This document is scheduled to be published in the Federal Register on 06/26/2017 and available online at https://federalregister.gov/d/2017-13326, and on FDsys.gov Department of Justice Antitrust Division United States, et al. v. The Dow Chemical Co., et al. Proposed Final Judgment and Competitive Impact Statement Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, Asset Preservation Stipulation and Order, and Competitive Impact Statement have been filed with the United States District Court for the District of Columbia in United States, et al. v. The Dow Chemical Co., et al., Civil Action No. 1:17-cv-01176. On June 15, 2017, the United States filed a Complaint alleging that the proposed merger of The Dow Chemical Company (“Dow”) and E.I. DuPont de Nemours and Company (“DuPont”) would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed at the same time as the Complaint, requires the defendants to divest DuPont’s Finesse herbicides business and Rynaxypyr insecticides business, and Dow’s acid copolymers and ionomers business. Copies of the Complaint, proposed Final Judgment, and Competitive Impact Statement are available for inspection on the Department of Justice’s website at http://www.justice.gov/atr and at the Office of the Clerk of the United States District Court for the District of Columbia. Copies of these materials may be obtained from the Antitrust Division upon request and payment of the copying fee set by Department of Justice regulations. Public comment is invited within 60 days of the date of this notice. Such comments, including the name of the submitter, and responses thereto, will be posted on the Antitrust Division’s website, filed with the Court, and, under certain circumstances, published in the Federal Register. Comments should be directed to Maribeth Petrizzi, Chief, Litigation II 2 Section, Antitrust Division, Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC 20530 (telephone: 202-307-0924). Patricia A. Brink Director of Civil Enforcement 3 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, U.S. Department of Justice Antitrust Division 450 Fifth Street NW, Suite 8700 Washington, DC 20530, STATE OF IOWA, 1305 East Walnut Street Des Moines, IA 50319, STATE OF MISSISSIPPI, 550 High Street Jackson, MS 39201, STATE OF MONTANA, 555 Fuller Ave CASE NO.: 1:17-cv-01176 Helena, MT 59601, JUDGE: Amit Mehta Plaintiffs, v. THE DOW CHEMICAL COMPANY 2030 Dow Center Midland, MI 48674 and E.I. DU PONT DE NEMOURS AND COMPANY 974 Centre Road Wilmington, DE 19805, Defendants. COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, the State of Iowa, the State of Mississippi, and the State of Montana (collectively, 4 “Plaintiff States”), acting by and through their respective Offices of the Attorney General, bring this civil action to enjoin the proposed merger of The Dow Chemical Company (“Dow Chemical”) and E.I. du Pont de Nemours and Company (“DuPont”). I. INTRODUCTION 1. In December 2015, Dow Chemical and DuPont announced that they had agreed to a merger of equals in a transaction with an estimated value exceeding $130 billion. Both Dow Chemical and DuPont are among the largest chemical companies in the world. 2. Dow Chemical and DuPont each make a wide variety of innovative crop protection chemicals used by farmers across the United States. Each company also manufactures a number of petrochemicals, including high-pressure ethylene derivatives that are crucial inputs to a number of important products and industries. 3. The agricultural sector is a large and vital part of the American economy. American farmers grow crops to feed consumers in the United States and abroad, to sustain livestock, and to produce alternative energy to power homes, vehicles, and industries. Every year, American farmers plant tens of millions of acres of corn, soybeans, wheat, and specialty crops, such as fruits, nuts, and vegetables. To meet the needs of a growing population, American farmers rely on a variety of effective crop protection chemical products, including herbicides and insecticides, which protect crops from weeds and insects that damage crops and reduce yield. 4. Dow Chemical and DuPont are two of only a handful of chemical companies that manufacture certain types of crop protection chemicals. Vigorous competition between Dow Chemical’s and DuPont’s crop protection chemicals has benefitted farmers through lower prices, more effective solutions to certain pest and weed problems, and superior service. In 5 particular, Dow Chemical and DuPont compete in the U.S. sales of broadleaf herbicides for winter wheat and insecticides for chewing pests. That competition would be lost if the merger is consummated. Accordingly, the proposed acquisition likely would substantially lessen competition in the markets for certain crop protection chemicals in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. 5. Dow Chemical and DuPont also compete in the manufacture and sale of two types of high-pressure ethylene derivative products called acid copolymers and ionomers, which are used in the production of flexible food packaging and other industrial applications. The combination of Dow Chemical and DuPont would result in a merger to monopoly in the production of acid copolymers and ionomers in the United States. Accordingly, the proposed transaction likely would substantially lessen competition in the markets for acid copolymers and ionomers in the United States in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. II. DEFENDANTS AND THE TRANSACTION 6. Dow Chemical, founded in 1897, is headquartered in Midland, Michigan, operates in approximately 180 countries, and employs over 50,000 people worldwide. In 2016, Dow Chemical had revenues of approximately $48 billion. Dow Chemical’s primary lines of business are chemical, plastic, and agricultural products and services. Dow Chemical’s products are used in various industries, ranging from agriculture to consumer goods. 7. DuPont, founded in 1802, is headquartered in Wilmington, Delaware, operates in approximately 90 countries, and employs more than 60,000 people worldwide. In 2016, DuPont reported revenues of $24.5 billion. DuPont’s primary products include crop protection chemicals and performance products, such as plastics and polymers. 8. Pursuant to a December 11, 2015 agreement, Dow Chemical and DuPont have 6 agreed to an all-stock merger of equals. At the time of the merger announcement, the combined market capitalization of the companies was $130 billion. The merger plan contemplates spinning off the firms’ combined assets into three separate, publicly-traded companies as soon as feasible. One of those companies would focus on agriculture products (with approximately $18 billion in revenue), another on material sciences (approximately $51 billion in revenue), and a third on “specialty” products, such as organic light-emitting diodes and building wrap (approximately $13 billion in revenue). III. JURISDICTION AND VENUE 9. The United States brings this action under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain defendants from violating Section 7 of the Clayton Act, 15 U.S.C. § 18. 10. The Plaintiff States bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent and restrain the defendants from violating Section 7 of the Clayton Act, 15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring this action as parens patriae on behalf of and to protect the health and welfare of their citizens and the general economy of each of their states. 11. Defendants Dow Chemical and DuPont sell crop protection chemicals, including herbicides and insecticides, and acid copolymers and ionomers throughout the United States. They are engaged in the regular, continuous, and substantial flow of interstate commerce, and their sales of crop protection chemicals and acid copolymers and ionomers have had a substantial effect on interstate commerce. This Court has subject matter jurisdiction over this action under Section 15 of the Clayton Act, 15 U.S.C. § 25, and 28 U.S.C. §§ 1331, 1337(a), and 1345. 7 12. Defendants have consented to venue and personal jurisdiction in this judicial district. Venue is therefore proper in this district under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. § 1391(c). IV. CROP PROTECTION CHEMICALS A. Background 13. Crop protection chemicals are used to protect crops from damage or loss from other biological organisms such as weeds, insects, or disease (e.g., fungus). Crop protection chemicals are critical to protecting crop yield — the total amount of a crop produced at each harvest — which benefits farmers and American consumers. 14. Crop protection chemicals can be separated into three broad categories that have different qualities and attributes: herbicides (to combat weeds); insecticides (to combat insect pests); and fungicides (to combat microbial disease). 15. The key component of any particular crop protection chemical is the “active ingredient,” which is the chemical molecule that produces the desired effect against the targeted weed or insect pest. Crop protection chemicals are typically sold as “formulated products” that contain the active ingredient and also inactive ingredients such as solvents, fillers, and adjuvants used to stabilize the active ingredient and facilitate its effective use on the intended crops. 16. Both active ingredients and formulated products must be registered with the U.S. Environmental Protection Agency (“EPA”) and approved for use. In order to gain approval, products must meet stringent toxicity and efficacy standards. Approvals are granted on a crop-by-crop basis and contain strict dosage requirements. A farmer wishing to control a certain pest on his or her farm can use only the products and dose-rates that the EPA has 8 approved for the particular crops to which the product will be applied. 17. The crop protection industry includes a handful of large integrated research and development firms (including Dow Chemical and DuPont) that develop, manufacture, and sell crop protection chemicals. While the large research and development firms sometimes sell directly to farmers, their primary customers are large distributors and farmer co-ops that resell products to farmers. 1. Broadleaf Herbicides for Winter Wheat 18. Both Dow Chemical and DuPont produce herbicides for winter wheat. Winter wheat is a type of grass that is planted in autumn and produces an edible grain. In the United States, winter wheat is grown primarily in the Great Plains states, including Kansas, Nebraska, and Texas. 19. Herbicides are chemicals used to combat weeds that harm crops. They can be selective (killing only certain types of plants) or non-selective. Non-selective herbicides kill all plant matter, including weeds and the crop. Because of this, non-selective herbicides are typically used after the crop is harvested, to clear the field of remaining weeds. Selective herbicides target only weeds, and are applied “post-emergence,” or during the growth of the crop. 20. There are three common types of selective herbicide products: broadleaf, grass, and cross-spectrum. Broadleaf herbicides primarily eliminate or suppress broadleaf weeds. Grass herbicides primarily eliminate or suppress grass weeds. Cross-spectrum herbicides are effective on both grass and broadleaf weeds. Each herbicide formulation has a different spectrum of weeds on which it is effective, so a farmer chooses an herbicide based on the particular kinds of weeds threatening the crop. 9 21. Herbicides are registered with the EPA for use on particular crops. Because crop choices and weed threats vary from farm to farm, the options available to farmers may vary from location to location, depending on the specific crop/weed combinations a farmer faces. 22. Dow Chemical and DuPont both offer herbicides that are labeled and registered for the control of broadleaf weeds in winter wheat crops. DuPont’s Finesse product is the top broadleaf herbicide used to combat the weed spectrum that typically threatens winter wheat crops. Dow Chemical recently introduced a new broadleaf herbicide for winter wheat, called Quelex. 2. Insecticides for Chewing Pests 23. Dow Chemical and DuPont also sell insecticides for chewing pests. Insecticides are used to suppress or eliminate insect infestations in crops. There are three main classes of insect pests: (1) chewing insects (e.g., moth larvae and beetles); (2) sucking insects (e.g., aphids and stink bugs); and (3) thrips (i.e., thunder flies), which have attributes of both chewing and sucking pests. 24. Insecticide use is particularly important for specialty crop farmers of tree fruit, tree nuts, and other fruits and vegetables (“specialty crops”). Any damage to specialty crops, no matter how slight, can result in the fruit or nut being rejected for sale. Thus, specialty crop farmers are particularly averse to the risk of insect damage when choosing an insecticide. Specialty crop farmers also value selective chemistry insecticides because they are less harmful to beneficial insects (such as bees and parasitic wasps) that not only pollinate fruit, but also help to control damaging insects, such as mites. In contrast, broad spectrum chemistries, such as pyrethroids, kill most of the insects in a field, including beneficial ones. 10 Farmers therefore either minimize their use and/or use them towards the end of a growing season. 25. DuPont produces the active ingredient chlorantraniliprole, which DuPont markets under the trade name, Rynaxypyr. Rynaxypyr is one of the best selling and most effective active ingredients used to combat chewing pests on the market. Rynaxypyr is patent- protected until 2022. In the United States, Rynaxypyr is marketed and sold in formulations under the brand names Altacor, Coragen, and Prevathon. DuPont’s 2015 U.S. insecticides sales totaled $118 million; of that total, Rynaxypyr sales accounted for $73 million. 26. Dow Chemical manufactures and sells two active ingredients which are also effective against chewing pests: (1) methoxyfenozide, sold under the brand name Intrepid, and (2) spinetoram, sold under the brand names Delegate and Radiant. In 2015, Dow Chemical had a total of $165 million in U.S. insecticides sales. Of that total, spinetoram sales accounted for $57 million and methoxyfenozide sales accounted for $34 million. B. Relevant Markets 1. Broadleaf Herbicides for Winter Wheat Sold in the United States 27. To combat broadleaf weeds in winter wheat, particularly in the central plains of the United States, farmers need broadleaf herbicides that are labeled and registered for use on winter wheat. Farmers of winter wheat cannot use grass herbicides to combat broadleaf weeds because they are ineffective. Farmers would not use cross-spectrum herbicides to combat broadleaf weeds, as cross-spectrum herbicides are significantly more expensive and, thus, it would not be cost-justified to use cross-spectrum herbicides for broadleaf weeds alone. Farmers would not forgo using broadleaf herbicides altogether, because doing so would risk significant wheat yield losses.