Monsanto-Bayer : one fusion, many questions

Banner against Monsanto during a protest in Honk (USA) in 2010. CC BY Lisa @ Sierra Tierra.

“Farmers must have the choice”. This sentence stated by the European commissioner for competition Margrethe Vestager says a lot about the concerns of the European Union. In the heart of the debate : the Monsanto-Bayer merger and its possible consequences on the farmer’s free-will.

With a transaction of 59 billion of euros, the German drug and chemical pesticides company Bayer wants to take over the American leader of seeds production Monsanto. Before becoming the colossus of the agricultural market, the merger has to be allowed by the European authorities.

“We never know what the authorities can demand in order to accept this kind of deal”, competition law and economics researcher, Frederic Marty said. The commission for competition has 25 days to examine the facts and decide whether monopoly in the field would be introduced and what the consequences would be for farmers. For Marty, the fusion presents two kinds of risks.

First, from a politics point of view, farmers and consumers can be worried. Indeed, Bayer could become one of the biggest German companies and a power in a national economy often goes hand in hand with an important lobbying influence. More than ever, farmers can have to fight against Goliath to keep the control of their own cultures.

“This is the major risk with a national economic ‘champion’. It is always complicated to reduce its economic power,” explains Marty. Further fraught discussions on EU legislation about the GMO crops are highly possible consequences of this scheme. Indeed, Monsanto is one of the most ardent defender of the use of chemistry in agriculture.

The case requires essential supervision skills. The future of a very important and protected profession in Europe is in stake, according to several farmer trade unions. By expressing her preoccupation for the free-will of the farmers, Margrethe Vestager confirms the European commitment to agriculture. She also reminds the companies about a major economic principle. It stipulates that each agent must have alternatives. If the European Union is defending this rule it is before everything for the consumers, they must be able to refuse GMO and choose pesticide free vegetables and fruits.

When a group owns the main part of the market, it can increase the prices and force its products, specific seeds, fertilizers or pesticides. The market is more and more concentrated, six companies shared the market last year. Now, the “big six” are about to become the “big four”.

According to Marty, an oligopoly today has great chance to become a monopoly after, especially when the entry cost is expensive and difficult. And in the chemical market, the patent system makes this entry complicated. If Monsanto-Bayer possesses most of these patents, it will be almost impossible for a new company to take part in this market.

In this way, one of the solutions can be to decree Monsanto-Bayer to give up some of its patents. An agreement on conditions which can be the most considered option for the European commission for competition. The institution can also demand to Monsanto-Bayer a commitment to not enter on specific market before a predetermined time.
In light of the precedent cases and the concerns, it is easy to imagine that the European commission for competition will wait and ask for an extensive examination.

Indeed, the last fusions between Dow Chemical and Dupont on one side and ChemChina and Syngenta on the other side are still on the table…

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