Bayer and Monsanto Merger: what role did revolving doors play?

Questions are being asked about how the Commission allowed a senior official to leave a team connected to the Bayer-Monsanto merger – a move with global impacts and raising major concerns over monopoly power in the agribusiness sector – to join a private consultancy firm that was hired to involved in this same merger. Lack of transparency means the public is in the dark about whether competition rules and ethics were respected in the merger case.

On 21 March 2018 the European Commission gave its final decision that agribusiness giant Bayer could acquire Monsanto. Declaring the merger to be “compatible with the internal market and the EEA agreement” the Commission gave a green light to the acquisition of the US glyphosate giant by the German chemicals and pharma behemoth Bayer for US$63 billion. This was one of the biggest acquisitions in history, with pervasive impacts on agricultural practices and policies at the European and global level. These included maximising the global use of bee-harming neonicotinoids and glyphosate, multiplying the massive lobby firepower of both companies, expanding a vast network of industry-funded science platforms, increasing pesticides in our food and water, and increasing patented, weedkiller-addicted GM crops. In short it was a match made in hell. A few conditions were applied: parts of the company had to be sold off, and BASF was to be one of the buyers.

Now, nearly six years on, Der Spiegel reveals new information gathered by Lobby Control and Corporate Europe Observatory which casts doubt over a potential conflict of interest having played a role in this decision. Just a few months after the authorisation for the merger, a member of DG Competition's team was hired by economic consultancy firm Compass Lexecon. This consultancy had submitted crucial reports to DG Competition on behalf of BASF in favour of the merger, and about BASF's acquisition of a significant part of Bayer’s assets.

The process

The merger evaluation process by the EU began in August 2017 when the Commission wrote that “the notified concentration raises serious doubts as to its compatibility with the [EU] internal market”. A key issue was the overlap in certain areas in which both Bayer and Monsanto worked, namely:

• the production of glyphosate by Monsanto and glufosinate ammonium by Bayer, non-selective herbicides which composed an absolute majority of this market;
• Monsanto's biological pesticide products and Bayer's chemical pesticide products and the competition between these two portfolios;
• both company's competition in vegetable seeds and their high combined market shares in many vegetable seeds markets;
• both companies were active in breeding and licensing seeds, with Monsanto holding the highest market share in oilseed rape seed in Europe, and Bayer holding the highest market share in oilseed rape seed at the global level, both also license cotton seeds and both invest in wheat research and innovation programmes;
• Monsanto and Bayer were competitors in traits (genetic characteristics of plants) markets, in particular tolerance to herbicides.

If there were to be a merger, the new entity would hold the largest portfolio of pesticide products globally, with the strongest global market position in seed and traits, “making it the largest integrated company in the world”, that could control competitors' access to distributors and farmers, in particular with regards to digital agriculture.

In the press release announcing the merger decision, the Commission announced it had assessed more than 2000 different product markets and reviewed 2.7 million internal documents, concluding that the companies must remove existing overlaps in seed and pesticide markets, divesting businesses and assets. A proposal from Bayer to address this included:

• A response to cover Bayer's global R&D organisation for seeds and traits;
• Bayer's research activities to develop a challenger product to Monsanto's glyphosate (divesting some of the Bayer seed treatment assets and products);
• Bayer's commitment to grant a license of its global digital agriculture assets and products to ensure continued competition in this emerging market (with the buyer granting Bayer temporary licence back to these assets and products).

BASF’s intervention

On 13 March 2018, global consultancy Compass Lexecon presented a study to DG Comp on behalf of BASF proposing how Bayer could divest a package of assets and businesses to its client. It proposed that BASF would purchase:

• Bayer's entire vegetable seeds business;
• Bayer's entire broad acre seeds and traits business including its R&D organisation, subject to limited carve outs;
• a number of Bayer non-selective herbicide assets, in particular Bayer's global glufosinate business assets and three lines of research as well as Bayer's global digital agriculture assets and products.

This study was only published eight days before the final decision was announced, but the decision followed very much along these lines. On 29 May 2018, the Commission published the 'Decision of implementation of the commitments – Purchaser approval' (M.8084) within which it explicitly referred to BASF's submission: “Analysis of BASF's incentives as regards to herbicides and herbicide tolerance traits”, prepared by Compass Lexecon. It is one of the few documents mentioned. BASF then acquired Bayer's businesses of seed treatment and some herbicides, as well as Bayer's digital agriculture business worldwide. On the 1 August 2018 BASF spent €7.6 billion in the acquisition of these assets.

The revolving door spins

In September 2018 a member of DG Competition's Chief Economist's team joined Compass Lexecon as Vice President. According to LinkedIn, this official had been in this team at DG Competition since June 2013. We understand that he moved directly from DG Comp to Compass Lexecon.

Within DG Comp, the team responsible for the decision-making on the Bayer-Monsanto merger was Unit E4. In December 2018, an article written by E4 team members (responsible for the merger) on European Commission's Competition explicitly thanked to one single person: the person who went through the revolving door.

Then, in 2020 he passed back through the revolving doors, rejoining DG Comp’s Chief Economist's team in October 2020, where he stayed until June 2022, after which he moved to DG Tax.

This seems to be a regular pattern. As Corporate Europe Observatory and LobbyControl showed in a joint report a year ago, it has become common practice for DG Comp members to be hired by economic consultancies directly engaged in the major mergers regulated by their own former DGs. These consultancies include Compass Lexecon, Charles River Associates International, Oxera, and RBB Economics.

Upon discovering this pattern, LobbyControl and Corporate Europe Observatory requested, in November 2023, access to documents about the applications this official made when leaving DG Comp to take up employment at Compass Lexecon in 2018, his job titles at the Commission (including dates held and duration of his working contracts), the issue of authorisation of his departure, assessment of compatibility of his new role at Compass Lexecon with his DG Comp role, as well as other documents related to the authorisation of the new role.

There are revolving door and conflict of interest rules that ought to have been observed and the process of how or whether these were applied need to be transparent. We have furthermore asked for documents and meeting notes concerned with this person's role in the Bayer/Monsanto merger and the BASF/Bayer divestment business, including information about his participation in Unit E4 or presence in Unit E4 meetings concerning the mergers, in particular connected to Compass Lexecon's report titled 'Analysis of BASF's incentives as regards to herbicides and herbicide tolerance traits'. Finally, we requested all declarations of interest made by this person when he rejoined the Commission from Compass Lexecon in October 2020.

In early December 2023 DG Competition replied, refusing to send us any documents regarding the case, referring only to already public documents. Defending their decision the Director-General of DG Comp said that procedures of the merger are “still pending”, that the disclosures of these documents “would undermine the protection of commercial interests and that it would undermine the protection of the purpose of inspections, investigations and audits”.

The Director-General further wrote that the documents we requested “contain commercial and market-sensitive information, in particular commercial strategies, which could bring serious harm to the undertakings' commercial interest”. They argued that this information is covered by professional secrecy, and that disclosure would lead to a situation where “undertakings subject to investigations and potential informants and complainants would lose their trust in the Commission's reliability and in the sound administration of competition files”. This could result in Monsanto, Bayer, BASF, and Compass Lexecon becoming reluctant to cooperate with the Commission and reduce their cooperation to the minimum, jeopardising “the Commission's authority and lead to a situation where the Commission would be unable to properly carry out its task of enforcing EU competition law”, and undermining the effective enforcement of the EU competition rules. We have appealed this decision.

By refusing access to any documents, DG Comp is maintaining in shadow this revolving door case. In particular its former official's participation in the Bayer/Monsanto merger and BASF/Bayer divestment arrangement, his revolving door move to become Vice President of this consulting firm, and his return to DG Comp two years later.

Given the refusal of the European Commission to clarify the terms under which it has allowed for a senior official of the Commission to leave a body which oversaw a billionaire merger with global impacts to a consultancy firm that was hired to promote it, we are concerned about whether competition rules were respected in the merger case. Refusal of a robust clarification could serve the purpose of hiding this person's role in these processes. Furthermore, the return of this person to DG Comp after two years aggravates the risk of conflicts of interest, as Compass Lexecon is one of the most regularly contracted consultancy firms involved in economic businesses which fall under DG Comp's auspices.

Chronology 

• 06/2013 The subject joins the Chief Economist Team from DG Competition
• 14/09/2016 Bayer announces the purchase of Monsanto
• 22/08/2017 Commission begins procedures due to serious concerns confirmed in the first documents
• 16/02/2018 Bayer's final commitments render transaction compatible with EU law
• 09/03/2018 Draft decision by Commission presented to Member States favourable decision 
• 12/03/2018 Hearing officer issues favourable decision 
• 13/03/2018 Compass Lexecon's BASF submission
• 21/03/2018 Commission favourable decision 
• 04/04/2018 Bayer proposes amendment to final commitment (6.1.3 + 6.1.5)
• 11/04/2018 Commission approves modification
• 29/05/2018 Commission Decision of implementation of the commitments – Purchaser approval (M.8084) expressly refers to BASF's submission “Analysis of BASF”, prepared by Compass Lexecon
• 01/08/2018 BASF acquires parts of Bayer connected to the merger
• 09/2018 Subject joins Compass Lexecon as Vice-President 
• 07/11/2018 Bayer sells Syngenta NSH line of research 1HT
• 12/2018 Article written by E4 team members (responsible for the merger) on directly thanks subject for his contribution to the case
• 09/2020 Subject leaves Compass Lexecon
• 10/2020 Subject rejoins Chief Economist Team of DG Comp
• 06/2022 Subject joints DG Tax
• 11/2023 LobbyControl and Corporate Europe Observatory ask for documentsfrom the Commission
• 12/2023 DG Comp refuses access to any documents related to the request 
   

1 Case M.8084 – BAYER / MONSANTO MERGER PROCEDURE 

2 Official Journal of the European Union - EUROPEAN COMMISSION - Initiation of proceedings (Case M.8084 — Bayer/Monsanto) (Text with EEA relevance) (2017/C 286/01) 

3 European Commission Press Release 22 August 2017. Mergers: Commission opens in-depth investigation into proposed acquisition of Monsanto by Bayer 

4 European Commission Press Release 21 March 2018. Mergers: Commission clears Bayer's acquisition of Monsanto, subject to conditions 

5 European Commission DG Comp Case M.8084 – Bayer-Monsanto. Decision on the implementation of the commitments - Purchaser approval Date: 29.05.2018 

6 BASF Press Release BASF closes acquisition of businesses and assets from Bayer

7 Competition Merger Brief. Issue 2/2018 December. DG Competition. Page 6 M8084 Bayer/Monsanto doi 10.2763/512788 ISBN 978-92-79-90180-5 ISSN 2363-2534

8 DG Comp letter to Max Bank and DG Comp letter to João Camargo: Subject: EASE 2023/6646 – Your request of 8 November 2023 for access to documents pursuant to Regulation (EC) No. 1049/2001