POLITICAL OPPOSITION TO AGRI-CHEM DEALS NOT MEANINGFUL TO DATE; DEAL ON TRACK TO GAIN REGULATORY APPROVAL
- As with most deals of this magnitude (DOW/DD, BAYN/MON, ChemChina/SYT), there has been expected and routine political pushback from trade associations and some members of Congress, specifically regarding the agriculture chemicals mergers; however, we do believe that the risk of political opposition could escalate.
- Agricultural chemicals companies have well-established government relations operations in Washington, affording them important relationships with members of Congress and executive branch agencies that will be useful as they seek regulatory approvals for their mergers.
So Far, Congress Has Been More Bark Than Bite
- Since the announcement of the proposed ChemChina-Syngenta and the proposed Dow-DuPont merger, as well as the potential Bayer-Monsanto merger, several members of Congress and outside groups have expressed concerns about the industry consolidation.
- Most notably, on May 23, 2016 Senate Judiciary Committee Antitrust Subcommittee Chairman Mike Lee (R-UT) and Ranking Member Amy Klobuchar (D-MN), as well as full Judiciary Committee Chairman Chuck Grassley (R-IA), committed to oversight of the mergers. While it is expected that Lee and Klobuchar will comment early in the process, Sen. Grassley typically defers to the judgment of the subcommittee’s leadership.
- Grassley’s participation at this early stage of the industry’s consolidation reflects the large role that agriculture plays in the Iowa economy. We expect that he will continue to closely monitor the deals. We also expect that Grassley’s antitrust subcommittee will conduct an oversight hearing on agri-chem consolidation later this fall, especially if Bayer and Monsanto enter into a definitive merger agreement.
- Furthermore, on July 14, 2016 Sen. Grassley called for the DoJ to carefully analyze the Dow-DuPont merger in a letter addressed to DoJ’s Antitrust Division. Sen. Grassley voiced his concerns over the merger’s potential negative effects on the agricultural biotechnology and seed industries.
- Other members have weighed in regarding ChemChina-Syngenta’s CFIUS review. Please contact VogelHood for further analysis of the national security issue. This report focuses exclusively on the industry consolidation issue.
Outside Groups Could Catalyze Significant Opposition – But It Hasn’t Happened Yet
- In general, political opposition to mergers can be an important factor in influencing a merger’s regulatory outcome. In the cases of the argi-chem deals, the National Farmer’s Union, Food & Water Watch, the American Antitrust Institute (AAI), and others have been public opponents of the two mergers.
- On May 31st, 2016 these groups sent a letter to DoJ outlining the reasons why the Dow-DuPont deal should be blocked. While we currently believe that this level of opposition is not strong enough to derail regulatory approval of the agri-chem deals, we do believe that additional efforts on the part of agriculture groups could derail the mergers. Farmers and others in the agricultural community have strong ties to their members of Congress. Agricultural associations in Washington could call upon their members to flood Congress with calls and email urging them to tell regulators to stop the deals.
Potential Warning Signs to Watch For
There are many proven influence tactics that opponents to the mergers can deploy. Such tactics would indicate that opponents are willing to devote real resources to stopping these deals. VogelHood is monitoring for evidence of these tactics. Tactics include:
- Anti-merger coalition: Agricultural groups could team together to be to form an anti-merger coalition, similar to the Stop Mega Cable Coaltion in the failed Comcast-Time Warner Cable merger, to coordinate lobbying and grassroots activities of consumer groups, farm organizations, and other stakeholders.
- Antitrust lobbyist engagement: As will be described below, some of the merging companies have already engaged top antitrust lobbyists to advocate on behalf of the deals. Opponents of the deal have not engaged lobbyists
- Adverting campaign: Many organizations undertake DC-based print, radio, and television advertising campaigns in an effort to influence the DC public policy community. There are no records or visible signs to indicate that opponents are devoting funds to this effort.
Agri-Chem Companies Are Well-Established Players in Washington
- With the exception of Chinese-based ChemChina, the companies involved in announced and potential agri-chem mergers all have well-established lobbying operations. In the first fiscal quarter of 2016 alone, DuPont, Dow Chemicals, Syngenta, Bayer and Monsanto collectively spent $8,920,982 on lobbying. For companies already engaged in merger reviews, three have retained new lobbyists with antitrust specialties to facilitate conversations with Congress regarding their mergers.
- ChemChina/SYT: Syngenta spent a total of $280,000 on its Washington lobbying efforts in the first quarter of 2016. Syngenta registered Ken Cunningham of Ken Cunningham Group, LLC on February 11, 2016. This was an important hire for the company, as Cunningham served as Chief of Staff and General Counsel for Sen. Chuck Grassley (R-IA), who has been highly critical of the proposed agri-chem mergers. The next day, the company registered two more lobbyists, Mark Kadesh and Christian Kierig, who both worked in the office of senior democrat Sen. Dianne Feinstein (D-CA)
- DOW/DD: DuPont, who spent $1,529,651 on lobbying in the first quarter of 2016, specifically lobbied the Senate, House of Representatives, USDA, and EPA on their merger with Dow Chemicals. This lobbying power is likely to prove influential during the merger review process. Dow Chemicals had a total of $4,840,982 in lobbying expenditures during the first fiscal quarter of this year. Although the company did not disclose any lobbying issues specifically related to their merger with DuPont, their overall lobbying power will most likely prove influential during the merger review process. Dow Chemicals registered five lobbyists from the Duberstein Group on April 14, 2016. DuPont similarly sought to strengthen its lobbying power by hiring four lobbyists from the Glover Park Group on April 13th, 2016, a day before their counterparts at Dow Chemicals. These lobbyists provided DuPont with connections to the Department of the Interior through Grant Leslie’s position as Legislative Director for former Secretary of the Interior Ken Salazar.
- BAYN/MON: Bayer has focused its $2,090,000 of lobbying expenditures primarily on government seed and pollination regulation. Bayer’s target, Monsanto, aimed its $1,710,000 of lobbying expenditures at the government’s regulation of biotech products and herbicides. These issues have been critical for both companies, as both have received criticism for their business in these categories.
- Known opponents (National Farmers Union, Food & Water Watch, and AAI) have little professional lobbying power. Of these three groups, Food & Water Watch was the only party to have lobbied during the first fiscal quarter of 2016, and their total lobbying expenditures were less than $5,000. Despite the fact that Food & Water Watch lobbied specifically against the Dow/DuPont Merger, their $5,000 or less in lobbying expenditures is inconsequential when compared to Dow Chemicals and DuPont, who collectively spent $6,370,633 on lobbying in the first quarter of this year.
Managing Director, Head of Research, VogelHood Group