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DOJ Sues to Halt Deere's Acquisition of Monsanto's Precision Planting

The Department of Justice ("DOJ") sued this week to stop Deere & Co.'s acquisition of Monsanto Co.'s Precision Planting, explaining that the deal would harm farmers.  The companies make high-speed precision planting systems, which allow farmers to plant uniformly spaced crops at double the speed of conventional planters.  The deal would give Deere at least 86 percent of the market for this planting technology, the DOJ said.

Of particular concern to the DOJ is that Precision Planting sells a set of high-speed planting components that can be retrofitted onto existing planters, while Deere primarily sells the technology bundled into new planters.  Precision Planting's retrofit kit is significantly less expensive than a new planter.  To meet this competition from Precision Planting, Deere has lowered prices, invested in innovation, improved its quality, and come out with its own line of retrofit kits.  DOJ maintains that the acquisition of Precision Planting "would eliminate this important competitive pressure and allow Deere to control nearly every method through which American farmers can reasonably acquire effective high-speed precision planting systems."

High-speed planting technology is not currently the norm, but the DOJ expects "sales [to] grow in this nascent market" as farmers seek the "unique and groundbreaking advantages that high-speed precision planting systems offer over conventional planting systems."  Precision Planting itself predicts this technology is likely to become standard in the farming industry in the next few years.   Deere's sales for the planters amount to about $900 million a year, while Precision Planting sells about $100 million a year.

This is certainly not the first time that Monsanto’s actions are subject to scrutiny by antitrust competition authorities.  Earlier this month, two former DOJ officials publicly urged the Antitrust Division to oppose any proposed merger between Monsanto and Bayer, who are still in talks.  In 2012, the DOJ closed a three-year investigation into whether the company's business practices were anti-competitive.  The company has also faced inquiry into its licensing agreements by attorneys general in Iowa, Texas and a handful of other states.  It was embroiled in an antitrust suit against competitor DuPont, which was dropped in 2013.  And we recently reported here on its ongoing antitrust woes in India.

Deere called the DOJ’s actions “misguided” and vowed to “defend the [Monsanto] transaction vigorously.”  The case is pending in the Northern District of Illinois.