[Federal Register Volume 82, Number 67 (Monday, April 10, 2017)]
[Notices]
[Pages 17260-17263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07069]
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FEDERAL TRADE COMMISSION
[File No. 161 0093; Docket No. C-4610]
China National Chemical Corporation, a Corporation; ADAMA
Agricultural Solutions Ltd., a Corporation; and Makhteshim Agan of
North America, Inc., Doing Business as ADAMA, a Corporation; Analysis
To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of
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federal law prohibiting unfair methods of competition. The attached
Analysis to Aid Public Comment describes both the allegations in the
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before May 4, 2017.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/chemchinaconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of China
National Chemical Corporation and Syngenta AG, File No. 161 0093'' on
your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/chemchinaconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, write ``In the Matter of China National Chemical Corporation
and Syngenta AG, File No. 161 0093'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: David Morris (202-326-3156), Bureau of
Competition, 600 Pennsylvania Avenue NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent orders to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for April 4, 2017), on the World Wide Web, at
http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before May 4, 2017.
Write ``In the Matter of China National Chemical Corporation and
Syngenta AG. File No. 161 0093'' on your comment. Your comment--
including your name and your state--will be placed on the public record
of this proceeding, including, to the extent practicable, on the public
Commission Web site, at https://www.ftc.gov/policy/public-comments. As
a matter of discretion, the Commission tries to remove individuals'
home contact information from comments before placing them on the
Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/chemchinaconsent by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that Web site.
If you file your comment on paper, write ``In the Matter of China
National Chemical Corporation and Syngenta AG, File No. 161 0093'' on
your comment and on the envelope, and mail your comment to the
following address: Federal Trade Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC
20580, or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC. If
possible, submit your paper comment to the Commission by courier or
overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before May 4, 2017. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted from
China National Chemical Corporation (``ChemChina''), subject to final
approval, an Agreement Containing Consent Orders (``Consent
Agreement''). The Consent Agreement, which contains a proposed Decision
and Order (``Order'') and Order to Maintain Assets, is designed to
remedy the anticompetitive effects resulting from ChemChina's proposed
acquisition of Syngenta AG (``Syngenta'').
Pursuant to an agreement signed on February 2, 2016 (the
``Agreement''), ChemChina, through an indirect subsidiary, will submit
a public tender offer for all publicly registered shares and American
Depository Shares of Syngenta at an offer price of $465 per share, for
total consideration of up to $43 billion in cash (the ``Acquisition'').
The proposed Acquisition would result in highly concentrated markets
and raise significant competitive concerns in the markets for the
herbicide paraquat, the insecticide abamectin, and the fungicide
chlorothalonil in the United
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States. The Commission's Complaint alleges that the proposed
Acquisition, if consummated, would violate section 7 of the Clayton
Act, as amended, 15 U.S.C. 18, and section 5 of the Federal Trade
Commission Act, as amended 15 U.S.C. 45, by lessening competition in
the markets for formulated crop protection products based on paraquat,
abamectin, and chlorothalonil in the United States.
The Consent Agreement remedies the alleged violation by replacing
the competition in the three relevant markets that would be lost as a
result of the proposed Acquisition. Under the terms of the Consent
Agreement, ChemChina subsidiary ADAMA will divest its paraquat,
abamectin, and chlorothalonil crop protection businesses in the United
States to American Vanguard Corporation and its affiliate Amvac
Chemical Corporation (collectively ``AMVAC'').
The Consent Agreement and proposed Order have been placed on the
public record for 30 days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After 30 days, the Commission will review the Consent Agreement
and the comments received, and decide whether it should withdraw,
modify, or make final the Consent Agreement and proposed Order.
II. The Parties
ChemChina is a Chinese state-owned entity and is a diversified
chemical company headquartered in Haidian District Beijing, China.
ChemChina owns an Israel-based crop protection company, ADAMA. This
wholly-owned subsidiary produces and/or sells formulated crop
protection products based on paraquat, abamectin, and chlorothalonil.
Headquartered in Basel, Switzerland, Syngenta is a large research-
based global agriculture company that manufactures and sells numerous
crop protection products including paraquat, abamectin, and
chlorothalonil.
III. Crop Protection Formulations
The relevant lines of commerce in which to analyze the effects of
the proposed Acquisition are crop protection formulations based on the
active ingredients paraquat, abamectin, and chlorothalonil. Crop
protection formulations are used to protect crops from pests. These
formulations are based on key active ingredients, which are diluted
from a concentrated technical grade. Crop protection chemicals fall
into three broad categories: (1) Herbicides, which control for weeds
and other vegetation; (2) fungicides, which control fungus; and (3)
insecticides, which control insects. Of the relevant lines of commerce,
paraquat is a herbicide, abamectin is an insecticide, and
chlorothalonil is a fungicide.
Paraquat is a non-selective ``burndown'' herbicide, which means it
does not discriminate between weeds and crops. It is used to clear
fields prior to the growing season. The use of paraquat has increased
in recent years due to the resistance issues faced by glyphosate caused
by its overuse. Other paraquat alternatives that do not have
glyphosate's resistance issues are significantly more expensive than
paraquat.
Abamectin is an insecticide used to kill mites, psyllid, and
leafminers. It is used primarily in citrus and tree nut crops. Other
alternative miticides are either significantly more expensive than
abamectin because they are still on patent, or are less effective than
abamectin. Due to resistance issues faced by insecticides, it is
typical for a grower to spray five to six different types of miticides
per season. Abamectin generally appears in any insecticide rotation
because it is inexpensive and highly effective.
Chlorothalonil is a broad spectrum fungicide used primarily to
protect peanuts and potatoes. Chlorothalonil is particularly effective
because it operates with four modes of action and is critical to
growers for resistance management. Syngenta recommends that growers
rotate or mix chlorothalonil with systemic fungicides to prevent or
slow development of resistance to single-site mode of action
fungicides.
The relevant geographic area in which to analyze the effects of the
Acquisition on the formulated crop protection markets is the United
States. The Environmental Protection Agency requires that manufacturers
register both the technical active ingredient and the formulated
products for sales in the United States under the Federal Insecticide,
Fungicide, and Rodenticide Act. This registration requirement limits
market access to a set of products that meet U.S. regulatory
requirements.
Each of the products at issue were either developed or acquired by
a Syngenta predecessor company, meaning that Syngenta offers the
branded version of the product and has significant market shares in
each. ADAMA is either the first or second largest generic supplier for
each of these products. For paraquat, ADAMA is currently the second
largest supplier behind Syngenta and another generic supplier. Post-
Acquisition, the combined share of the two firms would be over 60%.
ADAMA is the generic market leader for abamectin and has been for some
time. Post-Acquisition, the combined share of the two firms would be
close to 80%. Finally, ADAMA is the second largest generic supplier of
chlorothalonil and post-Acquisition the combined share of the two firms
would be over 40%. There are a number of other generic providers of
crop protection products generally, as well as other generic providers
of paraquat, abamectin, and chlorothalonil. However, they have been
largely unable to gain sufficient share to rival the scale and market
position ADAMA holds in the markets for these three products.
The proposed Acquisition removes significant competition between
Syngenta and ADAMA. Though branded and generic companies employ
different business models, the available evidence shows meaningful
competition between the merging parties. Syngenta, for example, has
lowered the price of its crop protection products in response to
competitive pressure from ADAMA.
Entry will not be sufficient to deter or counteract the
anticompetitive effects of the proposed Acquisition. While generic
entry may be likely and occur in a timely manner, it is unlikely to be
sufficient to replace the competitive significance and scale of ADAMA.
Typically, new entrants forecast and ultimately achieve minimal market
penetration while ADAMA, in contrast, has successfully maintained
significantly higher market shares for an extended period of time.
ADAMA has been a more robust competitor for the products at issue
through economies of scale and more favorable supply agreements.
IV. The Consent Agreement
The Consent Agreement eliminates the competitive concerns raised by
ChemChina's proposed acquisition of Syngenta by requiring ChemChina to
sell ADAMA's U.S. paraquat, abamectin, and chlorothalonil crop
protection businesses. The Consent Agreement requires ChemChina to sell
the relevant business assets to AMVAC, or another acquirer approved by
the Commission through a purchase agreement approved by the Commission.
AMVAC is well positioned to replace the competition that will be
eliminated as a result of the proposed Acquisition. It has the industry
experience, reputation, and resources to replace ADAMA as an effective
competitor in the U.S. markets for formulated crop protection products
based on paraquat, abamectin, and chlorothalonil. The company is
headquartered in Newport Beach, California, and has four separate
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manufacturing facilities within the U.S. AMVAC is an experienced player
in the agrochemical segments in which ADAMA and Syngenta operate, and
sells to the same customer base. AMVAC currently manufactures and
formulates a large number of crop protection chemicals including
herbicides, insecticides, and fungicides. The products to be divested
will complement its current product lines. Finally, due to its wide
spectrum of crop protection products, AMVAC is well placed to develop,
register, and market new combination products, further improving scale
in both crop protection and turf and ornamental applications.
Pursuant to the Consent Agreement, AMVAC (or another approved
acquirer) would acquire all of the assets and other such rights
necessary to be an effective competitor for paraquat-, abamectin-, and
chlorothalonil-based crop protection formulations. This will include
the U.S. product registrations and registration data packages for both
the formulated products and the technical active ingredients, all
intellectual property rights associated with the products including
confidential statements of formulation, and inventories. The divesture
also will include a cost-competitive transitional supply agreement for
the supply of paraquat with Sanonda, ADAMA's low cost paraquat
supplier, which is majority-owned by ChemChina, and a transitional
services agreement with ADAMA. In addition, the Consent Agreement
requires the removal of crop protection products containing any one of
the three active ingredients from Syngenta's loyalty program for three
years. This nurturing provision is to help ensure that AMVAC (or any
approved acquirer) can step into the shoes of ADAMA and ultimately
retain its competitiveness and scale.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement. It is not intended to constitute an official
interpretation of the proposed Order or to modify its terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2017-07069 Filed 4-7-17; 8:45 am]
BILLING CODE 6750-01-P