By Allison Weber
The seed: the source of self-sustaining populations, the breeding and saving of which allowed early humans to bring plants into our domain, to grow them for our own use, to feed our populations. For thousands of years we have saved seeds to be replanted in the next growing season, an idea put into practice by any child who has ever buried their saved apple seeds, and an idea that is dying with the industrialization of agriculture.
Imagine a single-use product that naturally reproduces itself, eradicating the need to buy more of it. Obviously, such a product would be a poor financial investment to base an entire industry off of- and thus arose the issue for seed companies: their products, once grown, could be easily replicated and the product of that even sold, decreasing the demand for their seeds and decreasing their profit. That is, of course, unless the seed sales can become proprietary- genetically modified to resist certain traits or bred for use with specific agro-chemicals sold by the same company.
There is a lot of money in proprietary seeds- “scientifically improved” and considered to be more genetically stable than traditional varieties- and there is only more money in this business as huge seed companies merge and acquire other agricultural businesses through vertical and horizontal integrations. This increases corporate power not only over the seed industry but across agriculture, simultaneously increasing corporate power over farmer choice and livelihood.
The idea of a monopoly is concerning for most consumers, but what about an oligopoly? Is the market much better off when it is dominated by only a small number of sellers instead of just one? More importantly, beyond the economic lens of the market, is allowing an oligopoly ethical in a country supposedly based on the ideals of a free market? Even further beyond the economic lens, is it ethical when farmer livelihoods and food culture are threatened by the growing power of the industrial food regime?
The agricultural market has recently seen three large mergers. The first was the 2017 acquisition of Syngenta AG, a seed, agrochemical, and biotechnology giant that was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals, by the China National Chemical Corporation (ChemChina), a Chinese state-owned chemical company. The second was The Dow Chemical Company and E. I. du Pont de Nemours and Company (DuPont) merger of 2017. The two legacy American chemical companies, Dow and DuPont, were extremely large market powers, with DuPont, prior to the spinoffs, as the world’s largest chemical company in terms of sales and Dow in the top three of the largest chemical producers. The third major merger was the 2018 acquisition of The Monsanto Company, an American agrochemical and agricultural biotechnology corporation, by Bayer AG, a German multinational pharmaceutical and life sciences company. These three agribusiness mergers alone have concentrated control in the agrochemical/seed market into the hands of what is being called “The Big Four” : Bayer, BASF, Corteva (a result of the Dow/Dupont merger), and Chem-China. Most other, smaller acquisitions have been retired, and the Big Four control an estimated 67% of proprietary seed sales, with only the three mergers above (although there have been many more) accounting for 70% of the agro-chemical industry.
The entire agribusiness industry is seeing a sweep of horizontal and vertical integrations, with these mergers resulting in a consolidation of power across almost all aspects of the production chain, across agricultural inputs, and, in the case of the above mergers, across plant development pathways. Seeds and agro-chemical use are deeply linked and often dependent on each other in the industrial plant development pathways due to the proliferation of proprietary seeds which are developed for use with specific proprietary agro-chemicals, and the consolidation of power across the agricultural production chain only strengthens this dependence.
Antitrust laws meant to regulate the market and protect consumers by ensuring competition across the world have failed to prevent mass control across the agricultural industry with a consensus based on a narrow view of what threatens the integrity of the means of food production. The three largest recent mergers- the Dow/Dupont merger, the ChemChina/Syngenta acquisition, and the Bayer/Monsanto acquisition- exemplify this situation, with antitrust agencies congratulating themselves for negotiated divestitures focused on market based goals that have allowed for the rise of the Big Four and concentrated corporate power.
On December 11th 2015 the Dow Chemical Company (Dow) and E. I. du Pont de Nemours and Company (DuPont) announced an intended merger of equals that was successfully completed in 2017. The all-stock merger was valued at $130 billion. The merger was established with an end goal of dividing once more “to create three intended industry-leading, independent, publicly traded companies” in which the Dow company announced “the true value of this merger lies in the intended creation of three industry powerhouses that will define their markets.” [1] Before the division of the proposed powerhouse, DowDupont, into the three companies (a materials science company, a specialty products company, and an agriculture company named Dow Inc., DuPont de Nemours, Inc., and Corteva respectively), the merged DowDupont was the biggest chemical conglomerate in the world. It boasted more than $86 billion in sales in 2018. This chemical conglomerate was made possible by the approval of antitrust agencies around the world which protect consumers only against mergers which take place in markets with few significant direct competitors and thus could lead to higher prices, less favorable contractual terms, and reduced incentive to innovate in the field. On June 15th 2017, the Department of Justice cited concerns for such threats to important competition between Dow and DuPont in the development and sale of insecticides and herbicides that are used by American farmers who plant winter wheat and other specialty crops as well as to the creation of a monopoly the merged company DowDupont would have over ethylene derivatives known as acid copolymers and ionomers that are used in the manufacturing of food packaging. To guard the market, the Department of Justice offered a settlement, working closely with the European Commission, in which DuPont was required to divest its market-leading herbicide Finesse and its Rynaxypyr insecticide products, which total combined annual U.S. sales of more than $100 million. Dow would be required to divest its U.S. acid copolymers and ionomers business. The Department of Justice claimed that the divestiture of these products to buyers approved by the United States would preserve competition in U.S. markets.
In February 2016, the Chinese state owned enterprise Chemchina announced its plan to acquire Syngenta AG, a global company based out of Switzerland and born out of several mergers before 2000. ChemChina acquired Syngenta for $43 billion after Monsanto, one of Syngenta’s main competitors, unsuccessfully attempted to acquire the company in 2014 for $40 billion. [2] ChemChina has no revenue from seed sales, but $4.3 billion of its $41.2 billion in revenue comes from agrochemical revenue while Syngenta has $2.7 billion of its $12.8 billion revenue come from seed sales, and $9.6 billion from agrochemical sales- expanding ChemChina’s reach in the agrochemical industry as well as into the seed industry. [3] ChemChina has a presence in Asia and a weaker global presence and Syngenta operates in North America, Latin America, Europe, the Middle East, and Africa, extending the reach of the two companies across the globe. This merger changes much of the industry order in China as an attempt at control across the food supply chain in the world’s largest market for food, where a growing middle class is demanding larger quantities of food and a history of famine is putting pressure on food security. In April 2017, the Federal Trade Commission, the Committee on Foreign Investment in the United States, and the European Commissioner for Competition approved the acquisition of Syngenta by ChemChina, allowing for the largest foreign takeover in Chinese history to proceed. Before it was approved, however, the Federal Trade Commission, working alongside antitrust agencies in Australia, Canada, European Union, India, and Mexico, charged the proposed merger as threatening significant competitive harm in the U.S. market due to elimination of direct competition in the agrochemical industry. In order for the merger to be approved The Federal Trade Commission required ChemChina to divest its subsidiary ADAMA’s U.S. crop protection shares to California based company AMVAC Chemical Company. ChemChina agreed to divest from the production of the generic versions of Syngenta’s branded herbicide paraquat, insecticide abamectin, and fungicide chlorothalonil, for which ChemChina’s subsidiary ADAMA is the first or second largest generic supplier. [4]
In 2016 it was announced that Bayer, a German multinational pharmaceutical and life sciences company which generates $10.2 billion of its $51.8 billion revenue from seed and agrochemical revenues, would acquire Monsanto an American agrochemical and agricultural biotechnology corporation, generating all of its $13.5 billion revenue from seed and agrochemical production, in a proposed $66 billion merger. The two businesses compete to provide farmers with a broad range of seed and crop protection products and are leaders in developing technologies which increase crop yields and improve efficiency. The acquisition would boost agricultural research and innovation and double the size of farm business for Bayer while dropping the negative press and worldwide pushback associated with the Monsanto name. Without the divestitures required by the Department of Justice in May of 2018, the Department of Justice expressed concerns over a likely result in higher prices, lower quality, and fewer choices across a wide array of the seed and crop protection products the companies compete in. The required divestitures occurred across major products such as Bayer’s cotton, canola, soybean, and vegetable seed businesses, as well as Bayer’s Liberty herbicide business, a major competitor of Monsanto’s well-known and controversial Roundup herbicide. In 2018, Bayer’s seed divisions including the major brands Stoneville, Nunhems, FiberMax, Credenz and InVigor, were sold to BASF for $7 billion to satisfy the antitrust regulator’s divestiture demands. [5] The required divestitures mark the largest negotiated merger divestiture ever required by the United States, yet the divesitures were sold off to BASF E, a German chemical company and the largest chemical producer in the world, further concentrating power not only in the hands of Bayer, but to another agribusiness giant as well. [6]
Agriculture feeds the world and remains the central factor of livelihoods across the globe and as a result is one of the most fundamental aspects of our lives- and yet antitrust agencies reduce threats of corporate power in the agribusiness industry to mere concerns of higher prices, lower quality, and reduced innovation caused by a decrease in competition. This reductionist economic lens does not consider possible wage inequality between these gigantic powerhouses and independent firms or the decline in the formation of new firms, as concentrated power discourages small business building with intimidating startup costs. [7] Consumer dependence on top firm products as a result of both horizontal and vertical consolidation control in product pathways prevents new competitors from becoming involved in the market. Additionally, corporate power is a concern in its own right as a result of lobbying power and the possibility of the evasion of regulation by these agri-business giants. The Big Six, now the Big Four of the seed industry alone, spend large amounts of money on lobbying and ensuring that the government continue to support them not only in massive mergers such as this, but in endeavors across the industry related to workers’, consumers’, and property rights, to name a few concerns.
Dow spent $200,000 on lobbying in the agricultural industry in 2016 while Syngenta spent $940,000, although this is nothing in comparison to the money spent by Monsanto on lobbying in the agricultural sector. Bayer and Monsanto both have a long history of political spending, with Monsanto as the biggest spender in the agricultural industry, spending nearly $4.6 million on lobbying efforts in 2016 before Bayer’s acquisition. [8] Bayer was the eighth-highest spender in the pharmaceuticals industry in 2016 and spent more than $3.6 million on lobbying, and together in the last decade Bayer and Monsanto have spent more than $120 million on lobbying combined. Even more impressive, perhaps, is the combined lobbying power of Dow and DuPont in the chemical sector in 2016, before the DowDupont merger, with Dow spending more than $13.4 million dollars on lobbying and DuPont more than $5.5 million. Through lobbying, these massive corporations can exhibit considerable control over the political landscape, furthering concerns over the power the small farmer has in comparison. As the food system becomes further industrialized, many feel that traditional values of small farming are being cast aside and rural communities are being hollowed out. These voices are losing power to defend their way of life in the face of corporate money-backed politics.
The consolidation of these large agricultural businesses is not purely economic, and so the concerns brought forth by antitrust agencies must go beyond a purely economic lens. Corporate concentration at such a large scale must be seen as a cultural matter as well, one that considers the ideals of the American public as well as producers and consumers of food all around the world: a public who believe in power to the people, small businesses, and the choice of having the ability to farm and feed oneself without dependance on industrialized agriculture products and without dependance on only four large corporations. [9]
References
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- “DowDuPont Merger Successfully Completed.” Dow, 1 Sept. 2017, https://corporate.dow.com/en-us/news/press-releases/dowdupont-merger-successfully-completed.html.
- Root, Al. “DowDuPont Is Splitting Into 3 Companies. Here’s Everything You Need to Know.”Barrons, 30 April 2019, https://www.barrons.com/articles/dowdupont-spinoff-dow-dupont-corteva-51556552428
- “Justice Department Requires Divestiture of Certain Herbicides, Insecticides, and Plastics Businesses in Order to Proceed with Dow-Dupont Merger.” The Department of Justice, 15 June 2017. https://www.justice.gov/opa/pr/justice-department-requires-divestiture-certain-herbicides-insecticides-and-plastics
- Calvin, Geoff. “Inside China’s $43 Billion Bid for Food Security.” Fortune, 21 April 2017, https://fortune.com/2017/04/21/chemchina-syngenta-acquisition-deal/
- “FTC Requires China National Chemical Corporation and Syngenta AG to Divest U.S. Assets as a Condition of Merger.” Federal Trade Commission, 4 April 2017. https://www.ftc.gov/news-events/press-releases/2017/04/ftc-requires-china-national-chemical-corporation-syngenta-ag
- “Justice Department Secures Largest Negotiated Merger Divestiture Ever to Preserve Competition Threatened by Bayer’s Acquisition of Monsanto.” The Department of Justice, 29 May 2018, https://www.justice.gov/opa/pr/justice-department-secures-largest-merger-divestiture-ever-preserve-competition-threatened
- Galston, William A., and Hendrickson, Clara. “What the Future of U.S. Antitrust Should Look Like.” Harvard Business Review, 9 January 2018, https://hbr.org/2018/01/what-the-future-of-u-s-antitrust-should-look-like
- Salop, Steven C. and Culley, Daniel P. “Potential Competitive Effects of Vertical Mergers: A How-To Guide for Practitioners.” Georgetown Law, 8 December 2014, https://scholarship.law.georgetown.edu/facpub/1392
- “Industry Profile: Summary, 2016.” Open Secrets, 27 January 2017, http://www.opensecrets.org/lobby/indusclient.php?id=A07&year=2016
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