Farmers Sue Big Ag for Allegedly Sidelining E-Commerce Startups
A group of farmers recently brought an antitrust lawsuit against major seed and agrichemical makers and sellers, alleging that they are conspiring to shut out new players who could help farmers get lower prices. Whether or not these new players’ presence would truly benefit farmers, the case sheds light on how a handful of dominant corporations control the ag input market to preference their products and cheat farmers.
To understand the case, it helps to put yourself in the shoes of a farmer trying to buy seeds, pesticides, or weed killers. It’s not as simple as walking into a local store and picking something off the shelf. For one, any farmer looking for patented genetically engineered seeds — which are used to grow more than 90% of the U.S. corn and soybean crop — will need to buy new ones every year from an “authorized retailer.” This could be a national chain, a local coop, a corporate sales rep, or even another farmer that sells seeds on the side.
While it might seem like there are many seed varieties to choose from, in reality just two corporations, Bayer and Corteva, make 70% of corn and 61% of soybean seeds in the U.S. Because of their dominance, these two giant corporations exercise huge power over retailers, who rely on hitting certain sales goals to unlock discounts and kickbacks that can make or break their businesses. These hidden contractual terms imposed on authorized retailers put them in a conflict of interest whenever farmers consult them and their agronomists about which products to buy, because of their financial incentives to push certain brands and products.
Seed companies also set different seed prices in different parts of the country, under so-called “zone pricing” that is supposed to account for regional differences in yield. But corporations do not publish these zones’ boundaries nor information on how they’re determined, making it even harder to tell what a “fair market” price is.
Farmers also don’t have any way of knowing whether the retailers themselves are engaging in price discrimination. Most retailers charge farmers with small orders more than those with larger volumes, while offering other deals based on loyalty and even personal relationships. In the end, farmers may pay different prices than their neighbors for the same products. For instance, a 2019 survey found that the price of the herbicide Roundup PowerMAX varied by 35% for North Dakota farmers and by 75% of more for Iowa and Nebraska farmers.
Aiming to disrupt this system, competing startups, such as the Google Ventures-funded Farmers Business Network (FBN), are trying to establish their own online marketplaces that will cut out traditional retailers. They promise that these new exchanges will feature transparent prices and that this will help farmers to compare seed and chemical prices across regions and retailers to find the best deal without any black box discounts. But according to the suit, the Big Four crop input makers—Bayer, Corteva, BASF, and Syngenta—are conspiring with each other and their retail partners to squash these efforts by refusing to sell their products to these startups.
For instance, the complaint charges that when some retailers sold Syngenta-made products to FBN, Syngenta audited its authorized retailers to identify and punish those that made the sales. The Big Four can audit authorized retailers at any time as a part of their licensing agreements.
Canadian antitrust authorities opened an investigation into this alleged boycott last year, when the Big Four abruptly canceled their supply contracts with a Canadian retailer, Yorkton, shortly after FBN acquired it. As a result, “Yorkton [lost] two-thirds of its branded products,” said the complaint. The U.S. Department of Justice is reportedly monitoring this investigation, according to the complaint.
When Canadian authorities first announced their investigation, representatives from Bayer, Corteva, and Cargill told The Wall Street Journal that their conduct did not violate antitrust law, and a representative from wholesaler Univar said that it ended business with FBN because of unaligned objectives.
Food & Power attempted to contact all defendants in the new private suit, but not all responded by the time of publication. Retailers GROWMARK, Federated Cooperatives Ltd., and CHS said they are aware of the lawsuit, but that as company policy they do not comment on pending litigation.
A spokesperson from BASF said, “we deny that any of the allegations made to date are indicative of anything other than a very competitive marketplace.”
A representative from Simplot said, “we strongly disagree with the allegations set forth in the complaint and plan to vigorously defend this lawsuit.”
Just who, if anyone, is the good guy in this story, is certainly open to debate. Yes, in theory, the new startups might initially offer healthy competition and transparency. But if other e-commerce disruptions in retail are any indication, a monopolistic online marketplace can lessen competition in the long run.
Amazon, for instance, has eliminated many middlemen, but it has also driven many retailers and competitors out business and engaged in all kinds of discriminatory and predatory practices of its own, from abusing personal and third-party sellers’ data to charging monopoly prices in order to sell on its platform. That said, absent third-party digital competitors, the Big Four may continue to push their own digital platforms in order to make planting recommendations and sell directly to farmers, cutting out brick-and-mortar retailers themselves. What farmers ultimately need is a truly open market that is neither cornered nor manipulated by self-dealing plutocrats.
What We’re Reading
According to a report by Public Citizen, the Trump administration never submitted their final GIPSA Undue Preferences rules to Congress, which may allow the Biden administration to “freeze” or reverse the ruling. (Public Citizen)
The Center for Science in the Public Interest requested that the Federal Trade Commission investigate slotting fees and other deals between food manufacturers and supermarkets that give big brands prime placement on shelves. (The Counter)
Many American agribusinesses publicly support controversial farm policies in India that will give corporations more control over commodity pricing. This follows decades of U.S. corporate intervention in Indian agriculture. (Civil Eats)