US Senate bill would broaden Cfius review to include food security, give USDA, HHS permanent membership

20 March 2017 1:27pm

14 March 2017. By Curtis Eichelberger, Matthew Tracy and Leah Nylen.

Iowa Senator Charles Grassley and Michigan Senator Debbie Stabenow introduced a bill Tuesday that would broaden the national security review conducted when foreign investors seek to buy US companies.

The legislation, inspired by state-owned ChemChina's proposed acquisition of Swiss-based crop protection company Syngenta for $43 billion, makes food security part of a review that has focused on technology with military uses.

The review is conducted by the Committee on Foreign Investment in the United States, or Cfius, which is chaired by the Treasury Department and includes representatives from the Department of Defense, Department of Justice and Department of Homeland Security, among others.

Grassley and Stabenow's bill would also make the Secretary of Agriculture and Secretary of Health and Human Services permanent members of Cfius.

Concern for food security and foreign control of US agriculture has been raised before.

Tom Vilsack, then Secretary of the Department of Agriculture, said last February that he was concerned the ChemChina-Syngenta merger would be harmful to innovation in the seed and crop protection industry because the Chinese government based its agriculture regulations too much on politics, rather than science.

Grassley asked Cfius to give the merger close scrutiny, but the deal received national security clearance in August. The deal is still undergoing antitrust review by the Federal Trade Commission.

Grassley, Chairman of the Senate Judiciary Committee, made a similar legislative effort last August when he introduced the Securing American Food Equity (SAFE) Act to add the Department of Agriculture to Cfius and to consider agricultural assets critical national security infrastructure. The only difference with his current bill is that it includes HHS.

Meanwhile, Representative Robert Pittenger of North Carolina and Senate Majority Whip John Cornyn of Texas are also working on a Cfius bill. In addition to the Secretaries of Agriculture and Health and Human Services, they would like to make the director of the Federal Bureau of Investigation a permanent member of Cfius.

Pittenger and Cornyn would also like to expand Cfius' guidelines to provide for stricter national security reviews of Chinese investments in the US.

Big agriculture deals

The ChemChina-Syngenta combination is one of three large agriculture merger currently under antitrust review. The three are valued at a combined $239 billion.

The others are Dow-DuPont ($130 billion), which is expected to receive antitrust approval in the coming weeks, and Bayer-Monsanto ($66 billion) which received a request from the Department of Justice for additional information on the proposed merger in December.

If each of the deals is approved, America's food supply will largely be controlled by four national agriculture biotechnology companies — two headquartered in Germany (Bayer-Monsanto, BASF), one in America (Dow-DuPont) and one in China (ChemChina-Syngenta).

A concern is what happens in a time of war. US farmers depending on foreign companies to manufacture genetically modified seeds that overcome drought or are resistant to certain types of insects or pesticides could find the products scarce. Worse yet, the products could be engineered to die on the vine, leaving the nation hungry.

Grassley said he hasn't discussed the bill with US President Donald Trump, who was critical of China's economic policies during his campaign. The bill could take months to become law and would come too late to stop the ChemChina-Syngenta merger.

Growing concerns

Amy Klobuchar, who hails from Minnesota and serves as the top Democrat on the Senate Judiciary's antitrust subcommittee, has also expressed reservations about the ChemChina-Syngenta, Dow-DuPont and Bayer-Monsanto mergers, pointing to their potential impact on seeds and agriculture. In a speech Monday, she expressed concern about continuing vigorous merger enforcement under President Trump, noting his recent meetings with CEOs who have deals under review.

"If it appears that political concerns have played a role in antitrust enforcement, the Subcommittee can and will hold the agencies accountable," Klobuchar said. "But I want to be very clear here. It is not enough to prevent a deterioration of enforcement."

Klobuchar pledged to introduce a package of legislation aimed at improving merger enforcement and remedies. The bills, which have yet to be introduced but will be in the coming weeks, would require parties to provide yearly updates on the competitive conditions in their industry post-merger in cases where the antitrust agencies enter into settlements.

They also would increase the filing fees for merger reviews, a proposal the Obama administration put forth annually in its federal budget that was never adopted.

Klobuchar's legislation also would require the DOJ and FTC to study the effect of investment fund ownership on competition. The Justice Department said last year that it was looking into the effect of common ownership and whether overlaps in investors were encouraging companies to compete less vigorously than they might otherwise.

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