DuPont Pioneer and Pannar consider it necessary and appropriate to respond to what they deem inaccurate and misleading comments made by economist Mike Schussler of South African firm Economists.co.za to the effect that the merger between Pioneer and Pannar would dramatically increase maize seed prices in South Africa.
Schussler stated this price increase as a fact, and ignored evidence to the contrary that was relied on by the Competition Appeal Court in finding that the merger would not significantly increase prices or otherwise be anticompetitive.
This claim of a dramatic seed price increase is simply not true, says a release from DuPont Pioneer and Pannar. They say Schussler failed to give consideration to publicly available information, including the findings of the Competition Appeal Court when it approved the transaction - information to which he would have been referred if he had contacted Pioneer or Pannar ahead of the Syngenta-sponsored media event [at which he made the comments] designed to discredit the merger. As a result, his research, which was also sponsored by Syngenta, led to damaging public statements to the media. Syngenta is a multinational company with commercial interests in the outcome of this matter that testified for the Competition Commission in opposition to the merger.Long-term dynamic efficiency improvements
Evidence in competition proceedings was that remedies and cost savings would reduce the potential short-term seed price increase to 1.6 percent at most. More importantly, the Competition Appeal Court found that the evidence demonstrated that the innovation benefits of the merger would more than offset any potential short-term price effects. The Competition Appeal Court determined that the " ... 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."1
Far from increasing maize seed prices by 12 percent, the Competition Appeal Court found that, taking account of trait fee savings, price cap remedies and using the most conservative assumptions relied on by the Competition Commission's own economic expert, the economic model forecasted short-term post-merger price increases of no more than 1.6 percent. However, this prediction based on conservative assumptions does not account for dynamic efficiencies in the form of higher-yielding and improved maize seed products, the most important type of welfare-enhancing benefit that will be generated from the merger. The court found that forecasted yield gains and efficiencies as a result of the merger would offset even this low predicted price increase.
The Competition Appeal Court also found that the maize seed breeding market is characterised by innovation, in which competition is driven by the application of ever-improving technologies to the hybrid breeding process. Schussler appeared to ignore this important fact and the significant productivity benefits that would arise from the merger, says DuPont Pioneer and Pannar.Further inaccurate assumptions
"Based on his incorrect premise of a supposed 12 percent price increase as a result of the merger, Schussler then went on to make further inaccurate assumptions about the potential cost effects of the merger on farmers, consumers and maize exports. We cannot speak for the accuracy of other areas of his research, but his information and conclusions concerning the effect of the merger on maize seed prices are not grounded on the evidence as presented in the case and are inaccurate," says DuPont Pioneer and Pannar in their response.
The partnership between Pioneer and Pannar is set to drive technology transfer, investment and innovation into South Africa, for the benefit of South Africa and Africa. The Competition Commission is currently pursuing an application for leave to appeal the 28 May, 2012, decision by the Competition Appeal Court to approve the transaction. Pioneer and Pannar are opposing the Commission's application and have submitted a response to it.1Competition Appeal Court Judgment, CAC CASE NO.: 113, page 46