“Competition in the seed industry is robust.”
The American Antitrust Institute (AAI) has set its sights on Monsanto, the world’s largest agricultural biotechnology company, in its latest attack on anti-competitive behaviour.
A few large companies dominate the development of new traits used in genetically modified (GM), according to a discussion paper released last month by the AAI. Monsanto is the largest of those companies and its patented technology dominates in U. S. corn, soybean and cotton markets.
“The agricultural biotechnology giant… controls about 95 per cent of the market for Bt (insect-tolerant) and Ht (herbicide-tolerant) cotton traits, 97 per cent of the market for Ht (herbicide-tolerant) soybean traits, and on average, around 75 per cent of the market for Bt and Ht corn traits, although depending on the trait, shares in corn traits can range close to 90 per cent,” the AAI paper says.
“Given the ability and incentive to exercise its substantial market power as rivals and farmers have alleged, Monsanto’s dominance in upstream markets thus raises the spectre of leveraging its market power downstream to the markets for traited seed.”
Inter-platform rivalry in the GM seed business is not a viable form of competition, according to the AAI. It also says the high cost of research and development prevents new companies from getting into the business.
In the meantime, bigger seed companies have purchased many independents.
Monsanto acquired 40 seed companies during the 1990s into the 2000s. “Collectively, the foregoing problems create an almost intractable situation for competition,” the AAI paper says.
“Competition is thus between the proverbial ‘rock and a hard place.’”
New technology typically lowers costs of operation or increases production enough to cover any additional costs. As well, the cost of widely adopted new technology usually declines. Not so in seed.
Between 2000 and 2008, real seed costs increased by an average annual rate of five, 11, and seven per cent for corn, cotton and soybeans, exceeding the growth in returns from those crops.
“Sustained high prices for mature technologies may indicate a number of forces at work including market power in innovation and input markets,” the AAI paper says.
The paper also claims concentration in the seed business has reduced the quality of innovation.
Monsanto has patented many of the techniques used to develop GM crops. Of the 13 major patented techniques Monsanto owns four. Syngenta is the patent-holder of two techniques. Bayer, CAMBIA, Zeneca, and DuPont each hold one patent or an exclusive licence, and universities account for the remaining two patents.
The AAI paper says Monsanto is accused of antitrust activity.
“Various plaintiffs allege that Monsanto has monopolized markets for genetic traits by engaging in a variety of exclusionary practices, including exclusive dealing arrangements that penalize seed companies for licensing traits other than Monsanto’s,” the paper says. “Also suspect are bundling agreements that financially penalize seed companies for selling less than a minimum percentage of seed containing Monsanto traits.”
The AAI says restoring competition in the seed business will put antitrust laws and patent laws at loggerheads.
Monsanto denies any wrongdoing and says on its website its products are popular and that’s why farmers buy them.
“Given the phenomenally broad adoption of these technologies by farmers, such questions (about competition) are normal and to be expected,” Monsanto’s website says. “Competition in the seed industry is robust.”