Antitrust or Good Business?

Whether the U.S. Justice Department approves Monsanto Co.'s plan to purchase Delta and Pine Land Co. hinges on seed market competition and political climate.

Published on: Aug 22, 2006

When the Justice Department sits down to decide whether Monsanto Co.'s proposed purchase of Delta and Pine Land Co. violates federal antitrust law, the legal issue is whether the level of market concentration after the acquisition exceeds the government's merger guidelines.

 

The mitigating factor is that the political climate is such that mergers are more likely to be looked on favorably, regardless of those guidelines, says Jim Ponsoldt, a law professor at the University of Georgia who specializes in antitrust.

 

"The technical legal response is that this acquisition, based upon market shares you provided, would almost definitely have violated the Clayton Antitrust Act as historically applied," Ponsoldt says, following a brief rundown of market share percentages and an overview of the history of the case. "The question is: Has the market changed so much that there's enough competition - or still would be - after the merger?"

 

What's certainly different today versus eight years ago when such a merger first was proposed is that similar mergers have been approved by the justice department in other industries, Ponsoldt says.

 

"It's ultimately a political decision. The government has been allowing potentially anticompetitive mergers and consolidations to occur," he says. "Antitrust is the means to police the free market. The government simply hasn't been doing its job in policing the market. Antitrust doctrine initially was created and popularized primarily by Republican public officials in the 19th and early 20th centuries. That's been forgotten."

 

This time around, Monsanto may even get to keep Stoneville Seed Co. - even though company officials announced they will divest themselves of the company, which they sold in 2002 and then regained when they bought Emergent Genetics a year ago.

 

"By buying DPL, Monsanto will acquire one of only two other genetic biotech alternatives to Monsanto's line. That's a huge problem for growers," says Steve Ford, an agricultural economist who farms in north Alabama. "I think we'll see less choice among technology packages."

 

Auburn Extension economist Bob Goodman, however, sees more competition in the seed market today than eight years ago and he's less concerned about the market concentration such a merger would give Monsanto.

 

"Delta Pine certainly still is the industry leader, but there are some other companies with good varieties out there," Goodman says. "The other seed companies are starting to get some really good varieties."

 

Bottom line, Goodman says, "There is competition. There is viable competition. And the viable competition is really starting to come on well."