Federal Register, Volume 84 Issue 23 (Monday, February 4, 2019)

[Federal Register Volume 84, Number 23 (Monday, February 4, 2019)]
[Notices]
[Pages 1493-1506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-00810]

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DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Bayer AG et al.; Response to Public Comments

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
Sec. 16(b)-(h), the United States hereby publishes below the Response
to Public Comments on the Proposed Final Judgment in United States v.
Bayer AG et al., Civil Action No. 1:18-cv-01241 (JEB), which was filed
in the United States District Court for the District of Columbia on
January 29, 2019, together with copies of the 14 comments received by
the United States.
Pursuant to the Court's January 2, 2019 order, comments were
published electronically and are available to be viewed and downloaded
at the Antitrust Division's Web site, at: https://www.justice.gov/atr/case/us-v-bayer-ag-and-monsanto-company. A copy of the United States'
response to the comments is also available at the same location. Copies
of the comments and the United States' response are available for
inspection at the Office of the Clerk of the United States District
Court for the District of Columbia. Copies of these materials may also
be obtained from the Antitrust Division upon request and payment of the
copying fee set by Department of Justice regulations.

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

United States of America, Plaintiff, v. Bayer AG, Monsanto Company, and
BASF SE, Defendants.

Civil Action No. 1:18-cv-01241 (JEB)

RESPONSE OF PLAINTIFF UNITED STATES TO PUBLIC COMMENTS ON THE PROPOSED
FINAL JUDGMENT

TABLE OF CONTENTS

I. Introduction................................................ 1
II. Procedural History......................................... 2
III. Standard of Judicial Review............................... 3
IV. The Investigation and the Proposed Final Judgment.......... 7
V. Summary of Public Comments and the United States' Response.. 10
a. Comments Regarding BASF's Suitability as a Divestiture 14
Buyer and Ability to Compete Effectively..................

[[Page 1494]]

i. The Proposed Divestitures Give BASF Everything 14
Necessary to Preserve Competition.....................
ii. BASF Has a Strong Incentive to Compete Aggressively 20
Against Bayer.........................................
b. Comments Regarding BASF's Ability to Execute the Remedy 22
Successfully and Requests for Ongoing Study...............
c. Comments Regarding Seed Treatments...................... 24
i. The Proposed Final Judgment Appropriately Requires 25
Bayer to Supply Seed Treatments to BASF at Variable
Cost..................................................
ii. BASF Cannot Resell Bayer Seed Treatments Supplied 27
under Section IV(G)(1) for Use on Non-BASF Seeds......
iii. The Proposed Final Judgment Allows BASF to Sell 28
Seed Treatments to Bayer..............................
iv. Concerns Regarding All Neonicotinoid Seed 29
Treatments Are Outside the Scope of the Complaint.....
d. Comments Related to Digital Agriculture and Cross- 30
Product Leveraging........................................
e. Comments Regarding Procedural Matters, Including 33
Government Oversight and Enforcement of Proposed Final
Judgment Compliance.......................................
i. The Standard of Review Established by Congress Is 33
Appropriate...........................................
ii. Modifications Concerning the Monitoring Trustee Are 34
Unnecessary...........................................
iii. The Proposed Final Judgment's Jurisdictional 35
Provisions Are Sufficient.............................
iv. The Proposed Final Judgment Appropriately Grants 37
the United States Discretion over Certain Decisions...
v. The Proposed Final Judgment Is Not the Product of 39
``Economic Leverage''.................................
f. Additional Issues Raised By Commenters.................. 40
i. Commenters Concerned about Industry Consolidation 40
Fail to Acknowledge the Effect of the Remedy..........
ii. Comments Regarding the Environmental Impact of 41
Agricultural Chemicals Are Beyond the Scope of this
Action................................................
iii. The United States Conducted an Impartial and 42
Independent Merger Analysis...........................
VI. Conclusion................................................. 43

I. Introduction

Pursuant to the requirements of the Antitrust Procedures and
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. Sec.
16(b)-(h), the United States hereby responds to the public comments
received regarding the proposed Final Judgment in this case. For the
reasons set forth below, the remedy the United States obtained from
Defendants addresses the competitive harm alleged in this action and is
in the public interest. Accordingly, the United States recommends no
modifications to the proposed Final Judgment.
This remedy is a victory for American farmers and consumers. It
fully addresses the competitive threat posed by the merger by vesting
the divestiture buyer, BASF, with the full complement of assets,
personnel, and rights needed to preserve competition in each of the 17
affected markets. It requires divestitures that go beyond what would be
needed to address the current horizontal overlaps or vertical concerns
in order to ensure that BASF can step into Bayer's shoes, thereby
preserving the competition that otherwise would be lost through the
merger. It provides for the transfer of over 4,000 Bayer employees so
that BASF will have the necessary expertise to run these divested
businesses, and it provides for time-limited interim support agreements
to avoid business disruptions during the transition period. It also
incorporates further safeguards that allow BASF to obtain additional
assets and personnel, if necessary, during the first year of operating
these businesses. In short, the United States has gone to extraordinary
lengths to ensure that BASF will seamlessly and successfully replace
Bayer as an independent and vigorous competitor in each of the affected
markets.
The competitive significance of the remedy is underscored by the $9
billion divestiture purchase price, which exceeds the value of most
mergers reviewed by the United States and far exceeds the value of most
merger remedies. Indeed, it is among the largest and most comprehensive
remedies obtained by the United States in a merger challenge. As one
commenter observes, ``the $9 billion divestiture, by which BASF would
acquire Bayer's position in genetically modified seeds and seed traits,
foundational herbicides, other crop seeds, and related research and
development efforts appears to be as robust a divestiture as might be
imagined.'' \1\
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\1\ Ducore Comment (attached as Exhibit 6) at 1.
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The United States received fourteen comments reflecting a wide
array of views. After careful consideration of these comments, the
United States has determined that nothing in them casts doubt on its
conclusion that the public interest is well-served by the proposed
remedy. The United States is publishing the comments and this response
on the Antitrust Division website and is submitting to the Federal
Register this response and the website address at which the comments
may be viewed and downloaded, as set forth in the Court's order dated
January 2, 2019 (Docket No. 21). Following Federal Register
publication, the United States will move the Court to enter the
proposed Final Judgment pursuant to 15 U.S.C. Sec. 16(d).

II. Procedural History

On September 14, 2016, Bayer AG entered into an agreement to
acquire Monsanto Company in a merger valued at approximately $66
billion. On May 29, 2018, the United States filed a civil antitrust
Complaint seeking to enjoin Bayer from acquiring Monsanto. The
Complaint alleges that the proposed acquisition would substantially
lessen competition for the sale of a range of agricultural products to
farmers in the United States in violation of Section 7 of the Clayton
Act, 15 U.S.C. Sec. 18.
Simultaneously with the filing of the Complaint, the United States
filed a proposed Final Judgment, a stipulation signed by the parties
that consents to entry of the proposed Final Judgment after compliance
with the requirements of the Tunney Act, and a Competitive Impact
Statement describing the transaction and the proposed Final Judgment.
The United States caused the Complaint, the proposed Final Judgment,
and Competitive Impact Statement to be published in the Federal
Register on June 13, 2018, see 83 Fed. Reg. 27652 (June 13, 2018), and
caused notice regarding the same, together with directions for the
submission of written comments relating to the proposed Final Judgment,
to be published in The Washington Post on June 5-11, 2018 and in the
St. Louis Post-Dispatch on June 3, 4, 6, and 8-11, 2018. The 60-day
period for public comment ended on August 13, 2018. The United States
received 14 comments (Exhibits 1 through 14).

III. Standard of Judicial Review

The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a 60-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the

[[Page 1495]]

public interest.'' 15 U.S.C. Sec. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended in
2004, is required to consider:

(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and

(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.

15 U.S.C. Sec. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States v.
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public interest standard under the Tunney Act); United
States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014)
(explaining that the ``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the
court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanisms to enforce the final
judgment are clear and manageable'').
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations in the government's complaint, whether the decree is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3. Instead:

[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's role
in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to the
decree. The court is required to determine not whether a particular
decree is the one that will best serve society, but whether the
settlement is ``within the reaches of the public interest.'' More
elaborate requirements might undermine the effectiveness of antitrust
enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\
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\2\ See also BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass'').
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In determining whether a proposed settlement is in the public
interest, a district court ``must accord deference to the government's
predictions about the efficacy of its remedies, and may not require
that the remedies perfectly match the alleged violations.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d
at 74-75 (noting that a court should not reject the proposed remedies
because it believes others are preferable and that room must be made
for the government to grant concessions in the negotiation process for
settlements); Microsoft, 56 F.3d at 1461 (noting the need for courts to
be ``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer-Daniels-Midland Co.,
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant
``due respect to the government's prediction as to the effect of
proposed remedies, its perception of the market structure, and its
views of the nature of the case''). The ultimate question is whether
``the remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest.' '' Microsoft, 56 F.3d at 1461 (quoting United States v.
Western Elec. Co., 900 F.2d 283, 309 (D.C. Cir. 1990)). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged in
the complaint against those the court believes could have, or even
should have, been alleged''). Because the ``court's authority to review
the decree depends entirely on the government's exercising its
prosecutorial discretion by bringing a case in the first place,'' it
follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60.
In its 2004 amendments to the APPA,\3\ Congress made clear its
intent to preserve the practical benefits of utilizing consent decrees
in antitrust enforcement, adding the unambiguous instruction that
``[n]othing in this section shall be construed to require the court to
conduct an evidentiary hearing or to require the court to permit anyone
to intervene.'' 15 U.S.C. Sec. 16(e)(2); see also U.S. Airways, 38 F.
Supp. 3d at 76 (indicating that a court is not required to hold an
evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act). This language explicitly wrote into the statute
what Congress intended when it first enacted the Tunney Act in 1974. As
Senator Tunney explained: ``[t]he court is nowhere compelled to go to
trial or to

[[Page 1496]]

engage in extended proceedings which might have the effect of vitiating
the benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen.
Tunney). Rather, the procedure for the public interest determination is
left to the discretion of the court, with the recognition that the
court's ``scope of review remains sharply proscribed by precedent and
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d
at 11. A court can make its public interest determination based on the
competitive impact statement and response to public comments alone.
U.S. Airways, 38 F. Supp. 3d at 76; see also United States v. Enova
Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the ``Tunney
Act expressly allows the court to make its public interest
determination on the basis of the competitive impact statement and
response to comments alone''); S. Rep. No. 93-298, 93d Cong., 1st
Sess., at 6 (1973) (``Where the public interest can be meaningfully
evaluated simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
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\3\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for a court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
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IV. The Investigation and the Proposed Final Judgment

The proposed Final Judgment is the culmination of a thorough,
comprehensive investigation conducted by the Antitrust Division of the
United States Department of Justice. Based on the evidence gathered
during its investigation, the United States concluded that Bayer's
proposed acquisition of Monsanto would likely substantially lessen
competition in 17 product markets in the agricultural industry,
resulting in higher prices, less innovation, fewer choices, and lower-
quality products for American farmers and consumers. Accordingly, the
United States filed a civil antitrust lawsuit to block the acquisition
as a violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
The proposed Final Judgment provides an effective and appropriate
remedy for the transaction's likely competitive harm by requiring Bayer
to divest its business in each relevant market, along with various
supporting assets, to BASF, a global chemical company with an existing
crop protection business. The United States identified a divestiture
package that remedies all dimensions of harm threatened by the proposed
merger. First, the proposed Final Judgment requires Bayer to divest
those businesses that vigorously compete head-to-head with Monsanto
today. Second, the proposed Final Judgment requires Bayer to divest
seed treatment businesses that, when combined with Monsanto's seed
business, would have given the combined company the incentive and
ability to harm competition by raising the prices it charges rival seed
companies. Third, because Bayer and Monsanto compete to develop new
products and services for farmers, the proposed Final Judgment requires
the divestiture of associated intellectual property and research
capabilities, including ``pipeline'' projects, to enable BASF to
replace Bayer as a leading innovator in the relevant markets. Fourth,
the proposed Final Judgment requires the divestiture of additional
assets that will give BASF the scale and scope to compete effectively
today and in the future.
Specifically, Bayer is required to divest its entire global row
crop seeds and traits business (with insignificant exceptions not
relevant to the United States), its entire global vegetable seeds
business, and all related research and development (``R&D'') assets.
Bayer also must divest significant crop protection assets, including
its global glufosinate ammonium business and IP and other assets to
allow BASF to continue Bayer's efforts in developing new foundational
herbicide systems. Finally, Bayer is required to divest certain seed
treatments for corn, soy, and cotton.
Because many of the divested assets will be separated from Bayer's
existing business units and incorporated into BASF, the proposed Final
Judgment includes provisions aimed at ensuring that the assets are
handed off in a seamless and efficient manner. To that end, Bayer is
required to transfer existing third-party agreements and customer
information to BASF, as well as to enter transition services agreements
that ensure that BASF can continue to serve customers immediately upon
completion of the divestitures. The transition services and interim
supply agreements are time-limited to ensure that BASF will become
fully independent of Bayer as soon as practicable.
The proposed Final Judgment also contemplates heightened safeguards
intended to ensure that BASF is receiving everything it needs to
replace Bayer as a competitor. The proposed Final Judgment requires
Bayer to warrant that the assets being divested are sufficient for BASF
to maintain the viability and competitiveness of the divested
businesses following BASF's acquisition of the assets. In addition, the
proposed Final Judgment gives BASF a one-year window after closing to
identify any additional assets that are reasonably necessary to ensure
the continued competitiveness of the divested businesses. The United
States will have sole discretion to determine if Bayer must divest
these additional assets. Finally, the proposed Final Judgment gives
BASF a one-year window to hire all of the personnel from Bayer needed
to support these businesses. These novel provisions strengthen the
remedy by allowing BASF to identify additional assets or employees it
needs to compete effectively after it has operated the divested
businesses for a certain period of time.
The divestitures will ensure that BASF can step into Bayer's shoes,
thereby preserving the competition that the merger would otherwise
destroy. The proposed Final Judgment provides for the appointment of a
monitoring trustee to have close oversight over the divestitures and
the transitional agreements between Bayer and BASF to ensure that they
proceed appropriately. The proposed Final Judgment also includes robust
mechanisms that will allow the United States and the Court to monitor
the effectiveness of the relief and to enforce compliance. And because
the United States has determined that BASF, as the divestiture buyer,
is a necessary party to effectuate complete relief, BASF has agreed to
be joined to this action for the purposes of the divestitures.

V. Summary of Public Comments and the United States' Response

The United States received public comments from a group of state
Attorneys General; certain Members of Congress; the National Federation
of Independent Businesses (``NFIB''); Syngenta, a seed and agrochemical
company; Daniel Ducore, former Assistant Director of the FTC Bureau of
Competition's Compliance Division; Daniel Bellemare, an attorney; the
Sierra Club; the Natural Resources Defense Council (``NRDC''); the
Consumer Federation of America; ActionAid USA; the National Family Farm
Coalition; Friends of the Earth; the Sustainable Food Center; and the
Pollinator Stewardship Council.
Certain commenters acknowledge the meaningful protections for
competition that the United States achieved, even as they advocate for
modifications to the proposed Final Judgment. Syngenta, one of the
Defendants' primary competitors, states that it ``believes that the
[proposed Final Judgment] remedies many of the most complex and
difficult anticompetitive aspects of the transaction.'' \4\ Similarly,
Daniel Ducore,

[[Page 1497]]

who served for more than 25 years as Assistant Director of the division
that oversaw all of the FTC's merger and non-merger remedies, notes
that the remedy ``appears to be as robust a divestiture as might be
imagined,'' and further observes that while ``[e]very remedy raises
risks about the scope of divested assets, the particular buyer, and the
implementation of the remedy,'' here the United States ``appears to
have done everything possible to reduce those risks.'' \5\
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\4\ Syngenta Comment (Exhibit 12) at 1.
\5\ Ducore Comment (Exhibit 6) at 1.
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The comments can be grouped into six categories: (1) BASF's
suitability as a divestiture buyer, including whether it will have
sufficient assets, expertise, and incentives to preserve competition;
(2) concerns that BASF could fail to execute the remedy in a way that
effectively preserves competition; (3) concerns about whether the
proposed Final Judgment properly addresses issues related to seed
treatments; (4) concerns that the remedy will not prevent the combined
Bayer/Monsanto from leveraging its strengths in certain areas--in
particular, digital agriculture and traits--to foreclose competition in
other markets; (5) procedural matters, including government oversight
and enforcement of proposed Final Judgment compliance; and (6) other
miscellaneous comments, including general concerns about consolidation
in the agricultural industry; concerns relating to the environment,
wildlife and human health; and concerns that the United States' review
process may have been influenced by politics. The comments are
summarized in more detail below:

A number of commenters express concern about BASF's
suitability as a divestiture buyer and its ability to compete
effectively with the divested assets. NRDC and the Attorneys General of
California, Iowa, Massachusetts, Mississippi, and Oregon (``State
Attorneys General'') express concerns that BASF may not be able to
replace Bayer as a competitor, asserting that BASF has no seeds
experience, that Monsanto is dominant in the market for genetically
modified seeds, and that the divestiture may leave BASF reliant on the
merged firm and discourage BASF from competing vigorously.\6\ The
Consumer Federation of America argues that the United States should
have required the merged firm to divest the stronger set of assets to
address each competitive overlap.\7\ In contrast, Daniel Ducore states
that the divestiture package includes everything that BASF could need
to operate the divested businesses successfully.\8\ Daniel Bellemare
raises a different concern, suggesting that if BASF is already well-
positioned to enter the relevant markets without the aid of the
divested assets, it may not be an appropriate divestiture buyer.\9\
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\6\ NRDC Comment (Exhibit 9) at 3-4; State Attorneys General
Comment (Exhibit 2) at 5-7.
\7\ Consumer Fed'n of Am. Comment (Exhibit 4) at 1.
\8\ Ducore Comment (Exhibit 6) at 5.
\9\ Bellemare Comment (Exhibit 5) at 10-12.
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Daniel Ducore and the State Attorneys General express concerns
that BASF will fail to execute its business plans successfully and will
therefore fail to replace the competition lost from the merger. Mr.
Ducore opines that the divestiture package includes everything that
BASF could need to operate the divested businesses successfully but
nevertheless expresses concern that ``BASF, even if it obtains
everything that was considered necessary and relevant when the remedy
was negotiated, will fail to step in for Bayer and compete with the new
Bayer-Monsanto as strongly as Bayer had competed with Monsanto before
the deal.'' \10\ Mr. Ducore urges the United States to monitor BASF's
performance over the next few years to evaluate the effectiveness of
the settlement. The State Attorneys General recommend that the Court
``order a retrospective study of the effects of the merger on
competition two years after transfer of the divestiture assets has
begun.'' \11\
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\10\ Ducore Comment (Exhibit 6) at 1-2.
\11\ State Attorneys General Comment (Exhibit 2) at 2-3.
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Syngenta and the Sustainable Food Center express concerns
about various aspects of the seed treatment divestiture and seek
modifications to the proposed Final Judgment's provisions concerning
seed treatments. Syngenta asserts that certain provisions of the
proposed Final Judgment should be modified to avoid the ``risk [of]
reducing competition and inhibiting innovation in the affected product
markets'' or otherwise undermining the purpose of the remedy.\12\ The
Sustainable Food Center seeks a broader divestiture of a class of seed
treatments.\13\
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\12\ Syngenta Comment (Exhibit 12) at 1.
\13\ Sustainable Food Ctr. Comment (Exhibit 11) at 1.
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Several commenters, including the National Family Farm
Coalition, Friends of the Earth, and NRDC, argue that allowing Bayer to
retain Monsanto's leading digital agriculture platform will enhance the
merged firm's ability to influence farmer choice in other areas, such
as seed and crop protection markets.\14\ Friends of the Earth, the
Sustainable Food Center, and the Consumer Federation of America offer
various suggestions regarding digital agriculture divestitures,
including proposing that Monsanto divest its digital agriculture
platform or revise its data access policies.\15\ NRDC, the Consumer
Federation of America, and the Pollinator Stewardship Council also
raise broad cross-product leveraging concerns that the merged firm will
be in a position to exploit its significant position in certain markets
to achieve dominance in other markets.
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\14\ NRDC Comment (Exhibit 9) at 4, 6, 9-10; Friends of the
Earth Comment (Exhibit 7) at 2-3; Nat'l Family Farm Coal. Comment
(Exhibit 8).
\15\ Friends of the Earth Comment (Exhibit 7) at 3-4; Consumer
Fed'n of Am. Comment (Exhibit 4) at 2; Sustainable Food Ctr. Comment
(Exhibit 11).
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Three commenters take issue with various procedural aspects of
the settlement. NFIB raises four concerns regarding aspects of the
proposed Final Judgment pertaining to the United States' authority to
oversee and enforce compliance with the settlement--generally
advocating for greater protections for the Defendants--and proposes
modifications to address each issue.\16\ The State Attorneys General
suggest certain measures relating to the enforcement mechanisms in the
proposed Final Judgment, such as removing the provision allowing for
possible early termination and mandating the appointment of a
monitoring trustee.\17\ And Daniel Bellemare argues that a public
interest determination in a transaction this complex merits more than
the limited judicial inquiry that the Tunney Act contemplates.\18\
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\16\ NFIB Comment (Exhibit 13).
\17\ State Attorneys General Comment (Exhibit 2) at 2-3.
\18\ Bellemare Comment (Exhibit 5) at 12-15.
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Certain commenters express concerns with consolidation in the
agricultural industry in general; some of these comments also suggest
that the United States should have sued to block this transaction.\19\
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\19\ In addition to their own comments, certain advocacy groups
submitted lists of names of individuals supporting the group's
comments and, in some cases, separate messages from individual
members of the general public. These individual messages were not
sent directly to the Division by their authors. ActionAid USA's
submission included a list of more than 1,200 individual supporters
of its comments. The Sierra Club enclosed more than 18,000
signatures and roughly 2,500 individual messages. NRDC and Friends
of the Earth both submitted, along with their own comments, tens of
thousands of what appear to be identical or substantially similar
messages from individuals opposed to the merger. In addition, a
number of other individuals sent emails about concerns relating to
the transaction to the United States using various channels outside
of the designated procedures for submitting Tunney Act comments. The
United States has reviewed these messages and emails, and none
appear to address the substance of the proposed Final Judgment or
raise any issue not otherwise addressed in this Response to
Comments. Accordingly, the United States has not addressed these
lists of names, individual messages, or emails as separate comments
and does not intend to file or publish them.

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[[Page 1498]]

A number of commenters, including Sierra Club, NRDC, ActionAid
USA, and the National Family Farm Coalition, argue that the merger will
have a negative effect on the environment, wildlife and human
health.\20\
---------------------------------------------------------------------------

\20\ See, e.g., NRDC Comment (Exhibit 9) at 7-10.
---------------------------------------------------------------------------

A group of 27 Members of Congress refer to media reports that
raise the possibility that the White House may have unduly influenced
the review of this and other transactions. They urge that antitrust
enforcement ``continue to be treated as a law enforcement matter
properly left to the independent judgment of DOJ.'' \21\
---------------------------------------------------------------------------

\21\ Members of Cong. Comment (Exhibit 3) at 2-3.
---------------------------------------------------------------------------

a. Comments Regarding BASF's Suitability as a Divestiture Buyer and
Ability to Compete Effectively

Comments questioning BASF's ability to preserve competition fall
into two general categories: (1) BASF's ability to succeed with the
divested assets and (2) BASF's incentives to compete aggressively
against the merged company. The United States carefully considered
these issues in crafting the proposed remedy. The proposed Final
Judgment requires Bayer to divest a broad range of assets--essentially
its entire global seeds and traits business as well as its digital
agriculture business and important crop protection products--and to
provide an array of transitional services. While it is impossible to
predict with certainty how well BASF will perform with the divested
assets (just as Bayer's own performance with those assets absent the
merger is not certain), the proposed remedy ensures that BASF will be
as well-positioned as possible and have the necessary incentives to
step into Bayer's shoes to replace the competition that otherwise would
be lost through the merger.

i. The Proposed Divestitures Give BASF Everything Necessary to Preserve
Competition

The State Attorneys General assert that the proposed Final Judgment
``trusts that BASF can immediately step into the shoes of Bayer in the
market'' with the divestiture assets and express concern about the
consequences if BASF is not able to do so.\22\ They also observe that
BASF ``does not currently make seeds and has never run a seeds
business.'' \23\ Other commenters likewise express doubt about BASF's
ability to replace Bayer as a competitor.\24\
---------------------------------------------------------------------------

\22\ State Attorneys General Comment (Exhibit 2) at 5.
\23\ Id.
\24\ See, e.g., Consumer Fed'n of Am. Comment (Exhibit 4) at 1;
NRDC Comment (Exhibit 9).
---------------------------------------------------------------------------

The United States crafted the remedy specifically taking into
account BASF's existing assets and capabilities.\25\ The fact that
United States has not identified viable alternative buyers is not a
weakness in the remedy as some commenters might suggest,\26\ but rather
a reflection of the importance of the buyer to the remedy here and the
high standard that the United States applied in evaluating potential
buyers for the divested assets. BASF is a large multinational firm with
extensive experience operating in jurisdictions around the world. And
while it is correct that BASF has not owned a seed business, BASF has
extensive agricultural experience in crop protection and trait
research--closely related businesses that it will integrate with the
seed businesses it is acquiring from Bayer.
---------------------------------------------------------------------------

\25\ See Competitive Impact Statement at 31-32.
\26\ See State Attorneys General Comment (Exhibit 2) at 5.
---------------------------------------------------------------------------

This remedy is the result of a careful and thorough investigation,
during which the United States scrutinized the merging parties' and
BASF's businesses and operations to identify a comprehensive package of
assets to be divested. The United States has structured the proposed
remedy to position BASF to be as strong of a competitor as Bayer in the
affected markets. To that end, the required divestitures go beyond what
would be needed to address the current horizontal overlaps or vertical
concerns in order to ensure that BASF can step into Bayer's shoes,
thereby preserving the competition that otherwise would be lost through
the merger. They also provide BASF with comparable scale and scope to
Bayer and give BASF the assets it needs going forward to be a strong
innovator.
Bayer is required to divest its entire global row crop seeds and
traits business (with insignificant exceptions not relevant to the
United States), its entire global vegetable seeds business, and all
related R&D assets. Even though neither Bayer nor Monsanto sells hybrid
wheat in the United States, Bayer must divest its entire wheat R&D
platform as well as its research facility in Ghent, Belgium that is
used to support R&D for wheat and other crops. These broad divestitures
assure that BASF will be able to take advantage of cross-crop R&D
synergies to the same extent as Bayer today. Similarly, Bayer is
divesting its entire vegetable seed business, which encompasses 24
different crops, even though the transaction raises competition
concerns in only five vegetable seed markets in the United States.
On the crop protection side, Bayer is divesting not only its global
glufosinate ammonium business, which competes with Monsanto's Roundup,
but also intellectual property and other assets to allow BASF to
continue Bayer's efforts in developing new foundational herbicide
systems.\27\ Bayer is also required to divest certain seed treatments
for corn, soy, and cotton to address horizontal and vertical
concerns.\28\ BASF is now able to offer these market-leading seed
treatment products alongside its cotton and soy seeds, just as Bayer
was able to do prior to the merger.
---------------------------------------------------------------------------

\27\ See Proposed Final Judgment Sec. II(U); Complaint ] 36.
\28\ See Complaint ] ] 38-50.
---------------------------------------------------------------------------

Without the merger, it is anticipated that competition would
intensify between Bayer and Monsanto to pursue what the industry calls
``integrated solutions''--combinations of seeds, traits, and crop
protection products supported by digital farming technologies and other
services.\29\ Commenters such as NRDC note the potential importance of
digital agriculture tools (which help farmers maximize yields and get
the most out of their other agriculture products) to future competition
in the industry. Even though integrated solutions are still evolving,
the proposed remedy requires Bayer to divest all assets related to
Bayer's digital agriculture business, including pipeline products, and
to transfer employees supporting these assets and products to BASF.
With these assets and employees, BASF will be able to step into Bayer's
shoes in pursuing integrated solutions.
---------------------------------------------------------------------------

\29\ See id. ] 61.
---------------------------------------------------------------------------

As an additional precaution, the proposed Final Judgment requires
Bayer

[[Page 1499]]

to warrant that the divestiture assets are ``sufficient in all material
respects for BASF, taking into account BASF's assets and business, to
maintain the viability and competitiveness'' of the businesses BASF has
acquired.\30\ And if BASF determines that Bayer has not divested all of
the assets ``reasonably necessary for the continued competitiveness''
of the divested businesses, BASF may notify Bayer and the Monitoring
Trustee that it requires those assets, and, in that situation, the
United States will determine whether the assets should be divested.\31\
One commenter notes that this aspect of the remedy ``perhaps
reflect[ed] the Division's efforts to reduce any `asset package risk'
to near zero.'' \32\
---------------------------------------------------------------------------

\30\ Proposed Final Judgment Sec. IV(F)(1).
\31\ Id. Sec. IV(F)(2).
\32\ Ducore Comment (Exhibit 6) at 4.
---------------------------------------------------------------------------

BASF will have the benefit of not only all of Bayer's seeds and
traits assets, but also of the approximately 4,000 former Bayer
employees slated to move to BASF with the divestitures. These
employees, who operated the divested businesses day-in and day-out for
Bayer, have extensive seeds experience. If BASF determines during the
following year that it lacks employees with expertise it needs, it may
seek to hire, without any interference from Bayer, any additional Bayer
employees who supported the divested businesses in any way since
2015.\33\
---------------------------------------------------------------------------

\33\ See Proposed Final Judgment Sec. IV(E).
---------------------------------------------------------------------------

Complementing the divested assets and transferring personnel, the
proposed remedy requires Bayer to provide transitional support to BASF
to ensure that BASF will be able to step into Bayer's competitive
shoes. For example, because prior to the merger Bayer was able to sell
a suite of its own seed treatments for use on its proprietary canola,
cotton, and soy seeds, Bayer is required to provide BASF a supply of
these seed treatments at Bayer's cost until BASF is able to develop
alternative sources of supply.\34\ In addition to the various
transition services specifically discussed in the proposed Final
Judgment, Bayer is required to provide ``any other transition services
reasonably necessary'' to facilitate a seamless transition of the
divested businesses from Bayer to BASF.\35\ One of the responsibilities
of the Monitoring Trustee is to ensure that Bayer lives up to its
obligation to provide such transition services to BASF. As Daniel
Ducore observes, ``it's hard to identify anything that BASF might need
that it isn't getting.'' \36\
---------------------------------------------------------------------------

\34\ See id. Sec. IV(G)(1).
\35\ See id. Sec. IV(H)(4).
\36\ Ducore Comment (Exhibit 6) at 5.
---------------------------------------------------------------------------

Voicing a different concern about the sufficiency of the
divestiture assets, the Consumer Federation of America writes that
``[t]he chances that BASF will be able to acquire the weaker
agricultural assets of the two firms and use them to compete
effectively are doubtful.'' \37\ Yet Bayer has been a strong competitor
even with what the Consumer Federation calls Bayer's ``weaker
agricultural assets.'' And the proposed Final Judgment ensures that
BASF will receive all of the assets it needs (along with transitional
support) to step into Bayer's shoes, thereby replacing any competition
that would otherwise be lost as a result of the merger. To the extent
commenters believe that Monsanto, by itself, held too much market power
prior to the merger, that concern is not specific to the merger and not
within the four corners of the United States' Complaint. See U.S.
Airways, 38 F. Supp. 3d at 76 (`` `Moreover, the Court's role under the
APPA is limited to reviewing the remedy in relationship to the
violations that the United States has alleged in its Complaint. . . .'
'') (quoting United States v. Graftech Int'l, No. 10-cv-2039, 2011 WL
1566781, at *13 (D.D.C. Mar. 24, 2011)).
---------------------------------------------------------------------------

\37\ Consumer Fed'n of Am. Comment (Exhibit 4) at 1.
---------------------------------------------------------------------------

While the proposed Final Judgment requires the merging parties to
divest Bayer's assets, and not Monsanto's, it also does not permit them
to pick and choose among Bayer's and Monsanto's assets to divest only
the weakest links in each company's portfolio. Bayer is not divesting
Monsanto's canola business, even though Monsanto has a much smaller
market share than Bayer in canola.\38\ Bayer is divesting its entire
global vegetable seeds business (Nunhems) even though Bayer's share for
certain vegetable seeds is larger than Monsanto's.\39\ Similarly, Bayer
is required to divest its market-leading nematicidal seed treatment
products, which enjoy over a 95% share for corn and 85% share for soy,
rather than Monsanto's NemaStrike product, which has only recently
become available for commercial sale.\40\
---------------------------------------------------------------------------

\38\ See Complaint ] 28 (Bayer's share is 60%; Monsanto's share
is 14%).
\39\ See, e.g., id. ] 58 (Bayer's share of watermelon seeds is
much larger than Monsanto's).
\40\ See Complaint ]] 41-42.
---------------------------------------------------------------------------

The required divestitures are also not wholly limited to Bayer
assets. Bayer is a relatively new entrant to the soybean business in
the United States. It has emerged as a serious threat to Monsanto in
the southern United States, but it lacks germplasm and varieties
suitable to the Midwest, an important soybean growing region. To help
strengthen BASF as a competitor to the merged company (and other
firms), the merged company is obligated to divest not only Bayer's
global soybean business, but also certain groups of Monsanto soybeans
used for research and breeding.\41\ These Monsanto assets will help
make BASF a stronger competitor in the Midwest than Bayer was before
the merger.
---------------------------------------------------------------------------

\41\ Proposed Final Judgment Sec. Sec. IV(N), II(S).
---------------------------------------------------------------------------

In contrast to some commenters' concern that BASF may not be able
to compete effectively with the seed assets it is acquiring from Bayer,
Daniel Bellemare questions whether BASF would have entered the seeds
markets and become a significant competitor on its own without the
divestitures.\42\ Even for a large company with substantial resources
such as BASF, however, barriers to entry in these markets are high.\43\
BASF needs Bayer's extensive libraries of seeds and other assets to
compete as an integrated firm on a global scale in seeds and traits.
---------------------------------------------------------------------------

\42\ Bellemare Comment (Exhibit 5) at 10-12.
\43\ See Complaint ] 62.
---------------------------------------------------------------------------

ii. BASF Has a Strong Incentive to Compete Aggressively Against Bayer

Certain commenters also express concern that BASF will lack
sufficient incentive to compete against the merged company due to the
number of post-divestiture agreements between BASF and Bayer as well as
BASF's interest in dicamba production.\44\ These concerns do not cast
doubt on the strength of the proposed remedy. The proposed Final
Judgment incentivizes BASF to compete aggressively against Bayer and
other competitors, and encourages BASF to become independent from Bayer
as soon as is reasonably possible.
---------------------------------------------------------------------------

\44\ State Attorneys General Comment (Exhibit 2) at 6-7; NRDC
Comment (Exhibit 9) at 2.
---------------------------------------------------------------------------

Bayer is obligated under the proposed Final Judgment to provide
various forms of transitional support to BASF. These arrangements lead
the State Attorneys General to suggest that, ``[b]ecause BASF will have
to rely on Bayer to make these assets work, the company will have a
disincentive to anger Bayer.'' \45\ The tolling, supply, and transition
service agreements are designed to eliminate any potential gaps in
BASF's ability to fully compete with the divested assets from the
outset. The intention is not to establish an ``ongoing, close
relationship'' between BASF and Bayer as the State Attorneys

[[Page 1500]]

General suggest.\46\ To the contrary, the proposed Final Judgment sets
relatively short initial time periods for these arrangements (generally
two years or less), which may be extended only with the approval of the
United States. The proposed Final Judgment encourages BASF to end these
arrangements as soon as practicable, requiring BASF to use ``best
efforts to develop or procure alternative sources of supply by the end
of the initial periods'' for tolling and supply agreements, and ``to
develop alternative solutions by the end of the initial periods'' for
transition service agreements.\47\ The Monitoring Trustee will closely
track BASF's progress towards operating without reliance on Bayer.\48\
In the meantime, BASF will not have to pull its competitive punches out
of concern that Bayer will stop providing the tolling, supply, or other
transitional services that it needs. Bayer's obligations are clearly
stated in the proposed Final Judgment (and detailed in separate
agreements between BASF and Bayer), and the Monitoring Trustee will
assess whether Bayer is fulfilling its responsibilities.
---------------------------------------------------------------------------

\45\ State Attorneys General Comment (Exhibit 2) at 6.
\46\ Id. at 7.
\47\ Proposed Final Judgment Sec. Sec. IV(G)(10); (H)(6).
\48\ Nor will Bayer want the transitional agreements to continue
longer than necessary, as Bayer is required during the initial terms
to provide the tolling and other services at variable cost (or
better). Proposed Final Judgment Sec. Sec. IV(G), (H).
---------------------------------------------------------------------------

NRDC suggests that BASF may not be an effective competitor to the
merged company because of BASF's existing interest in the herbicide
dicamba.\49\ The United States carefully considered BASF's premerger
role as a supplier of dicamba to Monsanto in evaluating BASF's
suitability as a buyer of the divestiture assets. As the owner of
Bayer's glufosinate ammonium business and the LibertyLink traits, BASF
will earn returns from selling seed containing the LibertyLink traits,
licensing those traits to third party seed companies, and selling the
Liberty herbicides. These interests will greatly outweigh any benefit
BASF would gain, as a supplier of dicamba, from Monsanto's sale of seed
containing Monsanto's dicamba-tolerance traits.\50\ Further, the
proposed remedy is structured so that BASF will not only have an
appropriate incentive to promote its already-commercialized LibertyLink
traits, but also traits that potentially would compete with Monsanto's
dicamba-tolerance traits in the future, such as isoxaflutole
tolerance.\51\
---------------------------------------------------------------------------

\49\ NRDC Comment (Exhibit 9) at 2.
\50\ It is also unclear for how long (or to what extent) BASF
will continue to supply dicamba to Monsanto. In 2017, Monsanto broke
ground on a $975 million expansion of a facility in Louisiana to
produce dicamba. See, e.g., https://monsanto.com/news-releases/monsanto-board-of-directors-approves-expansion-in-luling-louisiana/.
\51\ To ensure that BASF has a similar incentive to Bayer to
commercialize and promote these traits, Bayer is required to provide
BASF with a supply of isoxaflutole at Bayer's cost and to use best
efforts to obtain regulatory approvals for the use of isoxaflutole
over soybeans and cotton containing an isoxaflutole-tolerance trait.
Proposed Final Judgment Sec. Sec. IV(G)(2); (L)(3).
---------------------------------------------------------------------------

b. Comments Regarding BASF's Ability to Execute the Remedy Successfully
and Requests for Ongoing Study

Three commenters--the State Attorneys General, Daniel Ducore, and
Consumer Federation of America--raise concerns that the size and
complexity of the proposed remedy create uncertainty as to whether BASF
will be able to execute its current plans successfully and preserve
competition at premerger levels. As Mr. Ducore describes his concern,
there remains a risk that BASF ``will fail to step in for Bayer and
compete with the new Bayer-Monsanto as strongly as Bayer had competed
with Monsanto before the deal,'' notwithstanding that the remedy
package ``appears to be as robust a divestiture as might be imagined.''
\52\ The commenters do not propose any specific measures that could be
incorporated to reduce these risks. Nor do they urge the court to block
the merger. Instead, Mr. Ducore and the State Attorneys General propose
that the United States commit to conduct a retrospective study on the
success of the settlement in preserving competition, with the State
Attorneys General requesting that this Court order that the study be
conducted two years after the divestitures have been completed.\53\ The
commenters argue that the uncertainty inherent in the large and complex
transfer of businesses and assets justifies greater oversight of BASF's
future operations than the government would typically undertake in
conjunction with a merger settlement. Mr. Ducore proposes a
particularly extensive ``ongoing assessment,'' including, for example,
tracking BASF's ongoing performance, assessing BASF's evaluation of its
R&D projects, and reviewing BASF's sales and pricing levels.\54\
---------------------------------------------------------------------------

\52\ Ducore Comment (Exhibit 6) at 1-2.
\53\ State Attorneys General Comment (Exhibit 2) at 2-3.
\54\ Ducore Comment (Exhibit 6) at 5-7.
---------------------------------------------------------------------------

An obligatory retrospective study of the effects of this merger and
settlement on competition is not necessary to protect the public
interest. As described more fully in Section V(a), the United States
has incorporated a number of safeguards in the proposed Final Judgment
to ensure that BASF will be fully capable of stepping into Bayer's
shoes as an effective competitor. The United States intends to monitor
the divestitures to ensure that all of the assets and businesses are
transferred to BASF in accordance with the terms of the proposed Final
Judgment, and it has even taken the unusual step of requesting the
appointment of a monitoring trustee to supplement the government's
oversight of this process. The Monitoring Trustee has authority to
access the relevant company personnel, books, records, and other
pertinent information to ensure that Defendants comply with their
obligations, and the trustee will provide regular updates to the United
States on Defendants' compliance.\55\ The Trustee will continue to
monitor compliance with the proposed Final Judgment for as long as the
transitional agreements required by the proposed Final Judgment remain
in place (unless this period shortened or extended by the United
States).\56\ Thus, the proposed Final Judgment contemplates several
years of oversight by the Monitoring Trustee with regular reporting to
the United States to address issues that may arise with respect to the
remedy.
---------------------------------------------------------------------------

\55\ Proposed Final Judgment Sec. Sec. VIII(G), (H).
\56\ Id. Sec. VIII(J).
---------------------------------------------------------------------------

That said, the United States deliberately crafted the proposed
Final Judgment as a complete and permanent structural resolution that
remedies the antitrust violations alleged in the Complaint without the
need for future government involvement in BASF's (or Bayer's) business
operations. A retroactive assessment would not help shape the remedy in
this matter. The commenters do not explain how they expect the United
States to use the results of the assessment they would require, but
they may be suggesting that the United States should require additional
remedies in the future in the event the post-hoc review reveals
deficiencies in the settlement. As a law enforcement agency, the United
States is ill-equipped to continually oversee broader market operations
as suggested by the commenters. The United States should not be second-
guessing, for example, BASF's business plans or R&D investments several
years from now, when many of the relevant circumstances may have
changed from today. Indeed, as it would be impossible to predict with
certainty how well Bayer would have performed with the divested assets
absent the merger, it also would be impossible to assess with certainty
BASF's performance in comparison. To the contrary, once the

[[Page 1501]]

United States has remedied the antitrust violations--as the proposed
Final Judgment does here--competition, not the government, should
determine how individual competitors and the market as a whole perform
going forward.

c. Comments Regarding Seed Treatments

Two commenters raise questions relating to seed treatments.
Syngenta generally supports the proposed Final Judgment, noting that it
``resolves many of the most complex and difficult anticompetitive
aspects of the Transaction;'' \57\ however, Syngenta seeks
modifications to provisions that require Bayer to supply BASF with seed
treatments and proposes restrictions on BASF's ability to sell divested
seed treatments to Bayer. In addition, the Sustainable Food Center
proposes that all of Bayer's neonicotinoid seed treatments be divested
to BASF. We respond to each of these comments below.
---------------------------------------------------------------------------

\57\ Syngenta Comment (Exhibit 12) at 1.
---------------------------------------------------------------------------

i. The Proposed Final Judgment Appropriately Requires Bayer to Supply
Seed Treatments to BASF at Variable Cost

The proposed Final Judgment requires Bayer to supply certain seed
treatments products to BASF at ``variable cost'' for a limited period
of time to ensure continuity of seed treatment supply for the divested
businesses.\58\ Syngenta expresses concern that the term ``variable
cost'' is susceptible to different interpretations and could ``permit
BASF the opportunity to buy the products at a fraction of their full
production costs,'' which would give BASF ``a cost advantage above any
competitor'' and ``distort normal competitive dynamics'' for these
products.\59\ In particular, Syngenta asserts that the agribusiness
usage of the term ``variable cost'' would include only ``direct input
costs'' (such as the cost of raw materials), and exclude other costs
that would vary with production levels, resulting in BASF paying too
little for these products.\60\ Essentially, Syngenta appears to be
concerned that BASF may get too good a deal from Bayer on seed
treatment products, which could make it more challenging for Syngenta,
the second largest seed treatment supplier, to compete with BASF.
Syngenta asks that the proposed Final Judgment be ``clarified to note
that `variable cost' is defined more broadly than its typical industry
definition to include an appropriate allocation of fixed costs.'' \61\
To accomplish this, Syngenta proposes amending the proposed Final
Judgment to require Bayer to supply BASF these seed treatment products
at ``fully absorbed cost,'' an accounting measure that includes an
allocation of certain fixed costs.\62\
---------------------------------------------------------------------------

\58\ Proposed Final Judgment at Sec. IV(G).
\59\ Syngenta Comment (Exhibit 12) at 1, 3-4.
\60\ Id. at 3.
\61\ Id. at 4.
\62\ Id.
---------------------------------------------------------------------------

Syngenta's concerns are misplaced, and the proposed Final Judgment
changes that Syngenta requests are not necessary. The seed treatment
supply provisions aim to place BASF in the same cost position as Bayer
before the merger. By doing so, the remedy preserves competition during
the transition period since BASF's pricing decisions will be based on
the same underlying cost structure as Bayer prior to the merger. To
accomplish this, the proposed Final Judgment uses the economic concept
of ``variable cost,'' i.e., ``that part of cost which varies with the
level of output.'' \63\ This measure of costs will capture costs that
directly relate to Bayer's production of seed treatments for BASF--
including, for example, a per-unit allocation for machine use, where
appropriate--regardless of the accounting label that industry
participants might place on any specific cost item. Thus, there is no
basis for concern that Bayer will be selling seed treatments to BASF at
a fraction of the production costs. To the contrary, BASF will fully
reimburse Bayer for the costs directly related to producing these seed
treatment products.
---------------------------------------------------------------------------

\63\ See, e.g., Variable cost, Oxford Dictionary of Economics
(5th ed. 2017).
---------------------------------------------------------------------------

Syngenta's proposal to change the cost standard for seed treatments
would also introduce needless complication. Bayer is required to
provide several additional products and services at ``variable cost''
for the purpose of placing BASF in the same cost position as Bayer
before the merger. Amending the proposed Final Judgment to introduce
another cost standard specific to seed treatments would create
confusion in addition to being unnecessary. It would also create a risk
that Bayer would face conflicting obligations across jurisdictions, as
the European Commission and other jurisdictions have imposed the same
variable cost requirements as the United States in their respective
settlement documents.\64\
---------------------------------------------------------------------------

\64\ See, e.g., European Commission, Case M.8084--Bayer/
Monsanto, Modification of Commitments, Schedule, at ] 21, p. 39
(divested seed treatments to be tolled at variable cost), at ] 68(c)
(glufosinate formulations supplied at variable cost), and 9, 13, 28,
65 and 67 (transitional supplies or services will be supplied by
Bayer at variable cost), dated April 11, 2018, available at http://ec.europa.eu/competition/mergers/cases/decisions/m8084_12985_3.pdf;
Competition Commission of India, Order under Section 31(7) of the
Competition Act, Combination Registration No. C-2017/08/523, at ]
180(c), p. 54 (glufosinate formulation to be supplied at variable
cost) and ] 181, p. 54 (transitions supplies or services provided at
variable cost), dated June 14, 2018, available at https://www.cci.gov.in/sites/default/files/Notice_order_document/Order_14.06.2018.pdf.
---------------------------------------------------------------------------

ii. BASF Cannot Resell Bayer Seed Treatments Supplied under Section
IV(G)(1) for Use on Non-BASF Seeds

Section IV(G)(1) of the proposed Final Judgment requires Bayer to
supply BASF with the seed treatments that Bayer is not divesting to
BASF but that Bayer has been using in the divested seed businesses.
These provisions allow BASF to seamlessly continue marketing the same
combinations of seeds and seed treatments that Bayer offered before the
merger while BASF transitions to alternative sources of supply.
Syngenta suggests, however, that this section could be read to permit
BASF to resell these Bayer seed treatments for use on other companies'
seeds in competition with Syngenta, Bayer, and other producers of seed
treatments. Syngenta proposes amending the proposed Final Judgment to
expressly prohibit this.\65\
---------------------------------------------------------------------------

\65\ Syngenta Comment (Exhibit 12) at 2.
---------------------------------------------------------------------------

Syngenta's proposed amendment is unnecessary, as it would merely
repeat what is already clear from the text of the proposed Final
Judgment. The title of Section IV(G)(1) makes plain that the provision
relates to ``Seed Treatment Supply Agreements for Broad Acre Seeds and
Traits Business,'' \66\ that is, the agreements are intended to supply
the Broad Acre Seeds and Traits business BASF is acquiring from Bayer.
Moreover, the body of the provision limits its scope to Bayer seed
treatments that have been ``used by Bayer in the Broad Acre Seeds and
Traits Business.'' \67\ The European Commission Commitments likewise
prohibit resale because they require Bayer to supply these seed
treatments to BASF for use on BASF seeds.\68\ Given that Section
IV(G)(1) is limited to the supply of seed treatments to BASF for use on
its own

[[Page 1502]]

seeds, Syngenta's proposed amendment should be rejected.
---------------------------------------------------------------------------

\66\ Proposed Final Judgment Sec. IV(G)(1) (emphasis added).
\67\ Id. Sec. IV(G)(1).
\68\ See European Commission, Case M.8084--Bayer/Monsanto,
Modification of Commitments, Schedule, at ] 66(d) and 66(e), p. 52
(in connection with the divestiture of Broad Acre Seeds and Traits,
requiring Bayer to supply seed treatment ``used on'' divested canola
seeds and seed treatment ``for divested cotton and soy varieties''),
dated April 11, 2018, available at http://ec.europa.eu/competition/mergers/cases/decisions/m8084_12985_3.pdf.
---------------------------------------------------------------------------

iii. The Proposed Final Judgment Allows BASF to Sell Seed Treatments to
Bayer

Syngenta is also concerned that nothing prevents BASF from entering
into arm's-length commercial agreements to supply Bayer with the seed
treatments products it is obtaining through the divestitures. Syngenta
contends that allowing BASF to enter into such an agreement with Bayer
would undermine the remedy because it would ``permit Bayer to recreate
the sort of product bundles that were the source of significant concern
in the Transaction.'' \69\ Syngenta proposes to close the purported
``loophole'' by amending the proposed Final Judgment to prohibit BASF
from selling divested seed treatments to Bayer except for use in
Bayer's branded seed business.\70\
---------------------------------------------------------------------------

\69\ Syngenta Comment (Exhibit 12) at 2.
\70\ Id. at 2-3.
---------------------------------------------------------------------------

Syngenta's concerns are based on a fundamental misunderstanding of
the United States' theory of harm relating to seed treatments and the
basis for requiring divestiture of certain seed treatment products. The
United States has alleged that the merger would substantially lessen
competition through the vertical integration of Bayer and Monsanto in
one respect: By combining Monsanto's strong position in corn and
soybean seeds with Bayer's dominant position in certain seed
treatments, the merger would give the combined company the incentive
and ability to harm its seed rivals by raising the price of those seed
treatments--a key input for genetically modified seeds. For example,
before the merger, Bayer sold the only seed treatment that effectively
controls a destructive pest called corn rootworm. Because Bayer did not
sell corn seeds itself, it had a strong incentive to sell that seed
treatment to all corn seed companies, including Monsanto's rivals. But
the merger changes this calculus because Bayer now owns Monsanto, the
largest supplier of corn seeds in the United States. If Bayer were
permitted to retain its corn seed treatment, it would have a strong
incentive to raise the price of that treatment to its seed rivals (or
stop selling it altogether), knowing that its rivals rely on the
product and would be less able to compete effectively without it.
In other words, the possibility that Bayer may continue to use the
divested seed treatments on its seeds does not, in and of itself, give
rise to competitive harm. Rather, the problem is one of incentives. By
vesting control of both products in one firm, the merger would create
an incentive for the combined firm to raise its rivals' costs to make
it harder for them to compete to sell seeds. To ensure that the merger
does not give rise to this incentive to foreclose other competitors,
the United States has required Bayer to divest certain seed treatments
to BASF. In doing so, the United States has preserved the competitive
status quo: The seeds and seed treatments remain under the control of
different firms, Bayer and BASF, respectively. Accordingly, the
divestiture of these seed treatments to BASF fully resolves the
vertical foreclosure allegations in the Complaint.

iv. Concerns Regarding All Neonicotinoid Seed Treatments Are Outside
the Scope of the Complaint

Sustainable Food Center comments that the merger should not be
permitted unless Bayer divests, among other things, all its
``neonicotinoid seed treatments.'' \71\ ``Neonicotinoids'' refer to a
particular chemical class of insecticides. Under the proposed Final
Judgment, Bayer will divest seed treatments based on the chemical
clothianidin, which is one type of neonicotinoid. Bayer also sells seed
treatments based on the chemicals imidacloprid and thiacloprid, two
other types of neonicotinoid. The Complaint does not include a claim
relating to these types of seed treatments. Accordingly, there is no
basis for requiring Bayer to divest these products as a condition of
approving the merger.
---------------------------------------------------------------------------

\71\ Sustainable Food Ctr. Comment (Exhibit 11).
---------------------------------------------------------------------------

d. Comments Related to Digital Agriculture and Cross-Product Leveraging

Several commenters argue that allowing Bayer to retain Monsanto's
leading digital agriculture platform will enhance the merged firm's
ability to influence farmer choice in other areas, such as seed and
crop protection markets.\72\ Digital agriculture, although still
emerging, refers to tools and services that allow farmers to collect,
store, process, or interpret data about their crops. Digital
agriculture is expected to drive an industry trend toward ``integrated
solutions''-- combinations of seeds, traits, and crop protection
products supported by digital farming technologies and other services.
Certain commenters argue that the merged firm will be able to use its
platform to recommend its own products, ``locking in'' farmers to the
merged firm's portfolio of products.\73\ Several commenters urge the
United States to seek to block the merger altogether based on these
concerns.\74\ Other commenters propose modifications to the settlement
on this basis. For example, Friends of the Earth and the Consumer
Federation of America argue that Monsanto's digital agriculture
platform should be divested instead of Bayer's.\75\ Friends of the
Earth also suggests that the merged firm should be required to update
its privacy policy to allow farmers to more easily remove data from its
digital agriculture platform.\76\ Consumer Federation similarly urges
the Court to impose ``rigorous open access conditions'' for its digital
agriculture interfaces.\77\
---------------------------------------------------------------------------

\72\ NRDC Comment (Exhibit 9) at 4, 6, 9-10; Friends of the
Earth Comment (Exhibit 7) at 2-3; Nat'l Family Farm Coal. Comment
(Exhibit 8).
\73\ NRDC Comment (Exhibit 9) at 4 (asserting that the bundled
products would ``effectively turn farmers into captured users'');
Friends of the Earth Comment (Exhibit 7) at 3 (alleging that the
merged firm will be ``well-positioned to continue leveraging''
Monsanto's platform ``to sell more of its products''); Nat'l Family
Farm Coal. Comment (Exhibit 8) at 1 (arguing that the merged firm
will be able to ``leverage the sale of one product into another'');
Pollinator Stewardship Council Comment (Exhibit 10) at 2 (observing
that ``fewer technology `platforms' will dominate the marketplace,''
making it hard for smaller companies to compete, and ``farmers will
be locked into using these platforms as fewer choices will be
available in the marketplace'').
\74\ See, e.g., NRDC Comment (Exhibit 9); Nat'l Family Farm
Coal. Comment (Exhibit 8); Friends of the Earth Comment (Exhibit 7).
\75\ Friends of the Earth Comment (Exhibit 7) at 3-4; Consumer
Fed'n of Am. Comment (Exhibit 4) at 1.
\76\ Friends of the Earth Comment (Exhibit 7) at 3-4.
\77\ Consumer Fed'n of Am. Comment (Exhibit 4) at 2.
---------------------------------------------------------------------------

The United States has not alleged anticompetitive effects arising
from Bayer's acquisition of Monsanto's digital agriculture platform.
Nonetheless, the United States recognizes that BASF's ability to
compete in the future in the individual seed and crop protection
markets that are subject of the Complaint may depend on the strength of
BASF's digital agriculture platform. The leading global agricultural
businesses (including Bayer and Monsanto) project that digital
agriculture will be a key driver of seed and crop protection sales in
the future. To ensure BASF has the digital agriculture capabilities it
needs to replace Bayer as a competitor going forward, the proposed
Final Judgment requires Bayer to divest all assets related to its
digital agriculture portfolio and pipeline of products to BASF.
Although Bayer's digital agriculture products are not as developed as
Monsanto's, the divestiture provides BASF with similar

[[Page 1503]]

scale, scope, and innovation incentives as Bayer before the merger.
Comments advocating for open access to digital agriculture data or
for particular privacy policy provisions should be rejected as requests
for regulatory relief. The merger does not directly implicate these
issues. Moreover, behavioral remedies that require firms to commit to
particular business actions, such as requiring open access or
particular privacy provisions, are disfavored mechanisms for addressing
the effects of a merger, as they are inherently more difficult to craft
and administer and they risk unintended consequences. For example,
imposing a remedy that restricts the behavior of one competitor (the
merged firm) but not others may interfere with the competitive
marketplace. The structural divestiture of Bayer's digital agriculture
assets raises none of these concerns.
Several commenters also express broad concerns that the merged
firm, by virtue of its broader portfolio of products including
Monsanto's digital agriculture platform, will be able to leverage its
significant position in certain markets to foreclose competition in
other markets.\78\ Many of these cross-product leveraging concerns
appear to be animated by Monsanto's significant presence in traits:
Commenters fear that the merger will give the combined Bayer/Monsanto
new opportunities to leverage its strength in trait markets to
foreclose competition in other, unspecified, markets. For example, NRDC
argues that Monsanto has leveraged its ``virtual monopoly power'' in
seeds in anticompetitive ways in the past, and that a ``larger, more-
powerful Bayer/Monsanto corporation would be in an equal if not better
position to do so in the future by denying access to key traits,
charging monopoly prices, or coercing its competitors into anti-
competitive collaboration.'' \79\
---------------------------------------------------------------------------

\78\ NRDC Comment (Exhibit 9) at 3; Pollinator Stewardship
Council Comment (Exhibit 10) at 3-4; Consumer Fed'n of Am. Comment
(Exhibit 4) at 1-2.
\79\ NRDC Comment (Exhibit 9) at 3. See also Consumer Fed'n of
Am. Comment (Exhibit 4) at 1-2 (asserting that the proposed remedy
fails to prevent the merged firm from ``expanding its market power
and vertical leverage''); Pollinator Stewardship Council Comment
(Exhibit 10) at 3-4 (asserting that ``Monsanto can already exert
considerable market power through its cross-licensing agreements''
and ``[the merger] would likely lessen competition even further'').
---------------------------------------------------------------------------

To the extent the commenters have concerns about anticompetitive
effects in markets beyond those alleged in the Complaint and remedied
by the proposed Final Judgment, the commenters have not identified
them. Nor do the commenters explain why the merger, as remedied, would
result in such harm. It would be inappropriate to require a remedy for
such broad, amorphous concerns, unsupported by the rigorous antitrust
analysis the law requires. Furthermore, any such concerns go beyond the
allegations in the complaint and are thus beyond the scope of Tunney
Act review. See U.S. Airways, 38 F. Supp. 3d at 76 (`` `Moreover, the
Court's role under the APPA is limited to reviewing the remedy in
relationship to the violations that the United States has alleged in
its Complaint. . . .' '') (quoting Graftech, 2011 WL 1566781, at *13).
Going forward, the antitrust laws will continue to apply to the merged
firm, and the United States will challenge practices that run afoul of
applicable statutes.

e. Comments Regarding Procedural Matters, Including Government
Oversight and Enforcement of Proposed Final Judgment Compliance

Several commenters express concerns about procedural aspects of the
proposed Final Judgment. One commenter argues that the judicial review
procedures set forth in the APPA may be inapt in large transactions
requiring complicated divestitures. Another commenter argues that the
proposed Final Judgment should require, rather than permit, the
appointment of a monitoring trustee. Two commenters are concerned that
the proposed Final Judgment's jurisdictional provisions are inadequate.
One commenter fears that the proposed Final Judgment's enforcement
provisions improperly favor the United States. As explained below,
these concerns lack merit and do not require any amendment of the
proposed Final Judgment.

i. The Standard of Review Established by Congress Is Appropriate

One commenter, Daniel Bellemare, argues that a proposed decree
remedying the anticompetitive effects of a complex transaction such as
Bayer's acquisition of Monsanto may not be suited for a public interest
review under the APPA.\80\ Mr. Bellemare suggests instead that a trial
or preliminary injunction hearing may be a better forum for the
resolution of complicated antitrust issues.\81\
---------------------------------------------------------------------------

\80\ Bellemare Comment (Exhibit 5) at 14-15.
\81\ Id. at 15.
---------------------------------------------------------------------------

Irrespective of the size or nature of a transaction, the APPA
requires a court to conduct a limited public interest determination
when reviewing a proposed decree. Congress vested authority in the
Department of Justice, rather than the courts, to investigate and
prosecute violations of the Federal antitrust laws. See 28 C.F.R.
Sec. Sec. 0.40, 0.41; 15 U.S.C. Sec. Sec. 4, 9, 15a. This
prosecutorial authority includes the ability to craft remedies, such as
the proposed Final Judgment. In light of the fact that a proposed
decree is the product of the United States' exercise of prosecutorial
discretion, courts have interpreted the APPA to permit only a limited
inquiry into whether a settlement is ``within the reaches of the public
interest.'' Microsoft, 56 F.3d at 1458-61 (citation omitted). The
court's public interest determination focuses on whether the settlement
appropriately addresses the allegations identified in the complaint.
Id. at 1458-59; see also SBC Commc'ns, 489 F. Supp. 2d at 11 (the
court's ``scope of review remains sharply proscribed by precedent and
the nature of the Tunney Act proceedings''). The APPA does not require
a court to expend judicial time and resources considering alternative
remedies or probing the adequacy of the complaint itself. The limited
judicial review required by the APPA is appropriate for this matter and
is not unduly burdensome for this Court.

ii. Modifications Concerning the Monitoring Trustee Are Unnecessary

The State Attorneys General propose that the appointment of a
monitoring trustee should be required, rather than left to the
``discretion'' of the United States.\82\ This proposal is moot. This
Court granted the United States' motion to appoint the Honorable
Michael B. Mukasey as Monitoring Trustee on August 14, 2018.
---------------------------------------------------------------------------

\82\ State Attorneys General Comment (Exhibit 2) at 2.
---------------------------------------------------------------------------

iii. The Proposed Final Judgment's Jurisdictional Provisions Are
Sufficient

The State Attorneys General contend that the Court should
affirmatively retain jurisdiction throughout the ten-year term of the
Final Judgment.\83\ The commenters appear to misunderstand the terms of
the proposed Final Judgment, which provides that the Court retains
jurisdiction, without limitation, to enable any party to seek orders or
directions necessary or appropriate to carry out the terms of the
proposed Final Judgment.\84\
---------------------------------------------------------------------------

\83\ Id.
\84\ Proposed Final Judgment Sec. XIII.
---------------------------------------------------------------------------

By its terms, the Final Judgment is to expire ten years from the
date of its entry; however, the United States may terminate the Final
Judgment after six years if it finds that the divestitures

[[Page 1504]]

have been completed and the continuation of the Final Judgment is no
longer necessary or in the public interest.\85\ The State Attorneys
General ask that the Court require that the proposed Final Judgment, or
at least certain of its provisions, remain in place for the full ten-
year term, with no option to terminate after six years.\86\ This
request is unnecessary. The proposed Final Judgment is designed to
address the very potential for uncertainty that troubles the State
Attorneys General: it allows the decree to remain in place for ten
years if competition so requires, but it also reasonably allows for the
decree to be terminated earlier if it becomes unnecessary to protect
competition.
---------------------------------------------------------------------------

\85\ Id. Sec. XV.
\86\ State Attorneys General Comment (Exhibit 2) at 3, 8.
---------------------------------------------------------------------------

This flexibility is important because, while equitable relief under
the Clayton Act ``should unfetter a market from anticompetitive
conduct,'' Ford Motor Co. v. United States, 405 U.S. 562, 577 (1972),
at the same time relief ``must not be punitive,'' United States v. E.
I. du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). District courts
have regularly approved consent decrees providing for the sort of
flexibility contemplated here. See, e.g., United States v. Northrup
Grumman Corp., No. 1:02 CIV 02432, 2003 U.S. Dist. LEXIS 10636, at *26
(D.D.C. June 10, 2003) (approving decree with seven-year term and
option for government to seek three-year extension); United States v.
Alex Brown & Sons, Inc., No. 96 CIV 5313 (RWS), 1997 WL 314390, at *8
(S.D.N.Y. Apr. 24, 1997) (approving decree with a ten-year term except
that certain portions of the decree would expire in five years and the
Antitrust Division had the option to terminate those portions after
only two years); United States v. Lykes Bros. Steamship Co., No. CIV.A.
95 1839, 1995 WL 803552, at *4 (D.D.C. Oct. 5, 1995) (approving decree
with five-year term and option for government to extend an additional
five years).
If, after six years (but before the end of the full ten-year term)
the divestitures have been completed and the United States determines
that effective competition thereby has been preserved, then the public
interest is not served by a continuation of the decree and the
associated burdens placed upon the United States, the Defendants, and
the Court. It should also be noted that the proposed Final Judgment
also includes a provision allowing the United States to seek a one-time
extension of the decree in any enforcement proceeding in which the
Court finds that the Defendants have violated the decree. In any event,
in applying its review function under the Tunney Act, the district
court's role is not to make a de novo determination of what the public
interest requires but rather to determine whether the settlement
reflected in the proposed final judgment falls ``within the reaches of
the public interest.'' Massachusetts v. Microsoft Corp., 373 F.3d 1199,
1237 (D.C. Cir. 2004) (quoting United States v. Microsoft Corp., 56
F.3d 1448, 1458 (D.C. Cir. 1995)). This provision falls within those
reaches.
In its comment, NFIB complains that the proposed Final Judgment's
jurisdictional provision does not explicitly say ``[t]he Court has
determined that this matter constitutes a case or controversy.'' \87\
This argument has no merit. Although ``a court must assure itself of
the existence of subject-matter jurisdiction,'' Kaplan v. Cent. Bank of
the Islamic Republic of Iran, 896 F.3d 501, 511 (D.C. Cir. 2018), a
court's written decision need not ``explicitly discuss it,'' Trans
World Airlines v. Morales, 949 F.2d 141, 144 (5th Cir. 1991), aff'd in
part, rev'd in part, 504 U.S. 374 (1992). More importantly, the Supreme
Court has already determined that a proposed antitrust consent decree
filed simultaneously with the United States' complaint satisfied
Article III's case or controversy requirement because, among other
things, ``a suit for an injunction deals primarily, not with past
violations, but with threatened future ones.'' Swift & Co. v. United
States, 276 U.S. 311, 326 (1928). It is sufficient, therefore, for the
proposed Final Judgment to state that the ``Court has jurisdiction over
the subject matter of and each of the parties hereto with respect to
this action.'' \88\
---------------------------------------------------------------------------

\87\ NFIB Comment (Exhibit 13) at 2.
\88\ Proposed Final Judgment Sec. I.
---------------------------------------------------------------------------

iv. The Proposed Final Judgment Appropriately Grants the United States
Discretion over Certain Decisions

The NFIB claims the phrase ``sole discretion,'' as it applies to
the United States throughout the proposed Final Judgment, ``encourages,
if not authorizes, arbitrary action,'' and requests that a new
paragraph be inserted in the proposed Final Judgment imposing an
explicit duty on the United States ``to act reasonably in the
circumstances.'' \89\
---------------------------------------------------------------------------

\89\ NFIB Comment (Exhibit 13) at 2-3.
---------------------------------------------------------------------------

Certain aspects of the proposed Final Judgment contemplate
flexibility to ensure that the assets are handed off smoothly and
effectively. For example, Paragraph IV(F)(2) of the proposed Final
Judgment provides that, within one year, if BASF determines that
additional Bayer assets are reasonably necessary for the continued
competitiveness of the divested businesses, BASF may request that the
United States require Bayer to divest additional assets. This provision
allows BASF to fill any gaps that could not reasonably be foreseen
before it started operating those businesses. At the same time, an
efficient and impartial arbiter is needed to ensure that any such
requests are valid. With respect to this and all other provisions
allowing the United States to exercise its discretion, the United
States intends to strike a balance between ensuring that BASF has the
resources to replace Bayer as an independent and vigorous competitor
and guarding against BASF seeking more from Bayer than is necessary or
BASF relying on Bayer for transition services for longer than
necessary.
The term ``sole discretion'' appears regularly in consent decrees
approved by this and other courts as in the public interest. See, e.g.,
United States v. Heraeus Electro-Nite Co., LLC, No. 1:14-CV-00005-JEB,
2014 U.S. Dist. LEXIS 62755, at *6 (D.D.C. Apr. 7, 2014) (approving
antitrust consent decree ordering divestiture ``to an Acquirer
acceptable to the United States, in its sole discretion''); United
States v. Anheuser-Busch InBev SA/NV, No. CV 13-127(RWR), 2013 U.S.
Dist. LEXIS 167309, at *14 (D.D.C. Oct. 21, 2013) (approving decree
providing that ``United States, in its sole discretion, may agree to
one or more extensions of [] time period [to complete divestiture]'').
NFIB's suggestion ignores that ``a presumption of regularity attaches
to the actions of Government agencies'' such as the Department of
Justice. U.S. Postal Serv. v. Gregory, 534 U.S. 1, 10 (2001) (citing
United States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1926)). NFIB
has offered no reason to believe the United States would exercise its
discretion other than in ways that it reasonably determines would best
advance its longstanding mission of protecting competition and
consumers. The proposed modification should be rejected.\90\
---------------------------------------------------------------------------

\90\ See Mission, U.S. Dep't of Justice Antitrust Div., https://www.justice.gov/atr/mission (last updated July 20, 2015) (``The
mission of the Antitrust Division is to promote economic
competition,'' which ``benefits American consumers through lower
prices, better quality and greater choice'').
---------------------------------------------------------------------------

v. The Proposed Final Judgment Is Not the Product of ``Economic
Leverage''

NFIB misconstrues the proposed Final Judgment when it insists that
``[t]he

[[Page 1505]]

Court should not permit the Justice Department to use the economic
leverage it gained over the Defendants by filing an antitrust lawsuit
to pressure the Defendants to give up the assistance of corporate
counsel.'' \91\ The proposed Final Judgment merely gives the United
States the right ``to interview, either informally or on the record,
Defendants' officers, employees, or agents,'' for compliance purposes,
with ``their individual counsel present.'' \92\ That provision does
not, however, exclude corporate counsel. NFIB's comment also ignores
that ``in the absence of clear evidence to the contrary, courts presume
that [government officials] have properly discharged their official
duties.'' Chem. Found., 272 U.S. at 14-15.
---------------------------------------------------------------------------

\91\ NFIB Comment (Exhibit 13) at 3.
\92\ Proposed Final Judgment Sec. X.
---------------------------------------------------------------------------

NFIB similarly complains that the Defendants' agreement to a
``preponderance of the evidence'' standard in decree enforcement
proceedings was a product of the United States' purported ``economic
leverage.'' \93\ The terms of the proposed Final Judgment were
determined through negotiation, and both sides benefit in certain ways
from the agreement to a preponderance standard. The United States and
the public gain by making the investigation and enforcement of
antitrust consent decrees more efficient; the clear and convincing
evidence standard, which would otherwise apply, would subject the
parties to more onerous and resource-intensive investigations. The
preponderance standard lessens those burdens, while still ensuring that
the United States carries the burden of proving a decree violation. The
D.C. Circuit has already recognized that the standard of proof in
decree enforcement proceedings can be waived. See United States v.
Volvo Powertrain Corp., 758 F.3d 330, 338-39 (D.C. Cir. 2014)
(concluding that the defendant waived the ``clear and convincing''
standard by oral representation in the district court). NFIB has
identified no valid reason why the Defendants' waiver of the clear and
convincing standard here should not similarly be honored.
---------------------------------------------------------------------------

\93\ NFIB Comment (Exhibit 13) at 4.
---------------------------------------------------------------------------

f. Additional Issues Raised By Commenters

i. Commenters Concerned About Industry Consolidation Fail to
Acknowledge the Effect of the Remedy

Several commenters oppose the merger based on general concerns
about consolidation in the agricultural industry. They view the merger
as part of a pattern of consolidation and raise concerns regarding the
impact of such consolidation on prices and innovation. For example, the
comment by certain Members of Congress notes that this transaction
``comes in the midst of other agro-chemical company mergers . . . and
is only the latest example in decades of consolidation in the
industry.'' \94\ NRDC states that ``today's agricultural inputs markets
already resemble the tight, seemingly impenetrable oligopoly that the
Clayton Act abhors as a result of considerable and unchecked
consolidation over the past twenty years.'' \95\ The Sustainable Food
Center asserts that ``[f]armers in our network have expressed growing
concern with consolidation in the market for agricultural inputs.''
\96\ While these commenters cite consolidation as a reason to block the
merger, they fail to acknowledge that the remedy ensures that the
merger will not increase concentration in the affected markets.\97\
---------------------------------------------------------------------------

\94\ Members of Cong. Comment (Exhibit 3) at 1.
\95\ NRDC Comment (Exhibit 9) at 4.
\96\ Sustainable Food Ctr. Comment (Exhibit 11) at 1.
\97\ To the extent that commenters raised substantive issues
regarding the efficacy of the relief contained in the proposed Final
Judgment to remedy the competitive harm at issue in this transaction
we discuss and respond to them above. A number of comments, however,
expressed opposition to the merger without addressing any specific
aspects of the transaction or the settlement. See, e.g., Pollinator
Stewardship Council Comment (Exhibit 10) at 1 (asking the United
States to ``block this biotechnology mega-merger''); ActionAid USA
Comment (Exhibit 1) at 2 (``The only answer to this merger is
NO.'').
---------------------------------------------------------------------------

The United States agrees that the proposed merger, unremedied,
poses a substantial threat to competition. At the same time, the United
States is confident that the proposed divestitures to BASF will fully
address those concerns. As detailed above in Section V(a), the proposed
Final Judgment will ensure that BASF replaces Bayer as an independent
and vigorous competitor in each of the markets in which the merger
would otherwise lessen competition. The United States has gone to
extraordinary lengths to ensure that this settlement will prevent
increased concentration in the affected markets by vesting BASF with
the full complement of assets, personnel, and rights needed to preserve
competition in the affected markets.
It is well established that courts ``must accord deference to the
government's predictions about the efficacy of its remedies.'' SBC
Commc'ns, 489 F. Supp. 2d at 17. According appropriate deference to the
United States here, the proposed settlement is well within ``the
reaches of the public interest.'' Microsoft, 56 F.3d at 1461.

ii. Comments Regarding the Environmental Impact of Agricultural
Chemicals Are Beyond the Scope of this Action

A number of commenters express concerns relating to the
environment. Some commenters express broad concerns that the merger
would result in environmental harm.\98\ Others commenters express
general concerns, not specific to the merger, about the effect of
agricultural chemicals on wildlife, human health, and the
environment.\99\ NRDC expresses concern about the effect of the merger
on pollinators, specifically that Bayer may seek to leverage Monsanto's
seed position to expand the use of neonicotinoid seed treatments and
other pesticides, resulting in harm to pollinators.\100\
---------------------------------------------------------------------------

\98\ ActionAid USA Comment (Exhibit 1) at 1; Members of Cong.
Comment (Exhibit 3) at 2.
\99\ Sierra Club Comment (Exhibit 14) at 1; Nat'l Family Farm
Coal. Comment (Exhibit 8) at 1.
\100\ NRDC Comment (Exhibit 9) at 7-10.
---------------------------------------------------------------------------

These comments are beyond the purview of the Tunney Act. The United
States did not allege that the merger would result in harm to the
environment and, thus, environmental concerns are beyond the scope of
this proceeding and do not provide a basis for rejecting the proposed
Final Judgment. See U.S. Airways, 38 F. Supp. 3d at 76 (`` `Moreover,
the Court's role under the APPA is limited to reviewing the remedy in
relationship to the violations that the United States has alleged in
its Complaint. . . .' '') (quoting Graftech, 2011 WL 1566781, at *13).
Moreover, commenters generally concerned about the environmental
impact of agricultural chemicals offer no reason why the merger would
have an effect on such issues. Similarly, commenters who broadly allege
that the merger will result in environmental harm offer no specific
basis for their concerns. Regarding NRDC's concern that the merger will
increase the use of neonicotinoid seed treatments, as described in
Section V(d), the United States carefully considered whether the merger
would allow the merged firm to leverage Monsanto's seed position to
advance its position in certain seed treatments. Ultimately, the United
States did not find a basis to compel the divestiture of all of the
neonicotinoid seed treatments that are the subject of NRDC's complaint.

[[Page 1506]]

iii. The United States Conducted an Impartial and Independent Merger
Analysis

Members of Congress refer to news reports that raise the
possibility that the White House may have ``exercised outsized
influence'' in the review of this transaction and other deals.\101\ The
commenters do not make any specific claims regarding the investigation
of this merger, but rather urge that antitrust enforcement ``continue
to be treated as a law enforcement matter properly left to the
independent judgment of DOJ.'' \102\
---------------------------------------------------------------------------

\101\ Members of Cong. Comment (Exhibit 3) at 2-3.
\102\ Id. at 2.
---------------------------------------------------------------------------

Any suggestion that the settlement at issue here is or could be the
result of improper lobbying or political pressure is both
unsubstantiated and meritless. The settlement followed a thorough and
comprehensive investigation, and it is the result of extensive, good
faith negotiations between the United States and Defendants. The
proposed Final Judgment requires substantial relief that addresses the
competitive harm alleged in the Complaint. In short, there is no basis
to allege that the settlement results from anything other than the
United States' independent investigation and analysis.

VI. Conclusion

After careful consideration of the public comments, the United
States continues to believe that the proposed Final Judgment, as
drafted, provides an effective and appropriate remedy for the antitrust
violations alleged in the Complaint, and is therefore in the public
interest. The United States will move this Court to enter the proposed
Final Judgment after the comments and this response are published
pursuant to 15 U.S.C. Sec. 16(d).

Dated: January 29, 2019

Respectfully submitted,

J. Richard Doidge, Trial Attorney, U.S. Department of Justice,
Antitrust Division, 450 5th Street NW, Suite 8000, Washington, DC
20530, Tel: (202) 514-8944.

[FR Doc. 2019-00810 Filed 2-1-19; 8:45 am]
BILLING CODE 4410-11-P