The competition watchdog is concerned that the proposed takeover of wheat and barley seed breeder InterGrain by Australian Grain Technologies (AGT) could substantially lessen competition in the barley seeds sector.
AGT is Australia's largest wheat breeder and also breeds barley.
One of AGT's major shareholders is France's Limagrain, the fourth largest seed company in the world and the world's largest wheat breeder.
InterGrain, which breeds wheat and barley, has facilities in Western Australia, South Australia and Victoria.
AGT and InterGrain operate the only two significant barley breeding programs in Australia.
The Australian Competition and Consumer Commission on Friday released a statement of issues over the proposed combination of AGT and InterGrain.
It said the takeover could substantially lessen competition in the breeding and development of barley seed varieties for the Australian market.
"The ACCC is concerned that the loss of competitive tension may allow the combined entity to reduce investment in the research and development of new barley seed varieties, and to raise the levels of the royalties it charges farmers for using its seeds," ACCC commissioner MIck Keogh said in a statement.
However, the ACCC also said that although AGT and InterGrain overlapped in the breeding and development of wheat seed varieties, the watchdog's preliminary view was that "the combined entity would continue to face sufficient competitive constraint from alternative wheat seed breeders and threat of new entry".
Wheat and barley breeding involves the cross-breeding of existing varieties to maximise their best characteristics and can take 10 years for wheat and 12 years for barley.
Royalties collected from growers are the primary source of revenue for seed breeders.
The ACCC has asked for further submissions on the matter and expects to announce its final decision on May 25, 2017.
