Monsanto Company and Rhône-Poulenc SA: A report on the proposed merger

Summary of report (html format)
Full text (pdf format)

Adobe Acrobat Reader can be downloaded from http://www.adobe.com

Summary

On 22 June 1989 the Secretary of State for Trade and Industry requested the Commission (see Appendix 1.1) to investigate and report on the acquisition of the analgesics business of Monsanto Company by Rhône-Poulenc SA. As a result of the proposed merger, Rhône-Poulenc would control over 80 per cent of the supply in the United Kingdom of salicylic acid, methyl salicylate and bulk aspirin.

Both Monsanto and Rhône-Poulenc are international chemical companies, the former having its headquarters in the United States and the latter in France. Both have declared their intention of proceeding with the merger, which involves Monsanto's world-wide analgesics business, whatever the outcome in the United Kingdom. Neither the United States authorities nor the European Commission have raised objections to the proposed merger.

From the standpoint of competition in the United Kingdom, there are a number of concerns about the effects of the merger. Competition ceases between the two main suppliers and their combined market share is currently very high. There is strong opposition from customers because of fears both about prices and the availability of certain grades of salicylic acid and bulk aspirin.

However, in our view, the most likely outcome of the merger in the United Kingdom is that Rhône-Poulenc will continue the manufacture of salicylates at Monsanto's plant at Ruabon in North Wales and will be constrained in its behaviour as far as prices and the availability of grades are concerned. Customers would otherwise take advantage of external competitive pressures in an international market where there is over-supply, freedom of entry and generally available technology. On the other hand, the most likely outcome of ruling against a merger in the United Kingdom is that Monsanto would cease production of salicylates, with adverse effects on employment. Customers would still have to buy from Rhône-Poulenc or from elsewhere in the world.

We have found that Rhône-Poulenc's ability to exploit its predominant position in the supply of salicylic acid, methyl salicylate and bulk aspirin following the proposed merger would be constrained by competition, particularly from Eastern European and Third World sources. We believe that as a result Rhône-Poulenc would be unlikely to be able to impose unreasonable price increases. We accordingly unanimously conclude that the proposed merger may be expected not to operate against the public interest.

Full text

Back to the top