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How Monsanto Outfoxed the Obama Administration

The inside story of how the government let one company squash biotech innovation, and dominate an entire industry.
 
 
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"MON 810", a variety of genetically modified maize (corn) developed by Monsanto Company is pictured January 23, 2012. The agricultural giant posted a large increase in quarterly earnings on strong results in corn seed sales in the US and Latin America and

 

 

Last November, the U.S. Department of Justice quietly closed a three-year antitrust investigation into Monsanto, the biotech giant whose genetic traits are embedded in over 90 percent of America’s soybean crop and more than 80 percent of corn. Despite a splash of press coverage when the investigation was initially announced, its termination went mostly unreported. The DOJ released no written public statement. Only a brief press release from Monsanto conveyed the news.

The lack of attention belies the significance of the decision, both for food consumers around the world and for U.S. businesses. Experts who have examined Monsanto’s conduct say the Justice Department’s decision not to act all but officially establishes the firm’s sovereignty over the U.S. seed industry. Many of them also say the decision ratifies aggressive practices Monsanto used to entrench its dominance and deter competition. This includes  highly restrictive contractual agreements that excluded rivals, alongside a multibillion-dollar spree to buy up seed companies.

When the administration first launched its investigation, many antitrust and agriculture experts believed it was still possible to imagine an industry characterized by greater competition in the marketplace and greater diversity in seeds. That future may now be foreclosed.

The investigation into Monsanto’s business practices began at the  state level in 2007, when attorneys general in Iowa, Texas and a handful of other states initiated an inquiry into the company’s confidential licensing agreements. These are the contracts that must be signed by any seed company wishing to insert Monsanto’s genes into its own strains of soybean and corn plants.

State officials uncovered agreements that, in one form or another, required seed breeders and retailers to favor Monsanto over its competitors.  One provision, for example, prohibited seed companies from combining Monsanto’s genetic traits with the traits controlled by its rivals, unless given explicit written permission from Monsanto. Since the vast majority of U.S. corn and soybean crops contain Monsanto’s genes, the company could effectively lock out competitors.

In another arrangement Monsanto stipulated its product Roundup as  the only herbicide farmers could apply to its Roundup Ready crops.  Competitors say this tactic blocked a cheaper, generic herbicide from the market.

Monsanto also promised significant rebates to seed companies that agreed to ensure its products made up  at least 70 percent of certain lines of inventory.  Many seed dealers have said Monsanto’s policies dissuaded them from promoting competitors’ products.

Monsanto’s action were “very bad,” said one state lawyer who investigated the confidential agreements, and who asked not to be identified because he was not authorized to discuss them. “If a seed company didn’t play by Monsanto’s rules, it could wipe that company out.”

Soon after President Obama took office, two years into the state-level investigation, the Justice Department opened its own inquiry into Monsanto’s practices. At the time, the event was reported as major news. Of all the antitrust efforts undertaken by the new administration,  the Washington Post wrote, the Monsanto investigation appeared to “have the highest stakes, dealing as it does with the food supply and one of the nation’s largest agricultural firms.”

Federal and state antitrust laws have been blunted in recent decades by pro-business administrations and courts. Still, antitrust law maintains a highly critical view of the kinds of contractual restrictions Monsanto habitually imposed on seed companies and farmers. Antitrust enforcers also traditionally take a tougher line against companies that expand through acquisition rather than organic growth, as Monsanto has.

It’s useful to remember that, until recently, Monsanto was not in the seed business. Originally a chemical company that produced plastics and pesticides, it turned to biotech in the 1980s by developing genetic traits and licensing them to companies, big and small, that conducted the actual breeding of seeds and handled sales to farmers. In the mid-1990s, Monsanto adopted a new strategy and began acquiring many of the independent seed businesses that had been the prime customers for its traits. Over the next decade Monsanto spent more than $12 billion to buy at least 30 such businesses.

 
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