Brazil Puts Limits On Monsanto-Bayer Intacta Deal

Brazil's antitrust watchdog has signed off on a licensing deal giving Bayer SA access to Monsanto do Brasil Ltda.'s soybean seed technology but forced the companies to modify terms that could have given Monsanto undue control over Bayer's market activity.

Brazil's Administrative Council for Economic Defense, known as CADE, cleared the transaction under the country's merger control system with conditions.

The licensing agreement will allow Bayer to develop and sell soybean seeds using Monsanto's Intacta RR2 PRO technology, which gives plants resistance to insects and a tolerance to an herbicide used to kill weeds, according to CADE.

The agency worried, however, that some of the terms of the agreement could have given Monsanto excess control and influence over Bayer's conduct in the soybean market.

"A mechanism of creation, maintenance and expansion of control of the licensor over the licensed party is embedded in the contract," Commissioner Alessandro Octaviani wrote in his report. "This conditions the licensed company’s activities in the soy market as a whole and extrapolates, or even denatures, the characteristic of a technology license."

Some of the clauses in the license would harm potential market entrants and limit the choices available to growers and others in the industry, according to CADE.

Among other things, the agency took issue with Monsanto's royalties billing mechanism, which CADE said would give the company access to Bayer's sensitive commercial information and allow it to map out relationships among players in the soybean production chain.

As a result, CADE has forced Monsanto to eliminate certain provisions from the agreement, including one giving Monsanto certain preferential rights if Bayer were to acquire other companies in the soybean market.

The commissioners concluded that such a provision would have given Monsanto undue influence over Bayer's activities that could harm all other licensees and players in the soybean market.

Representatives for Bayer and Monsanto were not immediately available for comment for the issue.