Competition & Regulation

Mega-Mergers in the U.S. Seed and Agrochemical Sector

It is widely recognized that the increase in concentration in the cottonseed market resulting from the proposed Monsanto-Bayer merger violates the Department of Justice’s recently revised Horizontal Merger Guidelines by a wide, historically unprecedented margin. The companies argue that the economic efficiency resulting from the vertical integration of traits, seeds and agrochemicals offsets the harms to competition. This paper shows that the immense increase in vertical leverage and the ability to coordinate behaviors across multiple crops including cotton, corn, soybeans and canola magnifies the market power of the small number of firms that dominate the global field crop sector. The merger represents a dramatic increase in the market power of a sector that is already a “highly concentrated, vertically integrated, tight oligopoly on steroids” that raises prices, distorts innovation, and squeezes farmers and consumers. The only answer to this merger that makes economic sense is a loud and clear “No!”

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