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Bayer Tightens Control Over the World’s Food Supply

Bayer recently succeeded in a US$ 66 billion takeover bid of Monsanto—the biggest deal this year. While the public wants competitive prices, innovation and choice, these mergers block all three.

By Carin Smaller on September 23, 2016

To many people, the German pharmaceutical company, Bayer, is a household name for medicines (they invented Aspirin, for example). It is less well known for the chemicals it produces to make pesticides, herbicides and insecticides.

Last week, Bayer, succeeded in a US$ 66 billion takeover bid of Monsanto—the biggest deal this year. According to reports, it is an unsolicited takeover, in the face of falling profits. Monsanto is the world’s largest seed company, controlling 23 percent of the global seed market.

This is the latest in a series of mergers and acquisitions of the major chemical, seed and fertilizer companies that are transforming the world’s food supply. Earlier this year, ChemChina, one of China’s largest state-run chemical companies acquired the Swiss agribusiness, Syngenta, for US$43 billion. Dupont and the Dow Chemical Company agreed to a merger at the end of 2015. And this month, two major Canadian fertilizer companies, Potash and Agrium, agreed to a merger.

These deals are significant for four reasons. First, they raise serious questions about anti-competitive and anti-trust practices. Fewer companies controlling an ever-growing share of the agricultural inputs market undermines competition and can thwart innovation. For example, the Bayer takeover of Monsanto merges a chemical giant with a seed giant and leaves the control of the world’s food supply in too few hands. The merger also links two key parts of agricultural production, reducing competition in the food chain. Bayer is now expected to control 29 per cent of the global seed market and 24 per cent of the global pesticide market. The Canadian fertilizer merger will allow the new company to control two-thirds of North America’s potash capacity and a third of phosphate and nitrogen capacity. The deals are currently being scrutinised by anti-trust boards and regulatory authorities in Europe and North America, which may reject the deals.

Second, there are serious concerns about increased farmer dependency on a smaller number of suppliers, and higher prices due to weak competition. Jim Benham, the president of the Indiana Farmers Union told the New York Times the “merger is going to hurt the farmer. The more consolidation we have on our inputs, the worse it gets.” And Professor Neil Harl, retired professor of the University of Iowa told ABC, “if a supplier of seeds wants to up the price all they need to do is just raise the price and if there’s no other reasonable substitutes then they’ll probably succeed.”

Third, the deal increases the power of an even smaller group of companies over the intellectual property, and patents that already lock up much of the world’s commercially produced food supply. The patents weaken farmers’ ability to use and reuse their own seeds. Shrinking seed diversity also threatens biodiversity, which is important to enable plants and crops to withstand diseases, pests and other threats, such as climate change.

Finally, there are ongoing food health and safety concerns related to the seeds and chemicals produced by these companies. Increasing their market share increases their power over the market and over the producers and consumers that use their products. In 2015, the World Health Organisation declared glyphosate, the active ingredient in Monsanto’s herbicide, Roundup, as "probably carcinogenic in humans," and its use is currently being assessed in the EU. A Bayer chemical, neonicotinoid, that is used in pesticides, has been linked to the harm to bee populations in Europe, and has recently been banned. And, while the evidence of harm to human health caused by GMOs is inconclusive, their use remains highly controversial in Europe, where a number of bans are in place. The issues will likely become inflamed now that a European company owns the largest GMO seed producer.

Is there anything to gain from the recent wave of mergers other than the potential of increased profits? The public wants competitive prices, innovation and choice. These mergers block all three. It’s time for a global discussion on how to protect the positive dimensions of competition while disciplining anti-competitive behavior. This includes providing open and universal access to information, working against collusion among companies, and providing economically disempowered groups (including farm workers and smallholder producers) with the tools and information they need to redress unequal market power.

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