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Protect Indian farmers from 'Baysanto'

The question that the Competition Commission of India should consider is whether the remedies suggested are sufficient to allay the risk of competition law concerns

Indian farmers, farmers
BITTER PAST Given the experience of exploitative price increases for Bt cotton by Monsanto, often linked with increasing farmer suicides in India’s cotton belt, what is the guarantee that the Baysanto will be different? (Photo: Reuters)
M M Sharma
Last Updated : Mar 07 2018 | 6:02 AM IST
The Competition Commission of India (CCI) is examining the Indian leg of the mega merger between Bayer and Monsanto. The proposed acquisition of Monsanto’s entire shareholding by Bayer globally, which brings together two global giants in the seeds and agro-chemical markets, is also being examined in the US and EU. There is opposition amongst the antitrust experts and economists for justifiable reasons, which need to be discussed publicly in India. CCI has invited public comments on the merger on January 7, 2018.
 
If approved, the merger will lead to tight oligopoly of three multinational giants, (ChemChina-Syngenta, Du Pont-Dow and now Bayer-Monsanto) which will control almost two-thirds of the global production in seeds and agro-chemicals as well as the valuable big data and IT platforms. This will not only lead to price rise for seeds and pesticides but also will lead to control of the global food value chain as well as direction of the innovative efforts in the next few decades besides increasing the dependence of world (including Indian) agriculture on the three global giants. This should be a wake-up call for any sensitive government.

How Monsanto abused its market power: Opposition to Monsanto’s high royalties for its GMO seeds, particularly in cotton, is often linked to farmer suicides in cotton belts. Unlike in the US, since Monsanto could not sign individual contracts with Indian farmers, due to the absence of a patent, Monsanto locked 28 Indian seed companies through one-sided licence agreements to collect hefty royalties on its behalf. The same issue of the likely abuse of dominance in charging high trait fee by Mahyco Monsanto, the Indian subsidiary of Monsanto, is again challenged before the CCI, on complaints filed by various Indian seed associations and a reference by the ministry of agriculture.

Global opposition to the merger: There is a growing opposition to this merger on both sides of the Atlantic! Antitrust experts both in the US and EU have openly opposed the merger. The thrust of opposition is based on possibilities of “bundling” of “traited” seeds with innovative technology. In fact, some antitrust writers in the US have already started comparing the “Baysanto” with the famous antitrust case of 1998 against Microsoft involving its bundling of web browsers with its Windows operating platform.

The European Commission (EC) has identified preliminary concerns in the following three areas, namely, (i) pesticides—due to limited competition between Monsanto’s portfolio of biological pesticide and Bayer’s portfolio of chemical pesticide products, and the parties’ overlapping activities (ii) seeds—due to the parties’ high market share in the breeding and licensing of vegetable seeds for several field crops such as oilseed, rape seeds and cotton seeds, and in the research and innovation programmes for wheat; and (iii) traits—due to Monsanto’s dominant position in several traits markets worldwide and Bayer being one of the few competitors, which has notably developed alternative herbicide tolerance traits to Monsanto’s. The EC will further investigate whether competitors’ access to distributors and farmers could become more difficult if Bayer and Monsanto were to bundle or tie their sales of pesticide products and seeds, notably with the advent of “digital agriculture”.

On July 31, 2017, Bayer and Monsanto submitted commitments to address the above preliminary concerns but the EC found these commitments insufficient and has issued formal “Statement of Objections” to both parties to respond. Do efficiency gains outweigh the overall negative effects? It may be argued that considerable amounts of investments are needed in R&D in the agriculture sector and a higher level of consolidation could lead to higher profitability and hence higher investments by the private sector.

BITTER PAST Given the experience of exploitative price increases for Bt cotton by Monsanto, often linked with increasing farmer suicides in India’s cotton belt, what is the guarantee that the Baysanto will be different? (Photo: Reuters)

But does such an approach factors in the effects which such large corporations may have on the lives of around half a billion farmers in the world and their families, most of whom live in penury? Given the past experience of exploitative price increases for Bt cotton by Monsanto, often linked with increasing farmer suicides in India’s cotton belt, what is the guarantee that the Baysanto will be different? Should CCI clear this merger? According to the “details of combination” notified by the parties on the CCI website, post-merger, “Baysanto” will have a dominant “platform” in seeds (in cotton seeds in India), vegetable seeds (cabbage, cucumber, onion, hot pepper, tomato in India) as well as in insecticides for rice, cotton and corn (in India, Bayer already enjoys 60-65 per cent market share and Monsanto enjoys 15-20 per cent market share in corn insecticides in both the upstream market for seed treatments and downstream market for sale of seeds) and face insignificant competition. Though lawyers representing the parties before the CCI have based their arguments mainly on the recent removal of horizontal overlaps through global divestiture of Bayer’s Liberty, a glufosinate-ammonium-based pesticide to BASF in October 2017, they do not seem to have adequately answered many antitrust issues, for instance, the strong possibility of “bundling” by leveraging its dominance in one product line to force purchases in another.

The question that the CCI should consider is whether the remedies suggested, namely sale/divestiture of some of their assets by Bayer/Monsanto, are sufficient to allay the risk of competition law concerns discussed above. This remedy, for instance, does not specifically deal with the exclusionary portfolio effects and the possible adverse effects on innovation that may result from the combination of germplasm, traits, breeding technologies, crop protection, big data and digital farming as explained earlier.
 
It is hoped that the CCI will keep in mind the peculiar vulnerability of poor and illiterate Indian farmers and their lack of bargaining power and like the EC, consider cooperating closely with other competition authorities in the US and the EC, Australia, Brazil, Canada and South Africa.

The author heads the competition law and policy practice at Vaish Associates, Advocates, Views expressed are personal

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