Agricultural companies are merging at a remarkable rate. The ensuing ag-biotech behemoths will have unprecedented control over global food production. The companies claim that this industry consolidation will not only benefit shareholders, but will serve the public by promoting food security and environmental sustainability. This Article tests those claims and finds them wanting.
INTRODUCTION 584 II. A BRIEF HISTORY OF AG-BIOTECH MERGERS 589 III. DETAILS OF THE MERGER PROPOSALS 592 A. Dow/DuPont 592 B. Bayer/Monsanto 594 C. ChemChina/Syngenta 596 IV. SYSTEM-WIDE CONCERNS RAISED BY THESE MERGERS 598 A. Anticompetitive Behavior: Raising Prices 599 B. Anticompetitive Behavior: Reducing Choice 600 C. Anticompetitive Behavior: Decreased Innovation (and Why It Matters) 604 V. CONCLUSION 608 "For the public and nature such mergers are marriages made in hell" (1) I. INTRODUCTION
What if one company owned all the seeds for all the food crops planted around the world--all the corn, all the soy, all the wheat, all the rice--all owned by one corporation? What if that same company also owned all the fertilizer and all the pesticides? Would it matter? Would that kind of consolidation make food security more or less likely? What if it were two corporations instead of one? What if it were four companies instead of one? We are about to find out.
In the space of roughly one year, the so-called "Big Six" ag-biotech companies announced three mega-mergers. (2) First, in December 2015, Dow and DuPont announced a "merger of equals" combining the two United States-based chemical firms into a new $130 billion company. (3) In February 2016--less than two months later--Basel, Switzerland-based Syngenta announced that it had agreed to be purchased by the Chinese National Chemical Corporation (ChemChina) for $43 billion. (4) Syngenta made the ChemChina agreement after fending off repeated purchase offers from Monsanto. (5) Then, in mid-September 2016, Monsanto announced its own deal--the company had accepted a $66 billion merger proposal from Bayer. (6) When the dust settles, the world will be left with four extremely large ag-biotech companies: Dow/Dupont, ChemChina/Syngenta, Monsanto/Bayer, and BASF. As the lone non-merging company, BASF is the most likely purchaser of any agricultural units the other companies are forced to spin off in order to obtain regulatory approval for their proposed mergers. (7)
The primary justifications advanced for these mergers are efficiency and enhanced shareholder value. (8) Dow and DuPont, in particular, focused largely on the relatively prosaic business justifications of "synergies" and "strong industrial logic" for their merger. (9) However, the other companies were not above suggesting that these mergers were necessary to feed a growing global population. For example, Bayer CEO Werner Bauman characterized his company's proposed merger with Monsanto as "the kind of revolutionary approach to agriculture that will be necessary to sustainably feed the world." (10) Similarly, Monsanto's press release announcing the merger described it as responsive to "one of the greatest challenges of our time: how to feed an additional 3 billion people in the world by 2050 in an environmentally sustainable way." (11) The media conference call announcing the Bayer-Monsanto merger explicitly linked the merger to food security, describing the combined company as "benefiting from macro trends," including rapid population growth and "biophysical effects of climate change shocks on yields." (12) One Monsanto spokesman took this save-the-world rhetoric up a notch, commenting, "I find it difficult to see how an acquisition of a company whose seeds help feed the world by a company whose products help keep us all healthy longer could be anything less than saintly." (13)
Striking a similar note, ChemChina described its merger with Syngenta as "not confined to our mutual interests" but also as a way to "respond to and maximize the interests of farmers and consumers around the world" and "deliver safe and reliable solutions for the continued growth in global food demand." (14) This framing seeks to advance a narrative of social necessity--that feeding the world in an era of climate change requires the products these companies produce and the level of consolidation these companies represent.
But this "our products will save the world" narrative is characterized by some as a myth, (15) and there is another narrative emerging--one that places the kind of industrial agriculture these companies represent squarely on the problem side of the ledger, rather than on the solution side. In this alternative narrative, the industrial-scale monoculture that these companies represent helps drive climate change rather than combat it and stands as an obstacle to food security rather than as its mainstay. Glimmers of this alternative narrative are increasingly common in official reports. For example, the author of a major international report on agriculture recently characterized the extravagant, save-the-world-esque claims made for the genetically engineered (GE) crops these companies produce as "unproven." (16) The United Nations Conference on Trade and Development expressed concern that "concentration in agricultural biotechnology is giving the largest corporations unprecedented power vis-a-vis growers and other stakeholders" with "far-reaching implications for food security." (17) Similarly, the Food and Agriculture Organization of the United Nations recently noted that the more compelling advances claimed on behalf of this technology have "been anticipated several times... [but have] had very limited impact so far." (18) Writing specifically about pesticide use, Hilal Elver, the United Nations Special Rapporteur on the Right to Food, recently lambasted the very products these companies are touting as "solutions," on the ground that pesticides are "undermin[ing] the rights to adequate food and health for present and future generations." (19) Indeed, Elver cautioned that the model of agriculture these companies represent "is highly problematic, not only because of damage inflicted by pesticides, but also their effects on climate change, loss of biodiversity and inability to ensure food sovereignty." (20) She described the industry as an oligopoly with enormous power and highlighted the conflict of interest in allowing the same handful of companies to dominate global seed and pesticide sales. (21)
This competing agricultural narrative adds a compelling social justice edge to the ongoing antitrust examination of these mergers. The United Nations Conference on Trade and Development expressed a concern that "concentration in agricultural biotechnology is giving the largest corporations unprecedented power vis-a-vis growers and other stakeholders" (22) as the privatization and patenting of agricultural innovation (e.g., gene traits, transformation technologies, and seed germplasm) increasingly supplants traditional agricultural understandings about farmers' rights, and breeders' rights. (23) Yet, most of these weighty questions will not be directly on the table in the myriad of reviews these mergers will face. There will be no wide-ranging inquiry into the public's interest in environmental sustainability concerns and food security issues, despite the urgency of those questions.
Regulators deciding whether to approve these mergers have a relatively narrow purview. The Clayton Act (24) requires that regulators focus exclusively on whether the effect of the mergers "may be substantially to lessen competition, or to tend to create a monopoly." (25) In other words, the focus of the antitrust regulator is on making sure that "[m]ergers should not be permitted to create, enhance, or entrench market power or to facilitate its exercise." (26) As a result, regulatory analysis of these mergers will focus on arcane calculations of market concentration. While wading through technical analyses of the Herfindahl-Hirschman Index (27) (HHI), "small but significant and non-transitory increase in price" (28) (SSNIP), and concentration ratios (29) (CRs) that make up an antitrust assessment, it can be easy to lose sight of what is at stake--whether three or four companies should be permitted to control global agriculture and determine the priorities and direction of agricultural research.
Yet, even for the questions that are central to antitrust laws--the impacts on competition and innovation--the answers seem troubling. In general, when four firms control 80% or more of a market, that market is no longer considered competitive. (30) By that matrix, seed markets in the United States are already not competitive. In 2014-2015, the share of seed sales in the United States controlled by the four largest firms was "91% for cotton, 82% for com, and 76% for soybeans." (31) The numbers are not much better on the global scale. A combined Bayer/Monsanto would single-handedly control 29% of the world's seeds and 24% of its pesticides. (32) This level of concentration creates real concerns about the effects these mergers will have on farmers and on those of us who eat food. Among the concerns are the possibility of price increases and loss of choice, both for farmers and consumers, as well as the ramifications of increasingly consolidated control over the production of agricultural knowledge. (33)
This Article will consider each of these concerns in turn. Part II offers a general background on the rise of GE crops and the accompanying consolidation in the agricultural industry. Part III then describes the three merger proposals, surfacing some of the key regulatory concerns. Part IV draws on past experience with agricultural mergers to demonstrate how these mergers will negatively impact the ability of farmers to select and plant non-GE seeds. This Part makes the point that loss of farmer choice will result in a concomitant loss of choice for consumers and will...