Monsanto Draws Antitrust Inquiry

Nov. 29, 2009 - PRLog -- Today, the vast majority of the nation's two primary crops grow from seeds genetically altered according to Monsanto company patents.

Ninety-three percent of soybeans. Eighty percent of corn.

The seeds represent "probably the most revolutionary event in grain crops over the last 30 years," said Geno Lowe, a Salisbury, Md., soybean farmer.

But for farmers such as Lowe, prices of the Monsanto-patented seeds have steadily increased, roughly doubling during the past decade, to about $50 for a 50-pound bag of soybean seed, according to seed dealers.

The revolution, and Monsanto's dominant role in the nation's agriculture, has not unfolded without complaint. Farmers have decried the price increases, and competitors say the company has ruthlessly stifled competition. Now Monsanto -- like IBM and Google -- has drawn scrutiny from U.S. antitrust investigators, who under the Obama administration have looked more skeptically at the actions of dominant firms.

During the Bush administration, the Justice Department did not file a single case under antimonopoly laws regulating a dominant firm. But that stretch seems unlikely to continue. This year, the Obama Justice Department tossed out the antitrust guidelines of its predecessor because they advocated "extreme hesitancy in the face of potential abuses by monopoly firms."

"We must change course," Christine Varney, the Obama administration's chief antitrust enforcer, said at the time.

Of all the new scrutiny by Justice, the Monsanto investigation might have the highest stakes, dealing as it does with the food supply and one of the nation's largest agricultural firms. It could also force the Obama administration, already under fire for the government's expanded role in the economy, to explain how it distinguishes between normal rough-and-tumble competition and abusive monopolistic business practices.

Monsanto says it has done nothing wrong.

"Farmers choose these products because of the value they deliver on farm," Monsanto said in a statement. "Given the phenomenally broad adoption of these technologies by farmers, such questions are normal and to be expected."

Even with the growing cost, farmers have embraced the genetic modifications because they save work and enable them to cultivate more land. The modified plants can stand up to the powerful herbicide glyphosate, best known commercially as Roundup, allowing them to use the weedkiller not just before planting but also after the crops have come up.

"Everybody wants it, and Monsanto is seeing what the market will bear," said Lowe, 39. "People say that's capitalism. The question is, where does capitalism meet corruption?"

Before it jumped into biotechnology, Monsanto was already one of the nation's largest chemical companies and had patented glyphosate, bringing it to market as Roundup in the '70s.

The product kills just about all weeds, and for farmers it served as a wonderfully effective herbicide. Instead of tilling the earth, they could simply blanket it with Roundup. Because the chemicals in Roundup break down quickly in the sun and rain, seeds could be planted shortly afterward.

It became one of the best-selling herbicides ever, and the seed patents at the center of the antitrust allegations were built upon that chemical's appeal.
If there was a practical drawback with Roundup, it was that it couldn't be used after planting: Applying Roundup at that point would kill the crops, too.
Scientists wondered: Could they develop plants that could withstand Roundup? The answer emerged, partly by accident, out of Louisiana muck.

Monsanto was producing Roundup at a plant in Luling, La., and the water and sludge in the waste ponds around the plant were exposed to the chemical. It was the perfect place to find organisms that could withstand the chemical's lethal effects.

After bacteria discovered in the pond sludge proved resistant to the chemical, scientists isolated the gene that gave the bacteria Roundup tolerance and placed that gene, known as CPS4, into soybeans, then corn. The resulting plants, called "Roundup Ready," represented a billion-dollar breakthrough and, as Monsanto sees it, a just reward for its $1.5 billion investment in biotech research.


"During the same period, our competitors . . . largely ignored biotech," the company said in a statement. "Monsanto took risks our competition chose not to take." Although farmers have grumbled about Monsanto's regular price increases for Roundup Ready technology for seeds, it is DuPont, a Monsanto rival, that has pressed the antitrust case.

Farmers and seed companies "are afraid to speak in public, worried that they will become victims of retaliation," Thomas L. Sager, DuPont senior vice president and general counsel, said in a statement. "That's why it's so important that antitrust investigators move quickly -- to learn the truth before even more harm is done to America's farmers."

In court papers, DuPont argues that Monsanto has used the dominance of the Roundup Ready brand to prevent competitors from bringing innovations to market. In its view, Roundup Ready is so popular that any new biotech innovations must be designed to work with Monsanto's technology. But Monsanto effectively freezes out the competition, it says, by making it difficult for other companies to win a license to add their traits to Monsanto-patented seeds.

"Monsanto has abused its unlawfully-acquired monopoly power to block competition, thwart innovation and extract from farmers unjustified price increases of over 100 percent in recent years," DuPont argues in court documents.

A recent paper by Diana Moss of the American Antitrust Institute broadened the antitrust case against Monsanto and called for legal enforcement, citing "an almost intractable situation for competition." The institute has taken donations from DuPont but does not cater to its donors' viewpoints, officials said. Monsanto says that the allegations of stifling competition are "without merit" and that it broadly licenses its technology.

"We license Roundup Ready technology to hundreds of independent seed companies and our major competitors," Lee Quarles, a company spokesman said. The company won't license Roundup Ready without restriction, however, because it wants to ensure that any other traits that are stacked onto the Roundup Ready seeds actually function as promised, a precaution that protects their brand and their customers, Monsanto officials say.

Out in the fields, meanwhile, there remains resentment and wonder about the Monsanto-patented seed.
According to Moss, the price of seed from 2000 to 2008 outpaced the growth of crop yields by 2 to 4 percent a year.

Several farmers said the cost of Roundup Ready seeds seemed to rise faster than their own margins. But that doesn't mean, at least just yet, that they'll stop using them. "Everybody likes Roundup Ready," said William Layton, a grain farmer on the Eastern Shore. "Maybe it costs a little more than we like. But everybody's going to keep using it."

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