FOR IMMEDIATE RELEASE
July 26, 2017
American Antitrust Institute: Diana Moss, 720-233-5971, [email protected]
Food & Water Watch: Kate Fried, 202-683-4905, [email protected]
National Farmers Union: Andrew Jerome, 202-314-3106, [email protected]
Washington – Today the American Antitrust Institute (AAI), Food & Water Watch (FWW), and National Farmers Union (NFU) sent a joint letter to the U.S. Department of Justice (DOJ) on the proposed merger between agricultural input giants Bayer AG and Monsanto Co. The three groups offered their in-depth analysis of how the proposed deal would likely harm competition, farmers, and consumers. The letter notes that the merger would complete a sweeping restructuring of the agricultural biotechnology industry, creating the “Big 3” companies where just two years ago, there were six major rivals.
AAI President Diana Moss explained, “The merger substantially eliminates competition across a number of important markets. It could squeeze out smaller rivals and saddle farmers and consumers with higher prices, reduced choice, and less innovation.” Given the merger’s potential adverse effects, the letter encourages the DOJ to be skeptical of any claims that the companies need to be bigger to innovate or that planned cuts to fundamental research will benefit farmers and consumers.
The AAI-FWW-NFU analysis evaluates the effect of the merger on three major markets. One is the market for cottonseed containing genetic “traits,” where Monsanto-Bayer would have shares above 65 percent in several U.S. growing areas. A second includes the markets for crop traits such as herbicide tolerance, insect resistance, and others. A combined Monsanto-Bayer would hold between 58 percent to 97 percent of these markets in cotton, soybeans, and canola. A third concern outlined in the AAI-FWW-NFU letter is the effect of the merger on the market for research and development (R&D). Here, the merger would eliminate important competition between “parallel path” R&D pipelines and could reduce incentives to innovate because of less competitive pressure.
The letter notes that increases in market concentration in some traited cottonseed and crop traits markets far exceed the thresholds in the antitrust agencies’ merger guidelines. The DOJ has blocked a series of recent mergers with similar effects. Such massive scale consolidation in Monsanto-Bayer would create a firm with substantial market power and leave only two firms, or a duopoly, in control of several markets.
Roger Johnson, NFU’s president, pointed out that the merger is likely to affect not only the markets for genetically-modified seed, but also for important non-genetically modified, or “conventional” seed. “Farmers want and deserve choice in what they plant, with seed that is appropriate to their region and climate.” The letter notes that over time, firms have cut back on their conventional seed offerings, making it more difficult and costly for farmers to secure appropriate seed. The Monsanto-Bayer merger could exacerbate this trend.
The letter suggests the DOJ should just say “no” to Monsanto-Bayer. “The DOJ must block this seed mega-merger that would raise farmers’ prices and severely limit the choices for farmers, consumers and rural communities,” said FWW Executive Director Wenonah Hauter. “The wave of mega-mergers sweeping the food and agribusiness sectors is turning over the food system to a corporate cabal that thwarts the movement to build a fair, sustainable and healthy food system.”
With such a small group of firms in the industry, the task of divesting important genomics and seed assets to a buyer that could successfully maintain them would be difficult. A game of “musical chairs” among a dwindling set of market players is not a prescription for healthy, competitive agricultural input markets.
The letter can be read in its entirety here.