The Organization for Competitive Markets is disappointed by the Department of Justice Antitrust Division’s May 31, 2007 approval of Monsanto’s acquisition of Delta and Pine Land Company.  On the heels of the recently approved Smithfield Foods acquisition of Premium Standard Farms, it is becoming increasingly clear that this DOJ is unwilling or unable to protect American farm families from agricultural monopolists, or maintain competition in the American economy.

“I am dumbfounded by the Department of Justice’s willingness to allow Monsanto to destroy biotech competition by purchasing Delta and Pine Land, the joint development partner of Monsanto’s two primary competitors,” said Keith Mudd, OCM president.  “This acquisition destroys the prospect of breaking Monsanto’s biotech trait monopoly.  DOJ’s so-called remedy is superficial, and is grossly inadequate to protect the interests of farmers and consumers.”

U.S. farmers grew more than 15 million acres of cotton in 2006, generating sales of more than $5 billion.  On May 31, 2007, the Department of Justice Antitrust Division approved the merger by filing a complaint in U.S. District Court in Washington, DC, and filed a a proposed consent decree at the same time.  This is the procedural method used to impose conditions upon a proposed merger.  The consent decree requires Monsanto to sell off – or divest – a few of the thousands of its germplasm lines.

On March 9, 2007, OCM filed its opposition to Monsanto’s acquisition of the Delta and Pine Land.  OCM warned DOJ that this acquisition will harm farmers and consumers, who will be deprived of increased choices and lower prices resulting from biotech trait competition.  This excerpt from OCM’s prior letter shows the troubling facts of the merger:

Monsanto is the dominant developer and licensor of transgenic seed traits used in cotton.  Transgenic traits allow seed companies to produce seeds that grow plants able to resist insects and tolerate certain herbicides.  In the cotton transgenic seed trait market, Monsanto holds a 100% market share of insect resistant traits, a 95.1% market share of herbicide tolerant traits, and a 99.8% market share of stacked traits (combined herbicide tolerance and insect resistance).    Monsanto’s monopoly power in this market is evidenced by its ability to impose significant increases on farmers for seeds containing Monsanto technology.  For example, according to Center for Food Safety, the cost of cotton seed has risen 3.4-fold from 1995 to 2005, due primarily to rising technology fees charged for transgenic traits.  These fees represent about 70% of the price of a bag of seed and make up a significant portion of farmers’ costs.

Delta and Pine Land seed accounts for over half of all cotton acres planted in the U.S., and enjoys an even larger market share in the South Central and Southeast regions, where transgenic seed traits are highly valued.  Delta and Pine Land also is a partner with Monsanto competitors seeking to develop competing cotton traits that would provide much needed alternatives for cotton farmers.  By acquiring Delta and Pine Land, Monsanto will remove the key partner of its competitors midstream in their efforts to develop and commercialize transgenic seed traits that will compete with Monsanto’s monopoly products.

The divestiture remedy agreed to by U.S. DOJ merely requires Monsanto to sell a few of the thousands of germplasm lines that made Delta & Pine successful.  The to-be-sold germplasm lines cannot be utilized by another firm to pose a competitive threat to Monsanto.  The sell-off remedy is thus ineffective, and Monsanto will form an effective monopoly in the cotton seed markets.  Farmers will be charged higher prices for seeds, will have fewer choices, and will not benefit from future innovation in a competitive market.

“Having approved the Smithfield Foods pork processing monopoly in the Southeastern United States, and the Monsanto biotech trait monopoly, the Department of Justice Antitrust Division has been transformed into the Division of Monopoly Approval,” said Mudd.  “Senators and Representatives must add pro-competition legislation to the Farm Bill because the Executive Branch has no interest in enforcement.”