Why we should oppose agribusiness mergers like Monsanto-Bayer

Cover image: A Kenyan farmer at work in the Mount Kenya region. | wikicommons

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Lack of competition isn’t good for consumers. When it comes in the form of the creation of massive conglomerates, it’s bad for smaller-scale producers too. Yet this is what has been happening within the agricultural sector for decades. In 1996, the 10 biggest seed companies had a market share of less than 30 percent. By 2013, the three largest controlled more than 50 percent of the market. American farmers are at risk of losing out in the face of even more dramatic mergers such as the 2017 $150 billion Dow and DuPont Pioneer merger, the 2016 deal between ChemChina, one of China’s largest state-run chemical companies, and Swiss agribusiness, Syngenta, and an agreed-to merger between two major Canadian fertilizer companies, Potash and Agrium.

Another proposed merger between Monsanto and Bayer is poised to give these multinational pesticide and biotech corporations even more control over global agriculture. The merger would link two key parts of agricultural production, reducing competition in the food chain. Bayer is now expected to control 29 percent of the global seed market and 24 percent of the global pesticide market. The Canadian fertilizer merger will allow the new company to control two-thirds of North America’s potash capacity and a third of phosphate and nitrogen capacity. What kinds of effects will these mergers have on food supplies, food sovereignty, health and the environment, and economic viability for small- and mid-sized food producers?

Monsanto is already the largest seed corporation in the world. And it’s the fifth largest pesticide company, manufacturing chemicals to accompany its genetically engineered seed lines and creating a dependency on its products for farmers that have come to rely on its seed-chemical combination. Bayer, meanwhile, is the second largest pesticide corporation, with widely used, bee-harming neonics representing a key part of its portfolio, and ranks seventh in the seed market.

The Department of Justice (DOJ) Antitrust Division will be hearing public concerns about market consolidation—especially from farmers—in the coming weeks, but with an administration in the White House that tends to favor big business interests over the interests of the public consumer, what should be treated as an obvious creation of monopoly power and blocked by the government may be spun as a necessary economic stimulus or a global hunger-fighting, messianic merger.

A merger between these already-monolithic, transnational corporations raises serious antitrust concerns, including increased costs and reduced choices for farmers. In farming states like Iowa, where one in five jobs is connected to agriculture, higher seed prices and increased pesticide resistance could be catastrophic for working class people. Jim Benham, the president of the Indiana Farmers Union told the New York Times that the “merger is going to hurt the farmer. The more consolidation we have on our inputs, the worse it gets.” And Neil Harl, retired professor of the University of Iowa told ABC, “if a supplier of seeds wants to up the price all they need to do is just raise the price and if there’s no other reasonable substitutes then they’ll probably succeed.”

So far, USDA data shows that prices have not spiked dramatically in the past decades of consolidation, but these recent mergers are much larger, and their effects are being felt in the global south, where plantation workers and small farmers represent the weakest links in the “value chain” of global agriculture. In no other section of the population is hunger so widespread.

A Monsanto-Bayer merger represents a continuation of a problematic approach to agriculture that has given rise to a host of negative side effects, including costs to human health and safety, damage to farmland and the rural environment and harmful social and economic impacts.

The deal increases the power of an even smaller group of companies over the intellectual property and patents that already lock up a large portion of the world’s commercially-produced food supply. The patents weaken farmers’ ability to use and reuse their own seeds. Shrinking seed diversity also threatens biodiversity, which is important to enable plants and crops to withstand diseases, pests and other threats such as climate change.

The fear of corporate control over research has been leveled at all agricultural firms, but most pointedly at Monsanto. It was even raised, ironically enough, by DuPont Pioneer in 2010 while the two firms were fighting over a licensing deal. Monsanto, an early innovator in the field, sells licenses to its competitors, allowing them to use traits developed by Monsanto. Through those agreements and its own seeds, Monsanto biotech traits can be found in most of the corn and soybeans planted in the U.S. In a report to the DOJ, DuPont wrote:

The ag biotech trait market is firmly in the grip of a single supplier, acting as a bottleneck to competition and choice… it also threatens the global goals for agriculture in the 21st century: doubling the world’s food supply by 2050.

Corporations like Dow and DuPont Pioneer, Monsanto and Bayer, promise that these mergers will allow them to dramatically increase their research and development capacities, but such consolidation has had a number of impacts that constrain opportunities for renewable agriculture. Some of these include declining rates of saving and replanting seeds, as firms successfully convince a growing percentage of farmers to purchase their products year after year; a shift in both public and private research toward the most profitable proprietary crops and varieties, but away from the improvement of varieties that farmers can easily replant; and a reduction in seed diversity, as remaining firms eliminate less profitable lines from newly acquired subsidiaries. Consolidation allows for the shedding of jobs in the agriculture industry as well.

Perhaps most seriously though, such mergers further concentrate the power these corporations have over the daily lives of humans all over the planet by increasing the control they exert over global food supplies, particularly of crops like corn and soy beans, leading to the possibility of a developing monopoly over certain food sources. Beyond economic, public health and environmental impacts, these mergers therefore represent a fundamental threat to self-determination, food sovereignty and global human rights.

Many large manufacturing conglomerates were created in the 1880s and 1890s and were able to amass excessive economic power as a result. With the Interstate Commerce Act of 1887, the federal government began to exercise real regulatory power over these “trusts.” This was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson–Patman Act of 1936 and the Celler–Kefauver Act of 1950.

People like Senator John Sherman argued that, in order for the American economy to be successful, free competition was essential to maintaining the opportunity for individual Americans to build new businesses. As Sherman put it, “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessaries of life.” Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of American antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives the Justice Department the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.

Public officials during the Progressive Era made the creation and enforcement of strong antitrust laws a priority. President Theodore Roosevelt sued 45 companies under the Sherman Act, while President William Howard Taft sued 75. In 1902, Roosevelt stopped the formation of the Northern Securities Company, which threatened to monopolize transportation in the Northwest (see Northern Securities Co. v. United States).

At the core of this policy is the idea of promoting fair competition for the benefit of consumers by restricting the formation of cartels and prohibiting other collusive practices regarded as being in restraint of trade. The policy aims to restrict the mergers and acquisitions of organizations that could substantially lessen competition and prohibit the creation of a monopoly and the abuse of monopoly power.

While the scope of antitrust laws—the degree to which they should interfere in an enterprise’s freedom to conduct business, or to protect smaller businesses, communities and consumers—is contested, a broad range of legal and economic theorists see the role of antitrust laws as not only focusing on the benefits to consumers and overall efficiency, but also on controlling economic power in the public interest.

Consolidation tends to allow the most profitable elements of the food value chain to be separated from the marginal or unprofitable elements. Ownership of these profitable elements can then be concentrated in the hands of the few, even if this concentration does not make sense from ecological or social standpoints. Increasing monopoly control in the name of reducing global food prices is a poor economic rationale and is fundamentally unsustainable. As a South African paper examining the effects of consolidation on the food system there puts it: “What society saves at the supermarket checkout, it invariably pays for in other, less obvious, ways.”

Fortunately, this paper shows that there are other strategies for agriculture that can create greater economic activity without sacrificing sustainable ecological and social elements in the process:

In contrast to the somewhat alarming trends towards consolidation stands an impressive array of positive interventions being undertaken by private-sector organisations in partnership with civil society and the state in South Africa. These initiatives clearly illustrate how collective leadership and an increased focus on the challenges currently being faced have the potential to create an alternative food value chain.

This is the fourth year in a row of dropping commodity prices for farmers in the U.S., the worst slide since the Great Depression and, over the last 30 years, the consolidation of seed and chemical companies has already led to lower prices and fewer options for farmers in terms of seed diversity and pest and weed control. We need room for real diversity and innovation in agriculture, and these concerns should be at the forefront of the discussion as the DOJ reviews the pending Monsanto/Bayer merger.

Blocking this merger is not the same thing as accusing these corporations of plotting world domination via cornering the global food supply; it would simply represent an erring on the side of caution for the consumer, for the economic security of farmers and for the rights of human beings around the planet. It’s time for our political leaders to take a stand and protect the consumer against the potential monopolization of the food supply. It’s time to return to the progressivism of the late 19th and early 20th century with regards to “trust-busting.” It’s time to put economic power back in the hands of the people.