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Merger naysayers: long-term hit to farmers

When the proposed mega-merger of Monsanto and D&PL was put before the U.S. Department of Justice nearly a year ago, there was little doubt charges of monopoly and market anti-competitiveness would follow.

Indeed, those claims came. And after the DOJ’s May 31 decision to allow the merger, the charges haven’t calmed.

“This is a disappointing development in merger enforcement,” says Diana Moss, vice president of the non-profit Antitrust Institute. “We think the DOJ had a strong complaint and competitive impact statement. But their remedy is very weak and inadequate.

“They’re selling off Stoneville and some D&PL germ plasm assets to Bayer. And to effectively compete with D&PL in the Mid-South and Southeast cotton markets, you’ll need a vertically integrated, established platform. That would be all the way from the genetic trait development to delivery of the finished seed.”

Moss says the institute doesn’t see the remedy as creating that situation for Bayer. “Bayer has little, or no, experience in those markets and they’re a tiny player in genetic traits development. The germ plasm lines being divested are either experimental or not planted much in the Mid-South and Southeast.”

The DOJ should never have allowed the merger, insists Bill Freese.

“The remedies they propose won’t ensure competition,” says the analyst with the Center for Food Safety. “With Bayer buying Stoneville, there will be two companies controlling over 90 percent of the cottonseed. We’ve gone from an oligarchy to a duopoly. There will definitely be higher concentration in an already highly concentrated industry.”

The merger will result in a situation where “farmers have fewer choices and seed prices continue to rise. Now, there are two behemoths in the cottonseed industry.”

The DOJ “made a big deal” about making D&PL divest 20 cotton lines, says Freese. “What they did was create ‘enhanced’ Stoneville assets. So the divestment included not only Stoneville, but they also threw in 20 cottonseed lines from D&PL. That was supposedly significant, but 12 of the 20 varieties are experimentals. We don’t know if they’ll be competitive. And of those varieties, eight have been sold and account for less than 2 percent of the cotton planting in 2006.”

Freese says take away the legal squabbles and hand wringing and “at the end of the day, Monsanto is now the biggest cottonseed company in the world. I hope everyone understands this will consolidate their monopoly in cottonseed.”

And then there’s DuPont, a company extremely displeased with the merger. Was DuPont frozen out of the merger deal?

“Since the proposed merger was first announced, we’ve been on-the-record opposed,” says Doyle Karr, DuPont spokesperson. “That was because we feel it would very anticompetitive and would be a disservice to farmers and, ultimately, consumers. Throughout the process that’s been our position.”

Now that the DOJ has allowed the deal to proceed with remedies, “we still believe it’s anticompetitive,” says Karr. “Even with the remedies proposed it’s bad for farmers.”

Karr admits DuPont is looking at options to block the merger in court.

“The way this works is, if the DOJ wanted to stop the merger deal they’d have sued to block. Often, if the DOJ takes that option, the companies involved will simply say, ‘Enough. We’ll drop this because the uphill battle isn’t worth the trouble.’ And that’s along the lines of what happened the first time Monsanto tried to merge with D&PL.”

Karr says just because the DOJ hasn’t chosen to sue to block doesn’t mean other entities can’t. “That’s why we’re looking at this seriously.”

If DuPont files suit would the goal be to kill the merger or force new remedies the company would be satisfied with?

“It’s hard to speculate. Our basic argument is that when you take a company with a very high, dominant market share in biotechnology traits combined with another company with a very high, single-crop market share it will limit competition. It can’t help but limit it and make it very difficult to stay in the market.”

And, ultimately, farmers will pay the price, warns Karr. “That won’t be in the near-term — not something farmers will see tomorrow — but, over time, believe me, they’ll be asking, ‘Why don’t we have more options?’ And the answer will be ‘because there’s no competition.’

“Competition is a very good thing for any consumer. Lack of it means you may see some good things in the short run. But in the long term you’re missing out because of higher prices and no competition pushing research to the next level.

“When you look at where farmers sit with seed and input traits, they need to ask about competition and what this deal will mean in the long run. Ask questions!”

Like Moss, Karr says DuPont agrees with much of what the DOJ articulated on the situation in its ruling. But the proposed remedies “are seriously lacking in resolving the anti-competitive aspects of the acquisition.”

Under the Tunney Act, a 60-day comment period on the merger is now open. All interviewed suggest concerned farmers contact the DOJ, their state attorneys general and politicians.

“It is extremely important to know that the most critical voice in all this is the farmer’s,” says Karr. “There is a short time frame here, but if they’re worried about this deal, they need to let these officials know what they think.”

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