- Road Block or Speed Bump? DOJ Files Lawsuit to Halt Deere’s Acquisition of Precision Planting’s High-Speed Planting Technology
- November 16, 2016 | Author: Luke C. Holst
- Law Firm: McGrath North Mullin & Kratz, PC LLO - Omaha Office
- On August 31, 2016, the U.S. Department of Justice (“DOJ”) filed a civil antitrust lawsuit to halt Deere & Co.’s acquisition of Precision Planting, LLC from Monsanto, Co. The DOJ argues the lawsuit is necessary in order to preserve competition in the agriculture industry for high-speed planting technology. High-speed planting technology allows farmers to plant corn, soybeans and other row crops up to 10 mph-approximately twice the speed of a traditional planter-without sacrificing accuracy. This helps farmers get their crops in faster during the spring planting season to increase growers’ yields and lower costs.
Both Deere and Precision Planting have sold high-speed planting options since 2014. Deere initially sold its ExactEmerge high-speed planting technology on only its new planters. Soon after, Precision Planting began selling its retrofit high-speed planting technology, SpeedTube, that can be incorporated into existing planters made by all major manufacturers. This move prompted Deere to reconsider pricing and ultimately offer its own retrofit version of ExactEmerge.
According to the DOJ lawsuit, the intense head-to-head competition between Deere and Precision Planting “directly benefitted farmers through aggressive discounts and promotions, unit-share-of-high-speed-precision-planting-systems-deere-articlelower prices and innovative product offerings.” The DOJ noted that Deere and Precision Planting are the only two effective competitors in the high-speed planter industry, accounting for at least 86% of the market. The DOJ further noted that upon evaluating the benefits of acquiring Precision Planting, “Deere estimated that eliminating competition from Precision Planting would allow it to avoid cutting its ExactEmerge prices by 5% to 15%.” For these reasons, the DOJ argued that if Deere’s acquisition of Precision Planting were to proceed, “Deere would dominate the market for the high-speed precision planting systems and be able to raise prices and slow innovation at the expense of American farmers who rely on these systems.”
Deere and Monsanto recently pushed back against the DOJ. In court papers filed October 12th, Deere argued that high-speed planting equipment was not in a distinct market from traditional planting equipment, but was rather one of many factors farmers consider when purchasing planting technology. Deere also dismissed DOJ’s concerns that it will reserve only the best and most advanced high-speed planting technology for new Deere planters. Deere granted assurances that “[p]ost-transaction, Deere’s ExactEmerge planter technology will continue to provide growers seeking to buy new planters, as well as those that own late-model Deere planters, an opportunity to plant with greater precision at faster speeds. Meanwhile, Precision Planting’s products will continue to provide retrofit solutions for a range of planter makes and models, including late-model as well as older Deere planters.” Thus, Deere argued competition will intensify under its acquisition of Precision Planting because Deere’s resources and capabilities will help Precision Planting quickly bring to market new, innovative solutions that will benefit commodity growers.
In a further attempt to satisfy the DOJ, Deere announced its intent to license Precision Planting’s SpeedTube technology to competitor Ag Leader Technology after the merger. However, experts remain skeptical because the proposed licensing agreement doesn’t appear to transfer any actual patents or intellectual property assets to Ag Leader. Deere is moving ahead with the proposed acquisition of Precision Planting from Monsanto despite the DOJ lawsuit, and the case is expected to go to trial in February before a U.S. District Court in Illinois.