Bayer and Monsanto: A Troublesome Duo

In 2016 Bayer announced to take over the US-based agrochemical and agricultural biotechnology corporation Monsanto, in what at the time was described as the largest foreign acquisition led by a German company valued at $66 billion. Given the controversies and brand stigma attached to Monsanto concerning their product offering, namely genetically modified crops, and other herbicides allegedly causing health issues, Bayer faced discontent from its investors and saw in 2016 the value of its shares plunge at levels unseen after 2009. Against all odds, Bayer showed no hesitation and the transaction proceeded. Alas, the “marriage” between the two companies skipped the honeymoon period, and in turn, brought upon the acquiring party long-lasting litigious migraines.

Image Source

No Assets come without Liability

The US Department of Justice granted Bayer approval to move forward with the acquisition in late May 2018, with the condition to divest $9 billion of assets businesses that would directly compete with Monsanto’s product offering. The take-over had been given green light by the European Commission on similar terms, despite the environmentalists’ criticism over the decision to extend the license allowing Monsanto to continue trading Roundup – pesticide glyphosate – which is claimed to be causing cancer.

In fact, at the time of the acquisition, Monsanto’s controversial, yet widely popular among farmers, pesticide - Roundup - was at the centre of a class action brought by some 40,000 pursuers in the United States. All of them, having been consumers of Roundup in the past, filed lawsuits against Monsanto following the publication of the results of an investigation led by the International Agency for Research on Cancer (IARC) which showed probable cause to believe that the substance was cancerogenic.

The merger completed in June 2018. Monsanto was stated to be left out of the name given to the new emerging entity despite products being traded with their exiting names. However, the trouble was far from long gone over for Bayer. As of October 2019, the company was still in process of finalising the integration of the two businesses, and the ghost of the Roundup litigation never ceased to haunt Bayer leaving them with hefty sums to be spent in their attempts to settle the disputes with the aggrieved consumers.

The Roundup Litigation

The law firm representing the claimants in the very first three individual Roundup cancer lawsuits, seeking compensation for personal injuries, confirmed that the court ruled in favour of the pursuers, following which the defendant was ordered to pay damages amounting up to $2.424 billion combined. By far, in Pilliod, et al. v Monsanto Company, et al. – for a which a verdict was delivered in 2019, the jury awarded the highest compensatory sums amounting to $2 billion.

Concurrently, in 2017, the Roundup class action lawsuit was filed by six consumers in U.S. District Court for the Western District of Wisconsin. The six plaintiffs – residents of Florida, Illinois, New Jersey, New York, and Wisconsin – argue that Monsanto was misleadingly and falsely alleging that the glyphosate found in its product was not targeting enzymes human and pets, hence being safe to use. The claimants argue there is scientific evidence proving that the said enzyme is, in fact, found in the human organism the disruption of which resulting from the use of Roundup could harm biological processes such as digestion or the proper functioning of the immune system. Thus, they sought compensation equal to monies they had paid for Roundup products which they would not have bought had they been made aware of the potential risk associated with the use of glyphosate by people.

Image Source

Scientific Disagreement

The same year that the IARC investigation results were published, the European Food Safety Agency (EFSA) issued a statement after conducting its assessments claiming that there is no conclusive evidence that glyphosate can cause cancerogenic mutations; hence, the substance was not classified as a carcinogenic in the EU. In 2017, the US Environmental Protection Agency issued a draft report alleging that the IARC statements regarding the cancerogenic risks associated with the use of Roundup are flawed, stating in turn that glyphosate possesses no meaningful risk to human health. A recent study led by a consortium of American universities concluded their research stating that findings suggest a link between exposure to glyphosate and increased risk of developing cancer.

Contradicting scientific evidence led to contradicting policy response. In Europe alone, while the European Commission voted in favour of granting a licence extension, in France, Lyon, the Administrative Court issued an immediate ban on the trading of Roundup Pro 360 and associated products. President Macron himself vowed to end glyphosate use in France by the end of 2020. In the US, several states have imposed partial or total bans on the use of glyphosate, with California being at the forefront of change with its 2017 decision to add it in the list of substances known to be causing cancer.

Pressured by negative public perception of the product, in January 2020, the US National Toxicology Program ran additional tests for genotoxicity of glyphosate-based products concluding that certain formulations had genotoxic effects and were damaging human DNA. Without disclosing the names of the product used in their study, the government agency stated that when tested in isolation glyphosate did not have the same effect on DNA cells. Therefore, they claim that there is a gap in the scientific knowledge as to whether one particular formulation is more dangerous than others because the lack of disclosure of contained surfactants on labels on glyphosate-based products means that they could no be investigated. Around the same time, EPA issued an Interim Registration Decision concluding that glyphosate did not present any risk to human health.

The End of the Matter?

Bayer, endorsing the empirical evidence in support of the safety of the use of Roundup delivered through numerous research papers commissioned by health and safety regulators in American, European and other parts of the world, state to be continuing supplying Roundup as they fiercely defend the safety of their products. Despite not admitting liability, Bayer announced on June 24, 2020, that it had agreed to settle the vast majority of the lawsuits in the Monsanto litigation for a sum equal to $10.1 billion to $10.9 billion which will lead to the closure of around 75% of the ongoing litigation, $1.25 billion being devised to deal with any potential future litigation.

Despite seemingly having reached an endpoint of the legal nightmare they had been dealing with for years, Bayer is yet to see the outcome of three cases that have gone to trial and are yet to be ruled on by appeal courts. Bayer might have been benefited from having consolidated its market presence in the follow up of its Monsanto acquisition, yet it also saw its shares drop 29% and its reputation being damaged and still risking being brought under scrutiny and criticism by those who deem the settlement an offense to their rights.