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| AP: Monsanto contracts are squeezing competitors |
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ST. LOUIS, Mo. (AP) — Confidential contracts detailing Monsanto Co.’s business practices reveal how the world’s biggest seed developer is squeezing competitors, controlling smaller seed companies and protecting its dominance over the multibillion-dollar market for genetically altered crops, an Associated Press investigation has found.
With Monsanto’s patented genes being inserted into roughly 95 percent of all soybeans and 80 percent of all corn grown in the United States, the company also is using its wide reach to control the ability of new biotech firms to get wide distribution for their products, according to a review of several Monsanto licensing agreements and dozens of interviews with seed industry participants, agriculture and legal experts.
Monsanto’s methods are spelled out in a series of confidential commercial licensing agreements obtained by the AP. The contracts, as long as 30 pages, include basic terms for the selling of engineered crops resistant to Monsanto’s Roundup herbicide, along with shorter supplementary agreements that address new Monsanto traits or other contract amendments.
The company has used the agreements to spread its technology, giving some 200 smaller companies the right to insert Monsanto’s genes in their separate strains of corn and soybean plants. But, the AP found, access to Monsanto’s genes comes at a cost, and with plenty of strings attached.
For example, one contract provision bans independent companies from breeding plants that contain both Monsanto’s genes and the genes of any of its competitors, unless Monsanto gives prior written permission – giving Monsanto the ability to effectively lock out competitors from inserting their patented traits into the vast share of U.S. crops that already contain Monsanto’s genes.
Monsanto’s business strategies and licensing agreements are being investigated by the U.S. Department of Justice and at least two state attorneys general, who are trying to determine if the practices violate U.S. antitrust laws. The practices also are at the heart of civil antitrust suits filed against Monsanto by its competitors, including a 2004 suit filed by Syngenta AG that was settled with an agreement, and ongoing litigation filed this summer by DuPont in response to a Monsanto lawsuit.
The suburban St. Louis-based agricultural giant said it’s done nothing wrong.
“We do not believe there is any merit to allegations about our licensing agreement or the terms within,” said Monsanto spokesman Lee Quarles.
He said he couldn’t comment on many specific provisions of the agreements because they are confidential and the subject of ongoing litigation.
“Our approach to licensing (with) many companies is pro-competitive and has enabled literally hundreds of seed companies, including all of our major direct competitors, to offer thousands of new seed products to farmers,” he said.
The benefit of Monsanto’s technology for farmers has been undeniable, but some of its major competitors and smaller seed firms claim the company is using strong-arm tactics to further its control.
“We now believe that Monsanto has control over as much as 90 percent of (seed genetics). This level of control is almost unbelievable,” said Neil Harl, agricultural economist at Iowa State University who has studied the seed industry for decades.
“The upshot of that is that it’s tightening Monsanto’s control, and makes it possible for them to increase their prices long-term. And we’ve seen this happening the last five years, and the end is not in sight.”
At issue is how much power one company can have over seeds, the foundation of the world’s food supply. Without stiff competition, Monsanto could raise its seed prices at will, which in turn could raise the cost of everything from animal feed to wheat, bread and cookies.
The price of seeds is already rising. Monsanto increased some corn seed prices last year by 25 percent, with an additional 7 percent hike planned for corn seeds in 2010. Monsanto brand soybean seeds climbed 28 percent last year and will be flat or up 6 percent in 2010, said company spokeswoman Kelli Powers.
Monsanto’s broad use of licensing agreements has made its biotech traits among the most widely and rapidly adopted technologies in farming history. These days, when farmers buy bags of seed with obscure brand names like AgVenture or M-Pride Genetics, they are paying for Monsanto’s licensed products.
One of the numerous provisions in the licensing agreements is a ban on mixing genes, or “stacking,” that enhance Monsanto’s power. One contract provision likely helped Monsanto buy 24 independent seed companies throughout the U.S. Farm Belt over the last few years: that corn seed agreement says if a smaller company changes ownership, its inventory with Monsanto’s traits “shall be destroyed immediately.”
Quarles, however, said on Dec. 13 he wasn’t familiar with that older agreement, obtained by the AP, but said “as I understand it,” Monsanto includes provisions in all its contracts that allow companies to sell out their inventory if ownership changes, rather than force the firms to destroy the inventory immediately.
Another provision from contracts earlier this decade – regarding rebates – also helps explain Monsanto’s rapid growth as it rolled out new products. One contract gave an independent seed company deep discounts if the company ensured that Monsanto’s products would make up 70 percent of its total corn seed inventory. In its 2004 lawsuit, Syngenta called the discounts part of Monsanto’s “scorched earth campaign” to keep Syngenta’s new traits out of the market.
Quarles said the discounts were used to entice seed companies to carry Monsanto products when the technology was new. Now that the products are widespread, Monsanto has discontinued the discounts, he said.
The Monsanto contracts reviewed by the AP prohibit seed companies from discussing terms, and Monsanto has the right to cancel deals and wipe out the inventory of a business if the confidentiality clauses are violated.
Independent seed company owners could drop their contracts with Monsanto and return to selling conventional seed, but they say it could be financially ruinous. Monsanto’s Roundup Ready gene has become the industry standard over the last decade, and small companies fear losing customers if they drop it.
It also can take years of breeding and investment to mix Monsanto’s genes into a seed company’s product line, so dropping the genes can be costly.
Monsanto acknowledged that U.S. Department of Justice lawyers are seeking documents and interviewing company employees about its marketing practices. The Justice Department wouldn’t comment.
A spokesman for Iowa Attorney General Tom Miller said the office is examining possible antitrust violations. Additionally, two sources familiar with an investigation in Texas said state Attorney General Greg Abbott’s office is considering the same issues.
States have the authority to enforce federal antitrust law, and attorneys general are often involved in such cases. |
| 12/23/2009 |
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