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UPDATE: Deere Requests CNH, Kinze Opposition Briefs In DOJ Complaint

By now we’ve all heard about the Department of Justice’s lawsuit against Deere & Co. to block the company’s acquisition of Precision Planting. Since the initial complaint was filed, rumors have been swirling that competing equipment manufacturers are at the heart of the filing. Yet, no one was named – until now.

In a document obtained from Capital Press by Successful Farming dated October 14, 2016, Deere & Co. identifies CNH (the parent company of Case IH and New Holland) and Kinze as the two companies who presented opposition briefs as part of the Department of Justice's (DOJ) filing.

According to the paperwork submitted by Deere, “Deere’s competitors are self-interested parties who do not come to this Court as peripheral bystanders. The Department of Justice cleared Deere’s acquisition of Precision Planting last year. Only after CNH protested did the Plaintiff bring this action. As CNH details in its brief, the vast majority of the ‘investigative material’ that the Plaintiff produced came from CNH – all of it designated as confidential.”

By filing this document, Deere’s attorneys are attempting to gain access to the opposition briefs by CNH, Kinze, and the DOJ.

UPDATE:  Brian McKown, Kinze Manufacturing Executive Vice President and COO states that, "Kinze is not a party to the DOJ v. Deere-Precision Planting-Monsanto litigation. Kinze has taken no position on the merits of the lawsuit. Kinze Manufacturing has not filed, initiated or pursued any complaints regarding Deere's proposed acquisition of Precision Planting. Kinze's only filings in the lawsuit have been in an effort to protect Kinze's proprietary information from unwarranted intrusion by, and disclosure to, its competitors."

The Argument Against Deere

Two days earlier, Deere & Co. filed a response to the initial allegations made by the DOJ’s Antitrust Division. A copy of this document was obtained from Capital Press by Successful Farming.

In summary, the initial claim by the DOJ stated that if Deere & Co. were allowed to purchase Precision Planting, it would create a monopoly in the high-speed precision planting market.

Precision Planting was the first to bring its SpeedTube technology to market in 2014, which is a retrofit kit for Deere, Kinze, Case, and AGCO planters. These four manufacturers account for the majority of planter sales in the U.S. However, Deere dominates the market with more than half of all new planter sales.

In addition, Precision Planting has a nonexclusive licensing agreement with Case and AGCO that lets the two machinery companies integrate Precision Planting’s technology into their new planters.

A quote from the plaintiff’s allegations states that “As one executive explained, Precision Planting’s partnership with Case ‘is an obvious challenge to the goals of John Deere on every level. . . I cannot state more emphatically how much of a threat this news is as Precision Planting now views their agreement with Case IH as an opportunity to move into the new planter category.’”

That same year, Deere quickly followed suit and introduced the ExactEmerge high-speed planter. In 2015, Deere also announced a retrofit option for ExactEmerge.

Since launching SpeedTube and ExactEmerge, these two companies have dominated the U.S. high-speed precision planting market accounting for at least 86% (Deere = 44% and Precision Planting = 42%) of the sales. The equipment that allows for high-speed planting includes an advanced seed meter, an electric drive, a control system, and a seed delivery cartridge, which is the SpeedTube for Precision Planting and the brush belt for Deere.

According to the document, “Strong patent protections, in part, ensure that Deere and Precision Planting are the only two firms offering these seed delivery cartridges.”

Although there are claims that Kinze (12% of the market) and Horsch (2% of the market) offer comparable solutions, their planters use a conventional seed tube, which is not able to deliver the level of accuracy the Deere or Precision Planting technology can.

If it purchased Precision Planting, the document claims Deere would control virtually every avenue available to farmers to purchase an effective high-speed precision planting system, and it could push prices higher. In addition, the original DOJ claim noted that, “Deere estimated that its acquisition of Precision Planting would avert the need for Deere to reduce ExactEmerge pricing by 5% to 15% to maintain ExactEmerge’s market share. Deere calculates that the ‘strategic value’ of the acquisition – that it would retain from not having to compete with Precision Planting – ranges between $70 million and $210 million.” 

The plaintiff’s argument continues, “Deere has been concerned about Precision Planting’s technology exerting competitive pressure on Deere’s profitable ExactEmerge planter sales and on the pricing premium for those planters because Precision Planting’s retrofit solutions enables farmers to upgrade their conventional planters with the latest high-speed technology without purchasing a new planter. Thus, a farmer who might otherwise spend over $150,000 to purchase a new ExactEmerge planter could achieve the same results at one fifth the cost by upgrading a conventional planter with Precision Planting’s retrofit components.”

Deere’s Response

In Deere’s response, the company denies the allegations on multiple fronts. The company states that the terms “high-speed precision planting systems” and “conventional planters” are vague and ambiguous, and that there is no “particular range of planter operating speeds that constitute ‘conventional planting speeds.’” Deere further denies, “There is any meaningful economic market consisting of ‘high-speed precision planting systems.’”

Deere is also refuting accusations that the merger reduces competition, and states that the purchase will provide farmers increased access to Precision Planting technology through its extensive dealership network as well as the recent partnership with Ag Leader.

“In short, the transaction will increase competition and promote consumer freedom by increasing the total number of market players. Restraining this vibrant competition and greater consumer choice in the narrow interest of a particular competitor is not in the public’s interest,” states Deere.

 

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