Antitrust Probe of Monsanto May Turn on Anti-Stacking Provisions
24 Corporate Crime Reporter 19, May 10, 2010

The Justice Department’s antitrust probe of Monsanto may turn on something called stacking.

That’s according to Diana Moss of the American Antitrust Institute.

In October 2009, Moss wrote an white paper – Transgenic Seed Platforms: Competition Between a Rock and a Hard Place?

She wrote a second white paper last month titled – Transgenic Seed: The High Technology Test of Antitrust?

Moss says that Monsanto is a monopolist in the transgenic seed market.

Transgenic seeds are seeds that have been genetically altered to make them herbicide tolerant and insect resistant.

Transgenic seeds have come to dominate the market since they were introduced in the mid-1990s.

And Monsanto is the market monopolist.

Monsanto’s competitors – DuPont. Syngenta. Dow. Bayer. BASF.

Moss says that Monsanto dominates the market – controlling 75 percent of the transgenic corn market, 95 percent of soybeans and 97 percent of cotton.

Monsanto says that it licenses its transgenic seed technology broadly.

But the license comes with anti-stacking provisions, Moss says.

“Monsanto claims it licenses its technology broadly,” Moss told Corporate Crime Reporter in an interview last week. “So, Monsanto will say – here are our genetic traits. But those licenses are often restrictive. They do not allow seed companies to stack those traits with other Monsanto traits.”

“So, stacking is the crux of the problem. You have the appearance of broad licensing by Monsanto.”

“But in the process of doing that they have imposed anti-stacking restrictions that prevent or make it very difficult for rivals to stack traits with Monsanto traits.”

“Well, if you can’t stack, then you are sort of dead in the water as a competitor. It’s hard to bring new products to market if you can’t stack. Therein lies the issue and the problem.”

So, will the Justice Department’s investigation turn on the anti-stacking provisions of Monsanto licenses?

“That’s a good bet,” Moss said. “If you troll back through some of the Department’s history dealing with seed mergers, you uncover some pretty important clues.”

“In 2007, Monsanto acquired Delta & Pine Land. That created a big cotton platform of genetic traits and treated seed. That was a big vertical platform merger. The remedies that the Department extracted focused on intellectual property – the patent protection technologies.”

“And the Department required Monsanto to remove the anti-stacking provisions in their licenses.”

“But they understood that if that merger were to go through, a remedy was necessary. And the remedy was focused on providing access to Monsanto’s competitors.”

“And the way they did that was to force Monsanto to remove the anti-stacking provision.”

“This is a road map for antitrust enforcement in this particular area.”

“In another merger, Monsanto acquired DeKalb in the late 1990s. In that case, the Department also imposed remedies that went to the intellectual property.”

“So, those two big merger cases focused on the intellectual property.”

Monsanto responded to Moss with a paper of its own – written in part by two Arnold & Porter partners – Jonathan Gleklen and Kenneth Letzler.

Gleklen and Letzler say that the Moss paper was “sponsored” by DuPont– one of Monsanto’s major competitors.

Moss says that yes, AAI did receive a contribution from DuPont.

How much?

“That I don’t know,” Moss says. “It was not particularly large. All of our contributors are listed on our web site.”

“AAI’s whole history has been that of an independent observer and watchdog. We have an advisory board. We are objective. We perform independent analysis. That’s our bread and butter.”

“Contributions to AAI come from a wide variety of sources and are not at all tied to the positions we take.”

“If we were to take positions based on donations as a quid pro quo, we would lose our support. We would lose our advisory board members. We would not be viewed as independent or objective.”

“That would be the end. And that is obviously not in our interest. Our interest is to continue to be objective and to help consumers and media understand these issues.”

“Any contribution that comes in to AAI goes to the general treasury. It’s not tagged or line itemed for any particular project.”

“We devote resources to areas where we believe there is a genuine issue or problem of competition. DuPont promotes AAI’s core mission of promoting fair competition and consumer protection.”

[For a complete transcript of the Interview with Diana Moss, see 24 Corporate Crime Reporter 19(11), print editon only.]


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