DuPont Pioneer and Pannar Seed confirmed on Thursday that they have filed an answering affidavit with the Supreme Court of Appeal in response to the South Africa Competition Commission’s application for leave to appeal the Competition Appeal Court’s 28 May 2012 approval of their merger.
While the parties respect the legal process and understand that the Supreme Court must still act upon the application for appeal‚ they believe it appropriate and to be in the public interest to correct misleading information regarding alleged price increases on maize hybrids that would result from the merger.
The parties presented evidence‚ and the Competition Appeal Court agreed‚ that the South Africa seed industry is an innovation market – meaning that the ongoing science and technology investment necessary to developing higher-performing products is critical to maintaining a competitive position.
During the legal proceedings‚ the parties introduced economic evidence regarding the merger’s predicted impact on post-merger pricing. As the Competition Appeal Court found‚ at worst‚ using the most conservative status quo assumptions relied on by the Commission’s expert‚ short-term post merger pricing was predicted to increase by 1.6%. Importantly‚ the Appeal Court found that even when assuming this “worst-case scenario” the benefits of the merger swamp any potential short-term price effects.
The Competition Appeal Court held that these innovation benefits of the merger will create a more competitive adversary for Monsanto‚ the dominant firm in South African maize seed markets.
The Court concludes: this “increase in competition‚ for the market leader Monsanto … in the South African maize seed breeding market‚ dominated as it is by innovation competition‚ will result in long-term dynamic efficiency improvements‚ in the nature and quality of seed produced‚ as well as its competitive pricing‚ to the benefit of maize farmers and maize consumers in South Africa.”
“Recent statements by the Commission and others that the economic evidence in the case demonstrates that the transaction will result in a 12% increase in the price of hybrid maize seed are patently incorrect‚ misleading and do not reflect the evidence in the proceedings before the Competition Tribunal or the Competition Appeal Court. In this regard‚ we note that it was common cause in the proceedings that Pannar will benefit from lower trait fees as a direct result of the transaction and this fact‚ in conjunction with the price remedy‚ would have a direct impact on post merger price reductions‚” Pioneer and Pannar argued.
The Competition Appeal Court also held‚ with regard to evidence presented by the United-Kingdom based expert witness for the Commission: “… if the predicted percentage price effects of Mr. Smith‚ the expert who testified on behalf of the Commission‚ of 1.6% with [trait] fee efficiencies and the price cap included‚ were utilized‚ the yield gain would offset the predicted price increase.”
This price benefit was further assured by the parties committing to pricing remedies‚ including a three-year price freeze on certain Pannar products‚ followed by an indexed price cap for another five years.
Pioneer and Pannar said they will continue to pursue their right to implement the partnership‚ which they are convinced will increase the pace and scope of research and innovation in South Africa‚ bringing farmers in the country and throughout the continent more product choices and better products faster and more efficiently than either company could do on its own. - I-Net Bridge