Justice Department spotlights competition issues in agriculture

Mar 12, 2010
Justice Department spotlights competition issues in agriculture

Ray Gaesser will be one of the few lucky farmers who knows he will be able to share his thoughts on agricultural competition.

Gaesser, a soybean and corn farmer from Corning, IA, was to have a literal seat at the table last Friday at a community college campus in Ankeny, IA. He’s attending the first of five national meetings between now and December that are being held by USDA and Department of Justice (DOJ) to examine the state of competition for farmers.

To prepare for the workshops, DOJ and USDA asked for public comments and got more than 15,000 responses, so many that DOJ has been unable to process and post all of them. In a statement describing the meeting, DOJ said the workshops “will examine whether changes in the marketplace, including increased consolidation and vertical integration, have generated efficiencies, or whether they have led to increases in monopoly or monopsony power.”

The challenge for last Friday might have been honing in on one substantive theme. The day’s agenda included 31 listed speakers or panelists. Eight public officials start off the event, followed by a panel of five farmers, from different sectors, in the morning. The afternoon agenda includes panels on competition in the seed industry, trends in market power and agriculture enforcement. That’s all supposed to happen before the floor is opened for general public comments.

So many people want to speak about so many issues that several groups organized a separate meeting for the night to the Ankeny workshop that had more than 200 people registered to attend.

“The way the public workshops are set up now is nothing more than political theater,” said David Goodner, a community organizer with Iowa Citizens for Community Improvement. “They are giving the public one hour for public comments, at the end of the day, after hours of posturing by politicians and public interests. We think the public comments need to be put at the beginning of the day. There are only a handful of independent family farmers who will be part of the discussion.”

A vice president for the American Soybean Association, Gaesser sits on a panel about seed competition issues. He will explain the importance of assuring that farmers benefit from generic seed traits when those patents expire. In particular, the soybean growers want various seed developers to capitalize on the patent expiration for Roundup Ready 1 in 2014.

“Will there be any benefit to us as farmers from the investment that we have really made from buying that technology, really, for the last 14 years?” Gaesser said. “There’s a lot of uncertainty that there may not be any breeding with Roundup Ready 1 with all of the work going on in Roundup Ready 2.”

Among the biggest challenges with a generic Roundup Ready 1 product is keeping up with international registration and licensing. Monsanto has taken care of that work throughout the patent and committed to keep up the export registrations through 2017, but those licenses in different countries must be continually renewed in some cases.

“We’re concerned after 2017, making sure we’re not growing a product that is not accepted around the world,” Gaesser said. “If those registrations expire, someone has to see to it they are renewed and no one knows who that is just yet.”

Coupled with the seed trait debate, the lawsuitcountersuit between Monsanto Co. and DuPont/Pioneer case will likely be about as hard to ignore as an elephant in the room. Adding to the drama will be the investigation launched by the DOJ last fall into Monsanto’s licensing and marketing practices.

In fact, in the second paragraph of Monsanto’s 63-page comments to DOJ three months ago about the workshop, the company cited an October paper. The paper, “Transgenic Seed Platforms: Competition Between a Rock and a Hard Place?” was by American Antitrust Institute Vice President Diana Moss. Monsanto pointed out that DuPont had funded the institute and at least one investment analyst had characterized Moss’ paper as “the blueprint for a federal antitrust case against Monsanto.”

A large share of Monsanto’s public comments were dedicated to refuting Moss’ paper. Moss was to be on the seed competition panel last Friday with Jim Tobin, Monsanto’s vice president for Industry Affairs.

Roger McEowen, director of the Center for Agriculture Law and Taxation at Iowa State University, sees little change coming from any DOJ investigations.

“And if these (workshop) discussions focus only on antitrust, then they’re a waste of time. The book on (antitrust) closed a long time ago,” he said. “The body of case law in the past 10 to 20 years would seem to foreclose any real attempt to deal with this in an antitrust way. For the seed business, those (consolidation) issues were things that should have been addressed long ago.”

The issues he sees that need to be addressed, if change in the seeds business is desired, is in patent rights and intellectual property rights for seeds and other “living organisms.” Biotech companies were given broad patent rights to seed traits and similar discoveries since June 1980 when the U.S. Supreme Court ruled that living organisms could be patented.

“Thirty years have passed since that decision without Congress seeing fit to do anything with intellectual property law that would deal with the issues of monopolies,” McEowen said.

What little activity has taken place has been to strengthen intellectual property rights around biotechnology discoveries.

It was argued in 1980, and still is, that for companies to invest hundreds of

millions of dollars annually on biotech seed research, they needed the protection of patent law to recoup those investments. But McEowen and others said no one likely dreamed of how one company could come to dominate a market as detractors of Monsanto say that company has in soybeans and other crop seeds.

McEowen said the issue is this: Has a company acquired sufficient market power, through intellectual property rights, so as to have developed a monopoly? And if it has, is it using licenses, restrictive contracts and other business agreements to continue that monopoly past the time the patent on that intellectual property expires?

Some of the biggest agribusinesses in the country are actually farmer owned, whether it entails cooperatives that provide inputs to farmers or buy their grain or dairy products. The cooperatives worry about the tone these meetings will take throughout the year.

Chuck Conner, president and CEO of the National Council of Farmer Coopera tives,

wants to ensure the integrity of farmer-cooperative systems, especially after hearing concerns raised about cooperatives by DOJ Antitrust Chief Christine Varney at a Senate Judiciary Committee field hearing last fall. Varney, who was scheduled to speak last Friday, said at the time that cooperatives may have outlived their usefulness.

“The paraphrased version of that is we interpret that to mean, in some cases, the co-ops have grown so large they are not serving their members’ interests, that sort of thing,” Conner said. “Clearly, some negative comments against co-ops.”

Cooperatives are protected from antitrust challenges under exemptions created under the 1922 Capper- Volstead Act. It would still take an act of Congress to erase that exemption, regardless of the outcome of the DOJ-USDA hearings.

“I think there is just a common sense notion here that the need for the ability of individual farmers to come together through their co-op, to market their products in today’s economic environment, is far greater than what it was at the time Congress chose to do that,” Conner said. “They have some counterbalance there that enables them to negotiate for a reasonable price and reasonable standards, not to say those individual producers didn’t wish it was higher, that’s usually the case.”

While there will be livestock producers representing different industries speaking in Ankeny, separate livestock sectors will have meetings, starting with poultry in May. Still, there will be some highlighting of livestock challenges, particularly given Iowa is the nation’s largest hog producing state.

Sen. Charles Grassley, R-IA, has focused for years on competition issues, largely in livestock. Grassley said Iowans “are nervous about what will transpire” after the hearings.

“They all question whether this will fall on deaf ears,” he said.

Some of the major concerns relate to hogs, Iowa’s largest livestock sector. Farmers are constantly worried about the concentration of hogs and slaughter facilities, Grassley said.

“Just generally, not enough competition from two standpoints: Not enough marketing opportunities for farmers and the concentration on inputs into agriculture and not enough alternatives there,” Grassley said.

“What I hope comes out of it is what I’ve been preaching for a long period of time, that the Packers and Stockyards Act has not been fully used by previous administrations, and I hope there is some evidence they are beginning to lay the groundwork for greater use of it to make sure there is fairer competition,” he said.

Also, Grassley said he hopes DOJ will have a greater understanding of agriculture as an industry.

“To this point, just getting the attention of previous administrations, both Republicans and Democrats, to use antitrust in agriculture has been quite a fight,” he said. “So that awakening, or an awakening in that area, is what I’m looking forward to.” — Chris Clayton, DTN