The Ministry of Commerce of the People's Republic of China (hereinafter referred to as the "MOFCOM") received the anti-monopoly declaration of the concentration of undertakings on the case of the merger between The Dow Chemical Company (hereinafter referred to as "Dow") and E.I. Du Pont De Nemours And Company (hereinafter referred to as "DuPont") (hereinafter referred to as the "Case"). Upon review, the MOFCOM decided to approve the concentration of undertakings with additional restrictive conditions. In accordance with Article 30 of the Anti-monopoly Law of the People's Republic of China (hereinafter referred to as the “Anti-monopoly Law”), relevant matters are hereby announced as follows:

I. Case-filing and review procedures

On March 21, 2016, the Ministry of Commerce received the anti-monopoly declaration for the concentration of undertakings concerning the Case. Upon review, the MOFCOM considered that the documents for declaration were incomplete, and required the declarers (including Dow and DuPont, hereinafter the same) to make supplementation. On May 6, after further supplementation, the MOFCOM confirmed that the documents and materials complied with Article 23 of the Anti-monopoly Law, and therefore the anti-monopoly declaration for the concentration of undertakings was admitted to be filed, and the preliminary investigation was launched. On June 4, the MOFCOM decided to further review this concentration of undertakings. Upon further review, the MOFCOM raised competition concerns on the Case. On September 2 and with the consent of the declarers, the MOFCOM decided to extend the review period. Upon the expiry of the extended review period, the declarers applied for withdrawal of the Case, which was approved by the MOFCOM. On November 17, the MOFCOM conducted the investigation for the re-declaration from the declarers. The MOFCOM believed that the concentration might have adverse effects of eliminating and restricting competition on the markets of selective herbicide for rice and pesticide for rice in China, and had adverse effects of eliminating and restricting competition on the global markets of acid copolymer and ionomers. The Case is currently in the extended review period. The deadline is May 13, 2017.

In the course of review, the MOFCOM solicited opinions from relevant government departments, trade associations, downstream customers and industry experts, held several times of forums for the knowledge of relevant market definition, market players, market structure and industry characteristics, and reviewed the authenticity, completeness and accuracy of the documents and materials submitted by the declarers.

II. General information of the Case

One party in the merger Dow was incorporated in 1947 in the United States. Its establishment could be dated back to 1897, when it was a NYSE-listed company. Dow is a diversified chemical company mainly engaged in plastics and chemicals, agricultural science, hydrocarbons, energy products and services.

The other party in the merger DuPont was incorporated in 1915 in the United States. Its establishment could be dated back to 1802, when it was a NYSE-listed company. DuPont is mainly engaged in the development, production and sales of a variety of chemical products, polymers, agricultural chemicals, seeds, food ingredients and other materials.

According to the Agreement signed by Dow and DuPont on December 11, 2015, the two companies will combine in "merger of equals", and name the company after the merger as DowDuPont Inc. The existing shareholders of Dow and DuPont will hold approximately 50% equity, respectively of the new entity after the merger.

III. Relevant markets

(1) Relevant commodity markets.
1. Agrochemical products.
Dow and DuPont have lateral overlap in markets of nine commodities, namely selective herbicides for grain and rice, pesticides for vegetables, fruit trees, rice, and cotton, and germicides for vegetables, fruit trees and potatoes.

Herbicides can be divided into nonselective herbicides and selective herbicides. Nonselective herbicides are broad-spectrum herbicides that will kill weeds and crops non-selectively. Selective herbicides are herbicides that only kill weeds and are not toxic or have low degree of toxicity for particular crops within certain limits and are generally used for particular crops. Those selective herbicides suitable for different crops constitute separate commodity markets respectively.

Due to the obvious difference between common pests of different crops, in order to kill particular pests, pesticides for different crops contain different active ingredients and ratios thereof, which results in the limited effectiveness or even ineffectiveness of a pesticide suitable for a particular crop when applied to other crops. Those pesticides suitable for different crops constitute separate relevant commodity markets respectively.

The common pathogenic bacteria of different crops are usually caused by different pathogenic bacteria or groups of pathogenic bacteria, to which different germicides shall be applied. The germicides suitable for different crops contain different active ingredients and ratios thereof, and have the drug effect of killing particular pathogenic bacteria. Those germicides suitable for different crops constitute separate relevant commodity markets respectively.

2. Products of materials science and special products.

Products of materials science and special products involve a total of 16 commodity markets, including seven commodity markets with lateral overlap of low density polyethylene, acrylate copolymer, ionomer, maleic anhydride grafted copolymer, composite/formula solutions with opening easiness and resealing functions and carboxymethyl cellulose, and nine commodity markets with vertical relation of ethylene vinyl acetate polymer, heat sealing coating, semiconductor mixtures used for the application of wires and cables, ethylene-propylene-diene rubber and polyolefin elastomer, polyamide nylon 66 resin, propylene glycol, antioxidant, hydroxypropyl methyl cellulose and mixtures of dairies .

Low density polyethylene is the product after high-pressure polymerization reaction of ethylene monomer, which has the advantages of high strength, good toughness, heat resistance and cold resistance and is mainly used for producing films, sponges, packaging materials and so on.
　
Acrylate copolymer is the product of polymerization reaction of monomers of ethylene-acrylate copolymer which is mainly used for producing adhesive, surface coating and so on.

Acid copolymer is the product of high-pressure polymerization reaction of ethylene and acrylic acid or methacrylic acid which is mainly used for producing high-performance sealant, extrusion coating, coating films and so on.

Lonomer is the product of high-pressure polymerization reaction of ethylene-acrylate copolymer and other substances which is mainly used for producing viscous interface layer, surface coating, sealant, surfactant and so on.

Maleic anhydride grafted copolymer is produced by grafting maleic anhydride to basic polymers. It has good coupling and compatibility effects to improve the impact resistance of materials and is mainly used for producing wires, cables, external packing materials and so on.

Composite/formula solutions with opening easiness and resealing functions are mixtures compounded by multiple components at the same time, which are mainly used for realizing the opening easiness, sealing, adhesion, sound insulation and so on of materials.

Carboxymethyl cellulose is modified by cellulose and mainly used in food, textile, construction and other industries as thickener and stabilizer.

Ethylene vinyl acetate polymer is the product of high-pressure polymerization reaction of ethylene and vinyl acetate, which is soft and flexible and mainly used for producing plastic films, foam, wires, adhesive, sealant, coatings and so on.

Heat sealing coating is the hot melt adhesive or fluid, which is used for drying paper, film or foil substrates and mainly used in binding, packing, carpentry and other fields.

Mixtures used for the application of wires and cables are chemical mixtures designed for cables and wires, which can provide anti-lightning and other additional protection.
　
Ethylene-propylene-diene rubber and polyolefin elastomer, sharing similar molecular structure, are polyolefin elastomers, which have heat resistance, anti-oxidation, ozone resistance and other properties and are mainly used for producing wire sheaths, heat-resistant hoses, seals and so on. The two are basically the same in terms of main properties, application fields and production processes and mutually replaceable in practice. Therefore, ethylene-propylene-diene rubber and polyolefin elastomer are defined as falling into the same commodity market.

Polyamide nylon 66 resin is aliphatic or aromatic polyamide, which can be melted into fibers, films or sheets and is mainly used for producing clothing, films and other products.

Propylene glycol is the mixture of water, ethanol and a variety of organic solvents, which is widely used in cosmetics, toothpaste, soap, glycerin and other products.

Antioxidant is the substance that blocks the harmful effects of air and is mainly used for slow down the oxidation process of food and so on, to extend the food storage period.

Hydroxypropyl methyl cellulose is a kind of cellulose derivatives, which is widely used in construction, ceramics, printing, food and other industries.

Mixtures of dairies are mixtures specially used for producing dairies or food, primarily to preserve food flavors.

(2) Relevant geographic markets.
Before commodities such as selective herbicides for grain and rice, pesticides for vegetables, fruit trees, rice, and cotton, and germicides for vegetables, fruit trees and potatoes enter markets, they shall be registered with the relevant departments of China. Their compositions and application methods depend on the environment, climate, soil characteristics, topography and farmers' mode of operation of all countries and other specific circumstances. Chinese customers and agricultural platform companies usually purchase related products in China. Therefore, the relevant geographic market of the commodities above is the Chinese market.

The ionomer, acid copolymer and other products of materials science and special products involved in the Case are fine chemical products of high values, whose freight and tariffs do not constitute barriers in their global circulation and which are produced, supplied and procured globally. Their suppliers compete globally, and Asian customers (including Chinese customers) are usually supplied with such products from plants in North America. Therefore, the relevant geographic market of the commodities above is the global market.

IV. Competitive analysis

The MOFCOM reviewed the concentration of undertakings in terms of the relevant market concentration rate, market share and market control of the undertakings participating in concentration, and their impacts on market access and technological progress as well as consumers and other relevant undertakings in accordance with Article 27 of the Anti-monopoly Law, deeply analyzed the impacts of the concentration of undertakings on market competition and thereby came to believe that the concentration of undertakings might have adverse effects of eliminating and restricting competition in the Chinese market of selective herbicide for rice and pesticide for rice and had adverse effects of eliminating and restricting competition in the global market of acid copolymer and ionomer.

(I) The transaction might have adverse effects of eliminating and restricting competition in the market of selective herbicide for rice.

The global agrochemical market has a high degree of concentration, with six companies, namely Syngenta, Bayer, BASF, Dow, Monsanto and DuPont, accounting for 77% market share. The above enterprises are "pesticide creation enterprises" that have strong research and development strength, rich product reserves and patents and strong financial strength, and form a favorable business model of research and development - pesticide patents - market products - rich profits, and other enterprises can be divided into "pesticide enterprises mainly engaged in generic drugs" that have a certain development ability and are mainly engaged in the production and development of generic drugs and a large number of "pesticide preparation enterprises" that purchase production preparation of active components or produce OEM products for the above two categories of enterprises, with the latter two categories difficult to compete with the first category.

1. The transaction might further enhance both parties' market control of selective herbicide for rice.

Prior to the transaction, Dow has long been being ranked the first in the Chinese market of selective herbicide for rice, with the second to the seventh competitors accounting for less than 50% market share on aggregate. The selective herbicide for rice penoxsulam launched by Dow in 2005 has been achieving the largest sales volume in the Chinese market of selective herbicide for rice. Dow's products of selective herbicide for rice have low replaceable degree in the relevant market and have profit margins that are much higher than the industry average.

DuPont is a major creation enterprise in the Chinese market of selective herbicide for rice. It has advantage products that are launched overseas and may enter the Chinese market. A certain product of DuPont which has entered the VQ phase (development phase rather than non-early discovery phase) is the first product with a new functional mechanism over more than 30 years, which, once launched to the market, will have relatively significant impact on the relevant market. DuPont's products of selective herbicide for rice also have limited replaceable degree in the relevant market and have profit margins that are substantially higher than the industry average.

After the completion of the transaction, both parties to the transaction will account for almost 40% market share in the Chinese market of selective herbicide for rice; their market forces and research and development capabilities will be integrated; and their market control will be further enhanced.

2. In the short term, it is difficult to have new effective competitors in the market of selective herbicide for rice. Funds, technology and research and development capability are decisive factors for competition in the market of selective herbicide for rice. Due to the increasing declined new active ingredient screening success rates, and the increasing research and development costs, shortened patent protection periods and stricter requirements of environmental protection standards, in recent years, it is increasing difficult to launch new products and the cycles are constantly extended. Subject to limitation of the above factors, in recent years, the ranking of top seven undertakings in the market has been relatively stable, without new effective competitors. Therefore, in the short term, it is difficult to have new entrants of the corresponding strength who enter the relevant market in a timely manner, and form sufficient competitive pressure on both parties after the concentration.

3. The transaction might have adverse impact on technological progress in the market of selective herbicide for rice. Before the transaction, Dow and DuPont were respectively major innovation forces in the market of selective herbicide for rice. They competed in their research and development fields, made large input in research and development and had relatively strong innovation ability and rich product reserves. The transaction will eliminate the basis for the competition between both parties. After the transaction, both parties may reduce motion in technological research and development, decrease the input in the current parallel innovation fields (with the same target products), and delay the launch of new products, which may have adverse effect on the market technological progress of the relevant products.

4. The transaction might damage the interests of downstream distributors. Distributors of selective herbicide for rice relatively rely on producers in terms of product pricing, promotion input and technical services and are thus in a relatively weak bargaining position. In accordance with the revised Administrative Regulations on Agricultural Chemicals of the People's Republic of China, distributors will take responsibility for the quality (including safety) of agricultural chemicals; therefore, downstream distributors further rely on producers and are more willing to distribute products of well-known multinational corporations. After the completion of the transaction, competition between Dow and DuPont in the sales field of selective herbicide for rice will be eliminated. As their distributers in major Chinese provinces do not overlap before the merger, their original distributors may be integrated or eliminated, have their negotiating position further weakened and may have their interests damaged.

(II) The transaction might have adverse effects of eliminating and restricting competition in the market of pesticide for rice.

1. The transaction might further enhance both parties' market control of pesticide for rice.

In 2011-2015, DuPont ranked first in the Chinese market of pesticide for rice stably. Its market share was usually almost two times that of the competitor who ranked the second. The global sales of chlorantraniliprole, the pesticide product for rice of DuPont, exceed RMB 1 billion. It has strong strength and has been achieving an ultrahigh profit margin that is much higher than the industry average over more than ten years. Dow has strong creation ability in the Chinese market of pesticide for rice. The launch speed of active ingredients and product reserves are significantly better than other competitors, showing great market potential. The pesticide product for rice sulfoxaflor of Dow which has been launched has particular effect of killing rice planthopper, one of the major pests of rice in China, and there are no other products in China that can compete with it in terms of effect. Triflumezopyrim which is developed by DuPont for fighting against rice planthopper pests has been registered in China and is about to be launched to the market. The experiment results show that the drug is "highly efficient and rapid at low dosage and environmentally friendly". After the transaction, both parties integrate the market forces and research and development capabilities of Dow and DuPont, and further consolidate the existing leading position especially in the product portfolio of sulfoxaflor + triflumezopyrim, and further enhance the control of the relevant market.

2. In the short term, it is difficult to have new effective competitors in the market of pesticide for rice. As mentioned above, due to the increasing declined new active ingredient screening success rates, and the increasing research and development costs, shortened patent protection periods and stricter requirements of environmental protection standards, the top seven competitors in the Chinese market of pesticide for rice were basically stable in 2011-2015. There were few new entrants with strength. Therefore, in the short term, it is difficult to have new entrants of the corresponding strength who enter the Chinese market of pesticide for rice in a timely manner, and form sufficient competitive pressure.

3. The transaction might have adverse impact on technological progress in the market of pesticide for rice. Same as the market of selective herbicide for rice, before the transaction, Dow and DuPont were respectively major innovation forces in the market of pesticide for rice. They competed in their research and development fields, made large input in research and development and had rich product reserves. After the transaction, both parties may reduce motion in technological research and development, decrease the input in the current parallel innovation fields, and delay the launch of new products, which may have adverse effect on the market technological progress of the relevant products.

4. The transaction might damage the interests of downstream distributors. Distributors usually operate pesticide products for rice and selective herbicide products for rice at the same time. Same as selective herbicide for rice, after the completion of the transaction, with the integration of sales fields of pesticide for rice between Dow and DuPont, their original distributors may be integrated or eliminated, have their negotiating position further weakened and may have their interests damaged.

(III) The transaction has effects of eliminating and restricting competition in the acid copolymer market.

1. The transaction may lead to both parties' enhanced market control of acid copolymer. The structures of global and Chinese acid copolymer markets are so similar that there are only a few competitors and a high level of concentration. In 2015, Dow and DuPont accounted for 15% and 33% market share, respectively, or 48% totally, in the global acid copolymer market; they accounted for 12% and 63% market share, respectively, or 75% totally, in the Chinese market. The global Herfindahl-Hirschman Index (HHI) was 2008 before the transaction and 3002 after the transaction, with an increase in HHI (△HHI) of 994; the Chinese HHI was 4594 before the transaction and 5958 after the transaction, with an increase in HHI (△HHI) of 1364. The relevant market was highly concentrated before the transaction. As such, this transaction will further improve market concentration, and both parties' market control will be further enhanced.

2. The transaction will reduce competition in the relevant market. Dow and DuPont ranked the first and the third, respectively, in both the global and Chinese acid copolymer markets. They were important competitors for each other and had mutual constraints. The transaction will eliminate competition between two major competitors in the relevant market.

3. In the short term, it is difficult to have new effective competitors in the relevant market. Given the large investment in the establishment of acid copolymer plants and high equipment maintenance costs, there are certain technological barriers in the relevant market. In recent years, competitors in the relevant market have been relatively stable, and there are few new market entrants; therefore, effective competition constraints cannot be formed on both parties after the concentration, and it is difficult to eliminate the effects of eliminating and restricting competition the transaction has.

(IV) The transaction has effects of eliminating and restricting competition in the ionomer market.

1. The transaction may lead to both parties' enhanced market control of ionomers. The structures of global and Chinese ionomer markets are so similar that there are only a few competitors and a high level of concentration. In 2015, Dow and DuPont accounted for 1% and 90% market share, respectively, or 91% totally, in the global ionomer market; they accounted for 0.01% and almost 100% market share, respectively, or 100% totally, in the Chinese market. Before the transaction, DuPont had occupied the dominant market position in the global and Chinese ionomer markets. Although the market share of Dow in these markets was not high, it constituted an important competitive constraint. After the completion of the transaction, both parties' unilateral ability, motion and probability to eliminate and restrict competition in ionomer markets may be further enhanced.

2. The transaction will reduce or eliminate competition in the ionomer market. Dow and DuPont are competitors among the few competitors in the global ionomer market and the only two competitors in the Chinese market. The concentration of undertakings will reduce competitors and competition constraints in the global market, and thoroughly eliminate competition constraints in the Chinese market.

3. In the short term, it is difficult to have new effective entrants in the relevant market. Ionomer is the patented product of DuPont in the early phase. Although its protection period expires, DuPont still has a leading technological edge in such field. Ionomer production requires a lot of customer testing and certification. In the short term, it is difficult for new market entrants to complete the above work; therefore, effective competition constraints cannot be formed on both parties after the concentration, and it is difficult to eliminate the effects of eliminating and restricting competition the transaction has.

V. Discussions with additional restrictive conditions

In the course of review, the MOFCOM notified declarers in good time of the review opinion that the Case eliminated and restricted or might eliminate and restrict competition, and held several rounds of negotiation with declarers with respect to matters concerning how to reduce the adverse impacts of this concentration of undertakings on competition. With respect to the restrictive conditions proposal submitted by declarers, the MOFCOM mainly made evaluations in terms of the scope, validity, existence, competitiveness and marketability of the business to be divested, and the effectiveness of behavioral conditions, in accordance with the Provisions on Additional Restrictive Conditions for the Concentration of Undertakings (for Trial Implementation).

Upon evaluation, the MOFCOM believes that the final restrictive conditions proposal submitted by declarers on April 24, 2017 can reduce the adverse impacts of the concentration of undertakings on competition.

VI. Decisions

Given that the concentration of undertakings may have the effect of eliminating and restricting competition in the Chinese markets of selective herbicide for rice and pesticide for rice and has the effect of eliminating and restricting competition in the global markets of acid copolymer and ionomer, according to the final proposal on restrictive conditions submitted by declarers to the MOFCOM, the MOFCOM has decided to approve the concentration with additional restrictive conditions, and require Dow and DuPont to perform the following obligations:

(I) Divest the active ingredients metsulfuron-methyl and azimsulfuron used in selective herbicide for rice and preparations only containing the above active ingredients and related product registration and pending product registration of DuPont ; the contents to be divested include all related tangible assets, intangible assets and employees; divest DuPont's research and development products for selective herbicide for rice [research and development product A] and [research and development product B]; divest global technology departments and regional development departments related to selective herbicide for rice of DuPont.

(II) Divest the active ingredients cyantraniliprole, chlorantraniliprole and indoxacarb used in pesticide for rice and preparations only containing the above active ingredients and related product registration and pending product registration of DuPont; the contents to be divested include all related tangible assets, intangible assets and employees; divest global technology departments and regional development departments related to pesticide for rice of DuPont.

(III) Within five years upon closing of the transaction, supply on a non-exclusive basis the third-party Chinese companies who are willing to accept the relevant products and observe all financial obligations and Chinese laws and regulations (including the Administrative Regulations on Agricultural Chemicals) with hybrid active ingredients/active ingredients of bensulfuron methyl, bensulfuron methyl + carfentrazone ethyl, and pyrazosulfuron ethyl and DuPont's existing preparations that only contain the above hybrid active ingredients/active ingredients in China at reasonable prices (i.e. not higher than the average price over the past 12 months).

(IV) For the purpose of controlling rice planthopper only, within five years upon closing of the transaction, supply on a non-exclusive basis the third-party Chinese companies who are willing to accept the relevant products and observe all financial obligations and Chinese laws and regulations (including the Administrative Regulations on Agricultural Chemicals) with Dow's trifuralin (sulfoxaflor) or Dow's other preparations that only contain sulfoxaflor and are offered for sale in China at reasonable prices (i.e. not higher than the average price over the past 12 months).

(V) Within five years upon closing of the transaction, shall not require Chinese distributers to sell on an exclusive basis bensulfuron methyl + carfentrazone ethyl, pyrazosulfuron ethyl, bensulfuron methyl, penoxsulam, cyhalofop-butyl, penoxsulam + cyhalofop-butyl, penoxsulam + machette and both parties' all existing preparations that only contain the above seven hybrid active ingredients/active ingredients in China; shall not require Chinese distributers to sell on an exclusive basis sulfoxaflor or Dow's existing preparations that contain sulfoxaflor (i.e. trifuralin) and arben (sulfoxaflor + chlorpyrifos) in China.

(VI) Divest the acid copolymer business of Dow, including related production assets, customer contracts and sales records, supply contracts, intellectual property rights and operating agreements.

(VII) Divest the ionomer business of Dow, including related products, customer contracts and sales records, intellectual property rights and production agreements.

(VIII) Article 20 of the Provisions on Additional Restrictive Conditions for the Concentration of Undertakings (for Trial Implementation) shall be strictly fulfilled from the date of this announcement to the date of completion of the divesture to ensure the existence, competitiveness and marketability of the business to be divested.

(IX) Prior to the MOFCOM's official approval for the buyer in the above business to be divested and the sale agreement, the merger between Dow and DuPont shall not be implemented.

(X) Besides the supervision and execution of such restrictive conditions subject to the announcement, the final additional restrictive conditions proposal and relevant appendices submitted by Dow and DuPont to the MOFCOM on April 24, 2017 shall be binding upon Dow, DuPont and DowDuPont Inc. established after the concentration.

The MOFCOM has the power to supervise declarers on its own or through the supervision trustee on the fulfillment of the obligations above. Where declarers fail to fulfill the obligations above, the MOFCOM will handle the matter in accordance with the relevant provisions of the Anti-monopoly Law.

This Decision shall come into force as of the date of announcement.

MOFCOM
April 29, 2017