EXTRACT: "The portion of the price of soybeans that Monsanto is taking has gone up precipitously even as the amount of acres planted of those seeds has also increased," said Peter Carstensen, a former Justice Department antitrust lawyer who teaches law at the University of Wisconsin.
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Monsanto faces fight as probes bolster critics
Jeffrey Tomich
ST. LOUIS POST-DISPATCH, 11 March 2010
http://www.stltoday.com/stltoday/business/stories.nsf/0/EBA12CCC5DD50876862576E3000EE2AA?OpenDocument
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As the world's largest seed company, Monsanto Co. has been branded a bully before.
Usually, the company dismisses such criticism as ax-grinding by activists or others who are opposed to its genetically modified seeds.
These days, however, Monsanto has a bigger fight on its hands: a civil antitrust lawsuit by DuPont, the parent of archrival Pioneer Hi-Bred International Inc., and parallel antitrust investigations by the Justice Department as well as several states, including Iowa.
The government investigations are thought to focus on the same claims by DuPont ”” that Creve Coeur-based Monsanto has become a Microsoft-style monopoly, trying to muscle an even larger share of the multibillion-dollar biotech seed business.
"What we're concerned about is either barriers or roadblocks to bringing innovations to the marketplace," Pioneer President Paul E. Schickler said in an interview.
The claims by DuPont and others, which Monsanto strongly denies, will loom large Friday during a daylong gathering of top agriculture regulators and antitrust enforcers. And the stakes are high, not only for Monsanto and other seed companies vying for a bigger piece of the market, but also for farmers and consumers.
The workshop in Ankeny, Iowa, a Des Moines suburb, is the first of five being held nationwide this year. The meetings were organized by the U.S. departments of Justice and Agriculture as fact-finding missions to learn more about issues facing farmers and ranchers.
U.S. Attorney General Eric Holder and Agriculture Secretary Tom Vilsack headline a group of officials, academics and farmers who are scheduled to take part at Friday's event.
Issues span the farm, but Monsanto and its role atop the genetically modified seed business will be a central theme. In particular, discussion will revolve around the company's Roundup Ready herbicide tolerance trait in soybeans, which lets farmers spray for weeds without killing crops.
The Roundup Ready trait wasn't the first biotech trait launched in the United States, but it has been the most successful. Even though Monsanto sells less than a third of soybean seed planted nationwide, the company's Roundup Ready gene is in more than 90 percent of soybean acres. That's because Monsanto licenses the trait to other seed companies that pay a royalty.
DuPont, however, said Monsanto is using its licenses and related marketing practices as a lever to maintain and expand its lead in soybean and corn traits.
In formal comments submitted to the Justice Department, DuPont said Monsanto's licensing terms restrict seed producers from combining their own patented traits with the Roundup Ready genes. That keeps better seeds out of the hands of farmers, the company says.
"The ag biotech trait market is firmly in the grip of a single supplier, acting as a bottleneck to competition and choice," DuPont said.
What's more, the company said Monsanto is trying to coerce independent seed companies and farmers to switch to a new generation of herbicide-resistant soybeans before the patent on the original Roundup Ready soybeans expires in 2014.
Monsanto denies the claims and said it is fully cooperating with the Justice Department inquiry, including handing over millions of pages of documents.
In fact, Monsanto said that its long-standing practice of licensing genetic traits to competitors, including DuPont, has benefited farmers, not hurt them, and that competition in the seed business is robust.
"Be careful of the person shouting from the mountaintop on behalf of people they don't represent," Brett D. Begemann, Monsanto's senior vice president, said in an interview. "I hear the shouting about the bully we are to the seed companies, but I go to all of the licensing meetings, I go to (industry) events, and I'm sure not treated that way."
The company insists its spat with DuPont boils down to a contract dispute ”” one settled in January when a federal judge in St. Louis ruled that DuPont violated a licensing agreement by combining, or "stacking," its herbicide-resistance gene with Monsanto's Roundup Ready gene.
PRICING POWER
But DuPont isn't alone in its criticism of Monsanto. Other groups also have declared Monsanto a monopoly in biotech traits.
The American Antitrust Institute, an advocacy group that has long been critical of consolidation in the seed business, published a white paper in October that concluded as much. The paper, which Monsanto disputes, has been referred to by one Wall Street analyst as a potential "blueprint for a federal antitrust case" against the company.
One example of the impact of Monsanto's monopoly power is in the rising price of seed, according to the institute and others.
According to the USDA's National Agricultural Statistics Service, biotech soybean seeds have more than doubled in price from $23.90 to $49.60 a bushel from 2001 to 2009. And the price increase over that span reflects increasing royalties paid to Monsanto for use of its Roundup Ready trait, critics say.
Monsanto has increased what it charges for the Roundup Ready trait in soybeans from $6.50 per bag in 2000 to $17.50 per bag, according to a December report published by the Farmer to Farmer Campaign on Genetic Engineering.
"The portion of the price of soybeans that Monsanto is taking has gone up precipitously even as the amount of acres planted of those seeds has also increased," said Peter Carstensen, a former Justice Department antitrust lawyer who teaches law at the University of Wisconsin.
While farmers grumble about price when they're purchasing seed, they will only pay for seed or genetic traits if they get results, Monsanto CEO Hugh Grant said.
The same will hold true in a few years when the patent on Roundup Ready soybeans expires in 2014, opening the door for generic competition, he said.
"When you look at this business in the spring of 2015, if you have a bucket full of soil and a handful of seed, you're a generic manufacturer," Grant said.
Schickler sees it another way. He said Pioneer and other trait developers and seed companies remain blocked from being able to fairly compete for growers ”” a reason why government intervention is urgently needed.
"We've got to make sure there is an incentive to invest in the research so that you can bring those products to the marketplace as quickly and effectively as possible," he said. "Then customers have choice."