, it shall submit a reasoned request to the
    Commission no later than one month before the expiry of that period, showing good
    cause. This request shall be accompanied by a report from the Monitoring Trustee, who
    shall, at the same time send a non-confidential copy of the report to BASF. Only in
    exceptional circumstances shall BASF be entitled to request an extension within the last
    month of any period.
46. The Commission may further, in response to a reasoned request from BASF showing
    good cause waive, modify or substitute, in exceptional circumstances, one or more of the
    undertakings in these Commitments. This request shall be accompanied by a report from
    the Monitoring Trustee, who shall, at the same time send a non-confidential copy of the
    report to BASF. The request shall not have the effect of suspending the application of the
    undertaking and, in particular, of suspending the expiry of any time period in which the
    undertaking has to be complied with.
Section G.       Entry into force
47. The Commitments shall take effect upon the date of adoption of the Decision.
                                                    16
 ---pagebreak---                                           SCHEDULE
                                           PART I
   I.      Introduction
1. The Divestment Businesses comprise the Trunemco Assets and the [NSH line of
   research 1] Data Transfer and Licence. This Part I presents information on the
   Trunemco Assets, which comprise BASF’s global pipeline projects relating to
   nematode control seed treatment, known as ‘Trunemco’. The Trunemco Assets
   essentially consist of all rights necessary for the Purchaser to obtain regulatory
   approvals for the use of Trunemco as a seed treatment product, and to manufacture
   and ultimately commercialise Trunemco.
2. Trunemco is a formulated product which relies on two known active ingredients:
   bacillus amyloliquefaciens (strain MBI 600), which is a biological (i.e. a bacteria that
   colonises plant roots and excludes pathogens); and cis-jasmone, which is a
   semiochemical […]. In addition, Trunemco involves a standard formulation requiring
   know-how that will be possessed by any player active in seed treatment or biologicals.
   BASF’s proprietary know-how relates to the specific combination of active ingredients
   for use as a nematode control seed treatment. Unlike conventional chemical
   nematicides, Trunemco repels (but does not kill) nematodes.
   II.     The Trunemco Assets
3. The Trunemco Assets consist of the entirety of the assets comprising BASF’s global
   pipeline project for nematode control seed treatment, known as ‘Trunemco’, which is
   defined by the nematode repellent combination of MBI 600 and cis-jasmone
   (including all tangible and intangible assets, rights, liabilities and obligations). The
   Trunemco Assets include, but are not limited to:
   (a)     all intellectual property related to Trunemco and bacillus amyloliquefaciens
           (strain MBI 600) – originally referred to as bacillus subtilis – in combination
           with cis-jasmone (the active ingredients in Trunemco) as a two-component
           mixture for use as a nematode control seed treatment, including but not limited
           to worldwide patents, trademarks, and copyrights. Specifically:
           (i)     BASF IP relating to bacillus amyloliquefaciens (strain MBI 600)
                   combined with cis-jasmone for use as a nematode control seed
                   treatment will be exclusively licensed to the Purchaser […];
           (ii)    BASF IP relating to bacillus subtilis in combination with cis-jasmone
                   will be exclusively licensed to the Purchaser ([…]) for use as a
                   nematode control seed treatment;
           (iii)   in relation to cis-jasmone, BASF holds an exclusive licence to use […].
                   BASF commits to grant the Purchaser an exclusive sub-licence to cis-
                   jasmone in relation to the manufacture and use of Trunemco as a
                   nematode control seed treatment [...]. Furthermore, BASF will not
                                               17
 ---pagebreak---                    assert its rights under the exclusive licence from […] in any way that
                   restricts the use of the Trunemco Assets by the Purchaser for nematode
                   control seed treatment.
           (iv)    BASF will not assert its rights under any patents to restrict the use of
                   the Trunemco Assets by the Purchaser for nematode control seed
                   treatment in mixtures with any other active ingredient, under the
                   provision that none of the other active ingredient is itself (as a
                   compound or as part of a mixture of two or more active ingredients
                   none of which is Trunemco) claimed by any patent owned, controlled
                   or in-licensed by BASF.
   (b)     all product registrations and pending regulatory submissions related to
           Trunemco;
   (c)     all current formulations and those in development, as well as inter alia all
           developed processes, procedures, recipes, manuals, and quality control
           measures for the manufacture and formulation of Trunemco, including but not
           limited to protectable trade secrets;
   (d)     all data and analyses from Trunemco field trials, including ongoing trials,
           protocols, and studies and summaries of such studies;
   (e)     all sales and marketing assets, including BASF’s marketing and distribution
           plans, all transferable market research conducted to date for Trunemco, the
           Trunemco website and domains, and Trunemco social media sites (to the
           extent that such websites, domains or social media sites are in existence at
           closing);
4. BASF commits to supply the Purchaser with MBI 600 under a supply agreement on
   the following basis post-closing:
   (a)     Prior to first market launch of Trunemco, BASF commits to provide such
           quantities of MBI 600 to the Purchaser as are necessary for the continued
           development of the Trunemco Assets (e.g. testing materials) at the purchase
           price and conditions from a third party supplier that BASF enjoys for the
           respective quantities (hereinafter referred to as “variable cost” for the purpose
           of this paragraph 4).
   (b)     After first market launch of Trunemco, BASF commits to provide the
           Purchaser with a transitional commercial supply of MBI 600 at variable cost
           for an initial period of [1-3 years].
   (c)     At the Purchaser’s option, BASF commits to renewing the term of any
           MBI 600 supply agreement for up to two further periods of [0-1 year], for a
           total of up to [4-5 years] after the first market launch of Trunemco, on each
           occasion subject to the Commission’s approval following consultation with the
           Monitoring Trustee and to be supplied at variable cost.
                                                 18
 ---pagebreak---    (d)      Any subsequent supplies of MBI 600 will be based on commercial terms
            agreed with BASF and the Purchaser.
5. BASF will also use its best efforts to assist the Purchaser with taking over the
   continued negotiation of the supply agreement for cis-jasmone which BASF is
   currently negotiating with […], or where necessary, with the creation of new supply
   agreements for cis-jasmone, as the case may be, to be in place within such a timeframe
   as is reasonably required by the Purchaser to enable timely market launch; BASF will
   also provide the Purchaser with lists of third-party vendors that are known to be
   capable of supplying commercial quantities of cis-jasmone.
6. The Trunemco Assets will only require supply or services agreements between BASF
   and the Purchaser on a transitional basis; no long-term supply agreements will be
   required, unless desired by the Purchaser. BASF commits to enter into any such
   transitional agreements deemed necessary by the Monitoring Trustee. The basis upon
   which BASF will provide transitional supplies and services (aside from in relation to
   MBI 600 and cis-jasmone, which are dealt with in paragraphs 4 and 5 above) is set out
   in in more detail in Section III below.
7. At the written request of the Purchaser, BASF commits to providing training and
   information required by the Purchaser, delivered by appropriate specialists, to prepare
   the Purchaser’s sales and marketing teams to begin selling the products comprising the
   Trunemco Assets subject to receipt of relevant registrations. Such training will be
   available for up to [0-1 year] following the written request of the Purchaser, with the
   option of two extensions of [0-6 months] each at the Purchaser’s option. BASF
   commits to provide this support at variable cost, as calculated using BASF’s standard
   accounting practices, excluding overhead costs.
8. BASF will provide to the Purchaser the option to offer employment to up to […]
   employees (in total) working on the Trunemco Assets, subject to the Commission’s
   approval following the opinion of the Monitoring Trustee, including on whether these
   employees are required by the Purchaser. These employees, once identified by BASF
   in consultation with the Monitoring Trustee and approved by the Commission
   (following the opinion of the Monitoring Trustee), will be regarded as Key Personnel
   for the purposes of these Commitments. Any transfer of such Key Personnel to the
   Purchaser is also subject to all applicable employment laws.
   III.     Transitional Service Agreements, and Licensing                  Agreements
            Potentially Required to Support the Commitments
9. BASF and Purchaser shall negotiate the agreements required to support the Trunemco
   Assets. Transitional supplies or services will be provided by BASF at variable cost for
   an initial period of [0-1 year] after the written request of the Purchaser.
   (a)      At the Purchaser’s option, BASF commits to renewing the term of any
            transitional agreements for up to two further periods of [0-1 year], for a total of
            up to [1-3 years] after the written request of the Purchaser, on each occasion
                                                19
 ---pagebreak---              subject to the Commission’s approval following consultation with the
             Monitoring Trustee.
    (b)      Any subsequent supplies or services will be based on commercial terms agreed
             between BASF and Purchaser.
10. BASF commits to enter into any such transitional agreements deemed necessary by the
    Monitoring Trustee. The Parties currently contemplate the following post-sale
    transitional services with the Purchaser, though this is subject to further negotiation:
    Regulatory Approvals
11. BASF will assist the Purchaser in applying for the Purchaser’s [Jurisdiction A]
    [Jurisdiction B] and, at the discretion of the Purchaser, EU and [Jurisdiction C]
    product registrations to complete the transfer of such registrations. BASF will also
    transfer its Maximum Residue Limit (MRL) dossier and any other pending dossiers
    that are submitted to regulators by Purchaser Closing. BASF will also assist the
    Purchaser in responding to inquiries or follow-up questions from the [regulators]
    regarding BASF’s updated toxicology studies. This support is expected to continue for
    up to [0-1 year]. While a regulatory strategy for [Jurisdiction C] and Europe has not
    been developed, BASF commits to transfer any documents or know-how that has been
    developed towards that end.
    Product Testing / Ongoing Regulatory Studies
12. In addition to transferring data and records to the Purchaser, BASF will support the
    Purchaser with a combination of completing advanced ongoing studies, completing
    trials planned for the current growing season, and/or transferring the lab analysis
    portion of recently initiated studies to Purchaser for both product testing purposes and
    regulatory purposes, to the extent that any studies are currently underway. The extent
    of support will depend on the level of progress in the respective studies and
    Purchaser’s capabilities. BASF will also assist Purchaser in applying for Experimental
    Use Permits (EUPs) in required jurisdictions. BASF will provide support in
    transferring its Material Transfer Agreements (MTAs) with third-parties and
    accompanying research data, and use reasonable efforts to obtain any third party
    consents needed in this regard. Finally, in completing applicable ongoing studies,
    BASF will also provide consulting support to Purchaser to supplement its
    understanding of Trunemco formulations in development for row crops and other
    specialty crops, as well as its understanding of formulation compatibility, application,
    dust-off, stability, plantability, and seed safety. This support is expected to continue
    for up to [0-1 year].
    Production / Application / Supply Chain Processes
13. BASF will provide consulting support to the Purchaser in developing the Purchaser’s
    plans for introducing Trunemco into its seed treatment facilities, and will also provide
    general advice to the Purchaser, on request, concerning its own manufacturing site
    readiness, maintenance of quality controls, and development of treatment application
                                                20
 ---pagebreak---     protocols. BASF will also support Purchaser in developing its understanding of
    Trunemco application methodology and chemistry and will provide technical and
    troubleshooting support.
    Intellectual Property
14. BASF will provide documents necessary to license patents / patent applications and
    trademarks / trademark applications to the Purchaser and will support the Purchaser in
    responding to inquiries/prosecution of Trunemco-related patents and trademarks.
    BASF will also support the transition of any pending invention disclosures. It is
    anticipated that such support will continue for earlier of three months or until
    assignments are complete.
    Marketing
15. BASF will make available to the Purchaser all marketing, sales and distribution plans
    for Trunemco which have been developed prior to closing.
    Other
16. If there is any asset or personnel which is not covered by this Schedule but which is
    both used (exclusively or not) in the Trunemco Assets and necessary for the continued
    viability and competitiveness of the Divestment Business, that asset or an adequate
    substitute will be offered to potential purchasers.
                                                21
 ---pagebreak---                                               PART II
   I.        Introduction
1. The Divestment Businesses comprise the Trunemco Assets and the [NSH line of
   research 1] Data Transfer and Licence. This Part II presents information on the [NSH
   line of research 1] Data Transfer and Licence.
   II.       [NSH line of research 1] Data Transfer and Licence
2. The [NSH line of research 1] Data Transfer and Licence consist of the entirety of the
   assets comprising the package of intellectual property rights relating to [NSH line of
   research] class herbicide chemistry type [mode of action for NSH line of research 1]
   inhibitor that are transferred to BASF under the under the terms of the commitments in
   M.8084 – BASF / Monsanto, […]. In accordance with these terms, the [NSH line of
   research 1] Data Transfer and Licence includes but is not limited to:
   (a)       transfer to the Purchaser of all data and know-how gathered by Bayer up to the
             Effective Date from all field trials conducted on [NSH line of research 1]
             Chemistries as relating to all non-selective uses as well as information on the
             structure, and [NSH line of research 1] Data Transfer and Licence Samples, of
             the relevant molecules;
   (b)       grant to the Purchaser of a perpetual, exclusive, worldwide licence 1 of all IP
             rights and know-how relating to the BASF Divestment Business’s [NSH line
             of research 1] Chemistries existing at the Effective Date for all non-
             commercial and commercial applications in the field of non-selective uses,
             including:2
             (i)     for the control of unwanted vegetation for example in permanent crops
                     and plantation crops (such as trees, nuts and vines), on roadsides,
                     squares, industrial sites, airports or railway tracks; or
             (ii)    for the burn-down application, for example in farm crops; and
             (iii)   for the application on herbicide tolerant field crops (HT crops) in which
                     the tolerance is conferred by man-made mutation or transgenic
                     modification.
3. Explicitly excluded from this licence is any selective use in any plant which is tolerant
   by nature.
1
   For the avoidance of doubt, by granting the Purchaser an exclusive licence to the non-selective uses,
   BASF and Bayer will no longer have the right to use the IP rights and know-how covered by the [NSH
   line of research 1] Data Transfer and Licence for these non-selective uses while the Purchaser will not
   have the rights to use the IP rights and know-how covered by the [NSH line of research 1] Data
   Transfer and Licence for selective uses.
2
   […].
                                                    22
 ---pagebreak---