permaculture

["Lawrence F. London, Jr." <lflj@bellsouth.net>]

How Monsanto Outfoxed the Obama Administration
by Lina Khan (Salon.com)

http://www.salon.com/2013/03/15/how_did_monsanto_outfox_the_obama_administration/

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
<http://www.huffingtonpost.com/2009/12/13/monsanto-squeezes-out-see_n_390354.html> 

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
<http://www.monsanto.com/newsviews/Pages/iowa-attorney-general-working-group-closed-inquiry.aspx>, 


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
<http://www.huffingtonpost.com/2009/12/13/monsanto-squeezes-out-see_n_390354.html>, 


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
<http://docs.justia.com/cases/federal/appellate-courts/cafc/04-1532/04-1532-2011-03-27.pdf> 

farmers
could apply to its Roundup Ready crops. Competitors
<http://dockets.justia.com/docket/texas/txwdce/5:2007cv00673/254138/>
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
<http://www.huffingtonpost.com/2009/12/13/monsanto-squeezes-out-see_n_390354.html> 

of
certain lines of inventory. Many
<http://www.findforms.com/pdf_files/ded/35207/45-1.pdf> seed dealers
<http://dockets.justia.com/docket/texas/txwdce/5:2007cv00673/254138/> 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
<http://www.washingtonpost.com/wp-dyn/content/article/2009/11/28/AR2009112802471.html>, 


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.
Alarmed by the fact that they were losing access to many key seed gene
pools and seed breeders, biotech competitors – including DuPont, Dow and
Syngenta – scrambled to keep up, grabbing suites of seed companies to
secure their own arsenals.
Once mimicked by its rivals, Monsanto’s strategy redrew the industry.
Competition and variety
<http://farmertofarmercampaign.com/Out%20of%20Hand.FullReport.pdf> have
dwindled as a result. Since the mid-1990s, the number of independent
seed companies has shrunk
<http://www.mdpi.com/2071-1050/1/4/1266/pdf> from some 300 firms to
fewer than 100
<http://wcfcourier.com/business/local/independent-seed-companies-a-dying-breed/article_7cef1ffc-b0bb-56a8-8d83-faf894bf76ad.html>. 


Many businesses not bought out directly were pushed out by bankruptcy.
And even these figures underestimate Monsanto’s power, as many of the
independent companies that remain now must compete with the same company
on which they also depend for their supply of genetic traits, a fact
that constricts how freely they can select or market others’ products.
“My big concern is that Monsanto can go out and undercut us in the
marketplace through one of its own seed brands,” said the owner of a
family seed business in the Midwest who asked not to be identified
because he relies on Monsanto for genetic traits. “It puts us in a very
vulnerable position. It could squeeze us any time.”
Documents obtained from the Texas attorney general’s office through a
public information request show the states examined Monsanto’s conduct
broadly. Their materials included academic research on Monsanto’s
bundled pricing and law journal articles on how to police dominant firms
with intellectual property rights for anticompetitive conduct. The
documents suggest that the states were trying to gauge not just whether
Monsanto’s contracts were unlawful, but – more expansively – whether the
company had used its dominance illegally to maintain a monopoly.
The Midwest seed business owner said that DOJ officials, by contrast,
appeared to be most focused on the mechanics of Monsanto’s licensing
agreements, phoning him several times in 2010 to discuss the issue.
“They asked very specific questions about [Monsanto’s] contracts, the
conversation was very focused on this one point,” he said. “They did not
try to understand the layout of the seed industry, or any larger issues.”
When contacted, a spokeswoman for the DOJ acknowledged only that the
antitrust division had shut its investigation into “possible
anticompetitive activity” in the seed industry, due to “marketplace
developments that occurred during the pendency of the investigation.”
The spokeswoman would not detail these developments. “We believe it
would not be appropriate to comment further,” she said. The state
attorneys general who initiated the probe five years ago also closed
their inquiry and have chosen not to comment.
Academics and private attorneys who consulted with the government during
its investigation concede that an antitrust lawsuit against a company as
strategic and politically
<http://www.opensecrets.org/news/2012/05/monsantos-deep-roots-in-washington.html> 


connected
<http://books.google.com/books?id=LnOkNbVFu5kC&printsec=frontcover&dq=foodopoly&hl=en&sa=X&ei=Cn4rUZbKJYq30gHljoCgCg&ved=0CDAQ6AEwAA#v=onepage&q&f=false> 

as
Monsanto would not have been a guaranteed win. Few firms have as
methodically mastered the revolving door between Washington and industry
as Monsanto – whose former employees and lobbyists
<https://www.opensecrets.org/lobby/clientlbs.php?id=D000000055&year=>
frequently
enjoy top posts at agencies like the Food and Drug Administration and on
legislative committees – or groomed as deep ties with both Republican
and Democrat administrations. The company spent close to $6 million
<https://www.opensecrets.org/lobby/indusclient.php?id=A07&year=2012> on
lobbying in 2012, more than any other agribusiness organization, and
three times the sum dished out by the second-highest paying firm, Archer
Daniels Midland.
Those close to the investigation also note that it became easier for
officials to justify inaction because Monsanto cleaned up its act as
soon as authorities came knocking. Seed companies say Monsanto began
loosening its licensing agreements in 2008, less than a year after the
state attorneys general opened their inquiry. Months after the Justice
Department followed suit in 2009, Monsanto announced
<http://accordingtomonsanto.files.wordpress.com/2009/12/stakeholder-letter00011.pdf> 

it
would allow farmers to continue using its leading soybeans, Roundup
Ready 1, even after its patent expired in 2014. This gesture — at least
in theory
<http://kunc.org/post/generic-seeds-could-have-short-lifespan> — opens
the market to generic competition.
“Monsanto had reached a place of sufficient dominance that it no longer
needed its restrictive agreements, and they were just attracting
trouble,” said the lawyer in the state attorney’s office. “So it
loosened its practices, giving seed companies more freedom to make their
own choices. But it didn’t change the direction of the market — Monsanto
had already locked that in.”
The seed business owner from the Midwest confirmed that Monsanto adopted
a more benevolent face after the states began investigating in 2007.
When asked whether its new agreements were fair, he paused. “There are a
lot of ways Monsanto can use its power to influence you,” he said. “You
don’t need a written contract.”
When contacted by Salon, Monsanto declined to comment beyond its initial
public statement
<http://www.monsanto.com/newsviews/Pages/monsanto-notified-that-us-department-of-justice-has-concluded-its-inquiry.aspx> 

announcing
the DOJ’s decision.
Several experts agree that the strongest case the DOJ could have brought
against Monsanto would focus on how it has used its monopoly in one
market — the provision of genetic traits — both to exclude rivals and to
gain advantage in another market: the breeding and retail of seeds.
They note that Monsanto’s practices resemble conduct by Microsoft and
Dentsply, two dominant firms that the Justice Department sued for
antitrust violations in the late 1990s. Both companies had used
contracts to restrict competitors’ access to the platforms they needed
to distribute their technologies. In at least one way Monsanto enjoys
still greater power than even Microsoft: because it now owns many of
these intermediaries – the seed breeders and retailers – it no longer
needs written agreements to favor some companies over others. It can
effectively accomplish the same outcome without the paper trail.
Lawyers say winning such a case would have been tough but not
impossible. “A successful case against Monsanto would have required very
smart litigating,” said Peter Carstensen, a professor at the University
of Wisconsin Law School and antitrust specialist who has studied the
seed industry. “(The) Microsoft (case) required an extraordinarily able
set of lawyers.”
Some experts also say the Justice Department was unduly cautious and
ultimately outmaneuvered by the company. John Hinderaker, a lawyer who
litigated against Monsanto 10 years ago in a private antitrust case,
says that the company, by contrast, has been especially daring.  “Most
companies would draw the line at certain practices, but Monsanto had a
different attitude towards risk,” he said. “They’d look at a legal gray
area and decide to test it. They were aggressive and strategic.”
Hinderaker notes that early legal wins against poorly resourced farmers
fortified Monsanto in later battles, adding, “Monsanto has been very
lucky in its opponents.”
Carstensen, a former DOJ attorney, believes antitrust officials may have
been reluctant to wage a close fight given Monsanto’s political
connections. “There was a good case to be made, but at the end of the
day nobody was prepared to bite the bullet and move forward,” he said.
The public will suffer the costs of Monsanto’s capture of almost total
control over much of the U.S. seed business. Since 2001 the company has
more than doubled
<http://www.nytimes.com/2010/03/12/business/12seed.html?pagewanted=all&_r=0> 

the
price of soybean and corn seeds, whose crops are used in foods ranging
from cereal and pizza to chocolate and soda. In 2008 Monsanto officials
<http://www.dtnprogressivefarmer.com/dtnag/common/link.do;jsessionid=E2839555FFAB49946177FB788EA222F1.agfreejvm1?symbolicName=/ag/blogs/template1&blogHandle=business&blogEntryId=8a82c0bc1ae0f224011ae9296a9e005f>said 


farmers should expect seed prices to keep rising.
“Monsanto has used its power to raise prices and retain control over
genetics at the public’s expense,” says Neil Harl, agricultural
economist at Iowa State University who has studied the seed industry and
antitrust law for decades and consulted with the Iowa attorney general’s
office during the state investigation.
It is not just a matter of higher prices. The resulting loss
<http://farmertofarmercampaign.com/Out%20of%20Hand.FullReport.pdf> of
diversity
<http://www.centerforfoodsafety.org/wp-content/uploads/2013/02/Seed-Giants_final.pdf> 

from
Monsanto’s dominance may restrict our ability to adapt plant stocks to
an increasingly volatile climate. Many of the seed breeders and
retailers Monsanto purchased were regional experts, familiar with the
soil and adept at breeding crops suited to the vagaries of local pests
and climate. That sprawling network of local knowledge and
experimentation has been severely thinned.
Kyle Stiegert, professor of agriculture and applied economics at the
University of Wisconsin-Madison, says Monsanto’s degree of control
forecloses important opportunities for innovation. “There are suites of
traits and seed combinations that are no longer being experimented
with,” he says. “We have no idea if yields could be higher if farmers
had flexibility to experiment.”
Experts echoed concerns about how Monsanto’s monopoly threatens future
biotech advances to DOJ officials at a public workshop
<http://www.justice.gov/atr/public/workshops/ag2010/iowa-agworkshop-transcript.txt> 

in
Iowa in March 2010, as well as in reports submitted during the
investigation. They say DOJ’s inaction cements Monsanto dominance for
the foreseeable future.
In at least one recent instance, the Obama administration has supported
that dominance. In Bowman v. Monsanto – the highly publicized case heard
by the Supreme Court last month that pits the company against a
75-year-old farmer – the administration argued in favor of Monsanto’s
position. The case asks whether Monsanto can employ patents to control
how farmers use not just its seeds but also their progeny. In his brief
the solicitor general argued that if patent rights for Monsanto’s crops
were reduced, “[t]he incentive to invest in innovation and research
might well be diminished.”
“It’s a great frustration,” Carstensen says. “If the Obama
administration really cared about technological innovation, they would
have come in and tried to free technology from being captured by a
single company.” Instead, he says, they have “protected Monsanto’s
interest.”
The Obama administration opened the Monsanto investigation as part of a
signature effort to reinvigorate antitrust enforcement. In the end the
administration appears mainly to have fortified the immense power of a
chief target.
It has also ensured that future developments in our seeds – the basis of
our food supply – will be driven not by tinkering farmers or scientists
competing to discover the next breakthrough, but by the private
interests of a single giant.

http://www.salon.com/2013/03/15/how_did_monsanto_outfox_the_obama_administration/