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Dow Jones reports:

New agricultural technologies to boost yields are at the center of European antitrust authorities' probe into Dow Chemical Co.'s merger with DuPont Co.

Regulators have zeroed in on innovation competition as a concern the companies need to address before winning approval for their planned merger, according to people familiar with the matter.

The European Commission, the bloc's antitrust watchdog, sent Dow and DuPont in December a roughly 800-page statement of objections, focusing on the impact on the agricultural industry of losing a robust player with important research capabilities, the people say.

The companies are making progress toward remedies that would assuage the EU's concerns, according to both EU and company representatives.

Dow and DuPont spokesmen weren't immediately available for comment.

The companies defended their merger before commission officials at a closed-door hearing on Jan. 9. Also present were other industry participants, including rival German chemicals group, BASF SE, which has expressed interest in snapping up some of the companies' divested assets.

But time is running out to resolve the EU's concerns outlined in the charge-sheet, which counts among one of the longest drafted by the commission.

The EU has until the end of February to rule on the merger, which it is weighing alongside other deals in the industry, including between China National Chemical Corp. and Syngenta AG and Bayer AG and Monsanto Co.

Dow and DuPont were the first of the group to announce their deal, in December 2015. The merger would unite the two giants, with a combined market capitalization of roughly $122 billion, before splitting into three separate companies.

The commission signaled its concerns about reduced innovation in crop protection when it opened its in-depth probe in the Dow-DuPont merger in August. In particular, it pointed to the markets for herbicides for crops including cereals, beets and oilseed rape, as well as insecticides for chewing insects.

"The transaction would lead to the elimination of one of the few companies able to develop and launch new active ingredients," the commission said at the time.

Dow, DuPont and competitors together spend billions of dollars annually to develop crops that can survive weed-killing sprays and secrete bug-repelling proteins, along with more-powerful sprays to combat farm pests and data-crunching software to improve farm management.

Dow and DuPont executives say they expect to reduce research and development spending by around $300 million, as part of a plan to trim $3 billion in costs by combing. However, the merger would also help bring new products to market faster by combining Dow's biotechnology abilities with DuPont's deep library of corn and soybean genetics, they say.

Disputes with regulators over innovation can sometimes be harder for merging companies to resolve than commercial overlaps, where companies can divest business units that directly compete, antitrust lawyers say.

"It comes down to a question of a company's motivation to do something," Lisl Dunlop, co-chair of antitrust practice for Manatt, Phelps & Phillips LLP, said. Ms. Dunlop said she wasn't involved in any of the mentioned agricultural deals.

When scrutinizing issues of innovation, antitrust enforcers look at companies' incentives to license out new technologies, such as gene-editing methods and how these would change if the competitive ranks shrink. In previous merger reviews, the EU has required companies to sell off the European rights to products in their development pipeline.

Dow and DuPont have both invested in microbe-based products that can help crops better absorb nutrients and fend off bugs, as well as techniques for editing plant genes, which could deliver higher-yielding crops and other benefits for farmers.

Innovation competition is an increasingly important factor in antitrust reviews, lawyers say. It was also an issue in the EU's review of Halliburton Co.'s $35 billion planned merger with Baker Hughes Inc., which the parties called off last May, largely because of the failure to overcome regulatory challenges.

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