Russia clears Bayer/Monsanto after IP dispute. Vitaly Dianov gave his comments to Global Competition Review

23.04.2018

Russia’s antitrust authority has cleared agrochemical group Bayer’s €62.5 billion acquisition of rival Monsanto, subject to the merged company allowing its rivals to access certain intellectual property.

Last week, Russia’s Federal Antimonopoly Service said Bayer had agreed to transfer certain molecular breeding technologies to Russian recipients. The technology concerns crops such as corn, wheat, rapeseed, soybean, vegetables and selected germplasm of these crops excluding vegetables.

The Russian competition authority said the merged company will also provide “non-discriminatory access” to its data and digital farming platforms. Access to such data plays a key role for developing and introducing information technology products in the precise farming sector, the authority said. Precision farming is the observation, measuring and response to crop variations in fields.

The National Research University Higher School of Economics’ technology transfer centre will coordinate the patent transfer, the FAS said.

It is not yet known which companies will benefit from the remedies, but an FAS spokesperson told GCR “selected companies” will be provided with access.

The spokesperson said the authority is “satisfied” with the agreement, and it marks the end of “this long investigative process”. The agreement is valid for five years, and the authority will monitor its implementation.

Last year the FAS went public with its intentions to impose remedies on the deal, based upon the sharing of Bayer’s intellectual property. The authority said the merger could pose “substantial threats” to healthy competition, and behavioural remedies represented “the most balanced” approach.

However, Bayer filed to sue the Russian agency for forcing the company to share its intellectual property within the Russian agricultural sector. At the time, Bayer said it was considering pulling out of the deal in Russia if it were forced to share patented technology.

FAS deputy head Andrey Tsyganov said last week that the agency tried to make its remedies “proportionate, executable, and verified”, adding from his point of view “we managed to do that.” He said as long as the agreement is valid, the authority will control and monitor its execution.

“We encourage Bayer to prepare and stimulate its competitors on the Russian market, supporting Russian companies,” Tsyganov said.

Antimonopoly Law Office partner Andrey Zakataev said that though the FAS managed to “stand its ground” with Bayer, there were still some conditions it had to drop. The FAS “originally wanted access to Monsanto’s data from Canada and the Ukraine, as they were regions with similar climate conditions,” he said.

Zakataev said the Russian authority used its “large margin” of discretion “effectively” in applying remedies, but said there is potential for some dangerous drawbacks from the decision.

“It is the first time in the history of Russian competition law that remedies of this kind have been applied, and I get the feeling it does not comply well with the idea of businesses enjoying the results of their investment into innovation”, he said.

Zakataev also said the Higher School of Economy – overseeing the implementation of the technology transfers – is an impartial and independent body.

Bryan Cave Leighton Paisner partner Vitaly Dianov in Moscow said it is a “brilliant” result for the FAS, which he is certain the agency will use to develop its practice in innovation in the future. Russia is the the recipient of intellectual property in many industries rather than the innovator, he noted.

As the remedies are not yet public, it is not possible to say what part of Bayer’s database will be used in Russia, but it looks like it was an “amicable” agreement between the FAS and Bayer, Dianov said.

A spokesperson for Bayer said the deal remains subject to “customary closing conditions” including receipt of required regulatory approvals. “We are working closely with authorities worldwide with the goal of closing the transaction in the second quarter of 2018”, the spokesperson said.

The Russian competition authority cooperated with the Competition Commission of India and China’s Ministry of Commerce on the deal review, the FAS spokesperson said.

MOFCOM approved the deal in March subject to Bayer divesting its seed and herbicide business as well as granting access to its digital farming software. India’s competition authority started its public consultation on the deal in January to determine if it has adverse effects on competition; it is still to reach a final decision.

The European Commission cleared the deal last month, subject to Bayer divesting assets worth almost €6 billion. Earlier this month, the commission approved Bayer’s request to make two modifications to those approved commitments. The company asked to sell its seed treatment assets, product units, and global digital agriculture assets to chemical company BASF.

The US Department of Justice has yet to announce clearance for the merger.

Janith Aranze for the Global Competition Review

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