Bayer Plans Sell-Off that would Worsen Competition in Seeds, Chemicals
In the fall of 2016, the German drug, seed, and crop chemicals conglomerate Bayer announced plans to merge with the U.S. chemical and bio-tech seed giant Monsanto. Hoping to overcome objections from European anti-trust regulators, Bayer is promising to sell off its vegetable seed business to BASF, a German corporation that is currently the largest chemical maker in the world.
But would such a three-way deal actually reduce the monopoly problem in food and agriculture? Actually, it would do the reverse.
For one, it would turn BASF into a massive, integrated seed and chemical company. Currently, BASF produces agricultural chemicals but is not in the seed business itself. Instead, it partners with independent seed companies to produce pesticides and herbicides optimized to work with the specific strains of seeds the independents offer. This allows smaller seed companies to compete against big integrated firms like Dow, Bayer, and Monsanto that produce both seeds and chemicals.
But if BASF gets into the seed business itself it will be competing with, rather than servicing the independent seed companies it currently supplies with chemicals. Independent seed companies would lose a neutral chemical company to work with, making it that much more difficult for smaller, newer companies to compete with the biggest agro-giants.
“You will now have to make entry at the seed and chemical level, to be a competitor,” says Peter Carstensen, a law professor at the University of Wisconsin, “which will make it substantially more burdensome, if not possible, for anyone to emerge as a competitor to constrain the market power” of the biggest agriculture companies.
If antitrust enforcers approve the deal, BASF is likely to act like other big, integrated agribusinesses. These companies "leverage their market power to drive purchases of a narrower set of products,” says Kristina Hubbard, advocacy and communications director at the Organic Seed Alliance. Just as Monsanto uses its vast control over seeds and seed traits to steer farmers toward buying Monsanto herbicides and pesticides, BASF would have every reason to do the same.
In other words, Bayer’s planned sell-off would turn BASF into a more dominant company in the seed and agrochemicals sector without reducing concentration in this highly concentrated industry. Indeed, Bayer would grow even more powerful and dominant via its merger with Monsanto, which already controls 98% of seed traits for herbicide resistant soybeans, and 79% of seed traits for herbicide resistant corn.
"We think the merger is too big to fix,” says Diana Moss, president of the American Antitrust Institute. "The only effective remedy here is for the government to move to block the merger.”
Patrick Woodall, research director and senior policy advocate at Food and Water Watch, agrees. Rather than divesting bits and pieces of Monsanto or Bayer, "it makes more sense to block the merger.”
Antitrust enforcers in the US and Europe continue to scrutinize Bayer’s proposed takeover of Monsanto, and the process is taking longer than expected, according to Bayer. Originally, the company predicted the deal would close by the beginning of 2018, but this week, Bayer chief executive Werner Baumann said the company plans to close the deal in the second quarter of 2018.
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