Deere Rebuts Justice Department Challenge to Monsanto Deal
October 13 2016 - 8:00PM
Dow Jones News
Deere & Co. said the Justice Department is unfairly accusing
the company of trying to monopolize a market that doesn't exist
with its challenge to the planned purchase of Monsanto Co.'s
seed-planting equipment line.
The government aims to block Deere from buying Precision
Planting on grounds the deal would suppress competition for
technology that allows farmers to plant crops at accelerated rates.
The faster speeds boost productivity and improve the efficiency of
farm equipment.
Deere already offers high-speed components on its own planters.
In a response to the government's Aug. 31 lawsuit challenging the
deal, Deere denied the addition of Precision Planting would give it
86% of all U.S. sales of high-speed precision planting systems.
"Deere specifically denies that there is any meaningful economic
market consisting of high-speed precision planting systems," Deere
said in a response filed Wednesday in U.S. District Court in
Illinois.
A Justice Department spokesman declined to comment on Deere's
response.
Deere in its response repeatedly challenged the government's
attempts to distinguish high-speed planting systems from slower,
conventional planting equipment. The Moline, Ill.-based company
described Precision Planting products as optional features for
upgrading the performance of a planter.
Deere stressed that Precision's products would remain widely
available for non-Deere equipment after the deal. Deere disclosed
Wednesday that it struck a deal with rival equipment maker Ag
Leader Technology Inc., which makes systems for steering farm
machinery and controlling seeding, to sell some of Precision
Planting products.
"Ag Leader's capabilities and extensive distribution network
will ensure an additional independent and competitive channel for
growers and [equipment manufacturers] to purchase Precision
Planting's' key components," Deere said.
The government alleges in its complaint that Precision Planting
threatened to undermine sales of Deere's own high-speed planting
technology by offering farmers the ability retrofit the Precision
system onto an existing planter for "a fraction of the cost of a
new planter."
The government alleged that Deere would have had to cut prices
by 5% to 15% on its own planting system—known as ExactEmerge—to
remain competitive with Precision Planting. Deere denied the
government's claims that "eliminating competition from Precision
Planting would allow it to avoid" price cuts.
Precision Planting's U.S. sales were about $100 million in 2015,
according to the government. Deere's U.S. sales of planter-related
equipment last year were about $900 million. Deere is the world's
largest seller of farm equipment, especially high-horsepower
tractors and harvesting combines in North America.
With demand for tractors and combines mired in a deep slump,
Deere has increasingly looked to raise sales of services and
components that improve the productivity of farm machinery and
implements, like planters and plows. As part of the Precision
Planting purchase, Deere agreed to make it easier for farmers to
connect their Deere equipment to Monsanto's Climate Corp. unit,
which processes data on crop performance and weather conditions to
create farming advice.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
October 13, 2016 19:45 ET (23:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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