DOJ Calls Monoploy on Deere’s Purchase of Planting Technology

When the U.S. Department of Justice (DOJ) filed a lawsuit against Deere recently, arguing its purchase of Monsanto’s Precision Planting business would give Deere a monopoly in planting technology, we understood. We were disappointed though that what we see as other moves to monopolize the industry go unnoticed.

At the center of DOJ’s case is Precision Planting’s SpeedTube technology. It, like Deere’s ExactEmerge, allows farmers to drop seed with greater accuracy and speed. Precision Planting licenses its technology to CNH and AGCO and sells it to retrofit older planters. The retrofit costs about $30,000, which is a fifth of the cost of an ExactEmerge planter, according to a J.P. Morgan analyst.

The DOJ argues that by “offering farmers high-speed precision planting retrofit kits at a fraction of the cost of a new planter, Precision Planting posed a formidable challenge to Deere and its profitable sales of new planters.”

If Deere acquires Precision Planting and the SpeedTube technology, it will own 86 percent of the precision planting market, according to the DOJ.

“If the acquisition were consummated,” the department said in its complaint, “Deere would likely set the price, technology, and go-to-market timing of high-speed precision planting systems supplied to competitors to not undercut its planter sales. This strategy would likely harm Deere’s rivals, entrench Deere as the dominant provider of high-speed precision planting systems, and limit competitive choices available to farmers.”

This idea of limiting choices available to farmers is one we know well. In the summer issue of Ag Innovator, we heard from Doug Griffin, who has served in executive roles at AGCO and Caterpillar and now consults with agricultural firms throughout North America. Griffin wrote that as full-line manufacturers seek “higher shares of wallet from customers,” they offer dealers incentives to not sell shortline equipment when it overlaps with a product that the full-line company builds. In some cases, Griffin said, full-line manufacturers write dealer contracts that can block shortline equipment.

As dealerships consolidate and manufacturers search for new revenue opportunities, this strategy for majors to push shortline manufacturers off the lot strikes us as anti-competitive.

From a legal perspective, there’s a difference. Attorney Trent Johnson, a partner at Foley & Lardner who focuses on product distribution law, said the antitrust rule that applies to the possible Deere-Precision Planting deal is a horizontal relationship. He said different rules apply to vertical relationships or relationships up and down the stream of commerce.

On principle, however, much of what the DOJ finds objectionable in this case applies to the effort by majors to remove competition from dealers’ lots rather than to fairly compete. We intend to take every opportunity to challenge this trend and assure that our members are able to bring their innovative products to an open and diverse agriculture marketplace.

Sources: Janzen Ag Law Blog, Reuters, Ag Innovator, Attorney Trent Johnson

Related Note: Attorney Trent Johnson, who offers his thoughts in this article, serves as a legal resource to Association members with questions about product distribution law. He will join us at the convention in San Diego to explore high-profile cases in the industry and discuss members’ questions.