Seeking to block a potential agribusiness monopoly, U.S. federal regulators filed a civil complaint Aug. 31 in federal court in Chicago against John Deere and Monsanto over Deere's planned acquisition of a Monsanto subsidiary that makes high-tech planters.
At issue are “innovative high-speed precision planting systems” introduced over the past three years by both Deere and Precision Planting, a Monsanto subsidiary. Deere is attempting to acquire Precision Planting from Monsanto in a $190 million deal announced Nov. 3. The government argues the sale would create a monopoly and violate federal antitrust laws.
According to the federal government's complaint, Precision Planting announced its SpeedTube system in 2014. In a matter of weeks, Deere rolled out its ExactEmerge line, touted as “revolutionary technology that marries planting speed and accuracy.” A key difference was that SpeedTube was sold as aftermarket equipment to be retrofitted to existing planters — including Deere models — while Deere sold its system bundled into new planters.
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Both allowed “farmers to plant seeds at substantially higher speeds than conventional planters without sacrificing accuracy (to) substantially improve crop yields.” Unlike any other manufacturer, Deere and Precision Planting utilize “newly developed seed delivery cartridges that are critical to high-speed precision planting.”
The complaint details how Deere executives viewed Precision Planting’s marketing of retrofit kits as a threat, though the two companies combined to capture at least 86 percent of all sales in the high-speed precision planting market. In August 2015, Deere offered ExactEmerge as a retrofit option. Meanwhile, Precision Planting agreed to allow its SpeedTube equipment factory to be installed on planters sold by a leading Deere rival.
In negotiating with Monsanto to acquire Precision Planting, “Deere estimated that eliminating competition from Precision Planting would allow it to avoid cutting its ExactEmerge prices by 5–15 percent,” the complaint said. “Moreover, the acquisition would allow Deere to protect its lucrative planter business by reserving the best and most advanced high-speed planting technology for new Deere planters while” limiting growth of the techology’s use among its planter rivals.
“In 2015, Precision Planting’s U.S. sales for planter-related equipment were approximately $100 million,” the complaint stated, noting non-exclusive licensing agreements Precision Planting has with Deere rivals Case and AGCO that allow those manufacturers to compete directly with Deere.
The complaint details how the companies based pricing on each others’ market behavior, as well as how they competed with promotions to gain sales through “aggressive financial packages. Precision Planting, for example, introduced a rebate and 36-month, zero percent financing offer on its equipment ahead of Deere’s 2015 planter early-order program, timing that Deere viewed as ‘No coincidence.’ After hearing reports of deep discounting by Precision Planting dealers, Deere responded by introducing a rebate incentive and offered its own zero percent financing offer that bettered Precision Planting’s offer by 12 months.”
As “there are no reasonable substitutes” for the two lines, allowing the acquisition to continue would establish a monopoly allowing Deere to sell its products for more than it could if Precision Planting remained a competitor. The complaint notes two firms, Kinze and Horsch Maschinen GmbH “claim to offer comparable solutions” but do not use seed-delivery cartridges, rather conventional seed tubes, and thus are not able to deliver the same accuracy.
The government says the “strategic value” of the acquisition to Deere is between $70 million and $210 million” and it would enable Deere to unfairly “weaken competition from rival planter manufacturers.”
The government seeks a permanent enjoinder barring the acquisition as well as reimbursement for its costs in pursuing the litigation.