[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