Global potash producers have acted in a coordinated manner, the global fertilizer industry has a history of cartels dating back to the 1800s, and the current structure of the industry is conducive to a tacit or overt global super cartel.
Yet the antitrust enforcement agencies in the United States have largely ignored repeated requests to investigate the fertilizer industry and avoided enforcement action against potentially collusive behavior by export associations.
This is particularly egregious in light of the fact that damages due to higher potash prices charged to domestic buyers amounts to several billion dollars over the past five years.
Those are the key conclusions of a report issued by the American Antitrust Institute titled — The Fertilizer Oligopoly: The Case for Global Antitrust Enforcement.
The report was written by AAI’s Diana Moss and Auburn University Professor C. Robert Taylor.
The global industry is dominated by two government-sanctioned export associations in the U.S. (PhosChem) and Canada (Canpotex), a privately traded monopoly sanctioned and likely controlled by the Moroccan government (Office Chérifien des Phosphates (OCP)), and a cabal of three potash companies in the former Soviet Union (Belaruskali, Silvinit, and Uralkali, operating through their marketing cartel, Belarusian Potash Company (BPC)).
The report finds that the underlying structure of the current global industry remains conducive to anticompetitive coordination – a landscape that undoubtedly prompted Wall Street Journal commentators to observe that fertilizer markets are so manipulated, “they might make a Saudi prince blush.”
“Whether a reluctance to pursue enforcement actions against fertilizer producers or cartels is due to international political sensitivities, the immense economic and political power of dominant fertilizer producers, or insufficient resources for antitrust investigations, is unclear,” Moss and Taylor write. “But it strongly begs the question: Have the transnational fertilizer corporations become too big to prosecute?”
The report calls for a strong coordinated antitrust enforcement response against the industry.
“Civil and criminal penalties should be sufficiently high to deter unfair and anticompetitive behavior in international as well as domestic markets,” Moss and Taylor write. “Antitrust penalties in the U.S. and abroad are not sufficiently high to deter formation of new cartels. Rather, fines are simply a cost of doing business. Considering the long history of international fertilizer cartels, legislation should consider establishing a corporate equivalent of ‘repeat offender’ status as well as civil fines and criminal penalties for executives that are sufficiently large to deter anticompetitive behavior.”
“Because action by any single competition or other governmental authority may be inadequate to restore competition in fertilizer markets, a coordinated, concerted approach to enforcement will be required at both national and international levels,” Moss and Taylor write. “Such an approach is more likely to deal with the reality that fertilizer producers have a history and corporate sociology of collusion and thus no longer need to explicitly communicate to continue cartel behavior.”