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The Bayer-Monsanto merger kills innovation and must be stopped

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While media attention has been focused on the Trump administration’s battle with AT&T over its proposed acquisition of Time Warner, coming in under the radar is an even more important, if less glamorous, combination that could reshape the world’s agricultural markets: Bayer’s proposal to acquire Monsanto. For anyone who, like myself, is schooled in the antitrust jurisprudence of Judge Robert Bork, that merger is far more troubling and without major changes should not be allowed to go forward.

Beyond knowing that Bayer makes aspirin and Monsanto does something with genetically modified organisms (GMOs), few Americans are familiar with either company. In fact, both are leaders in agricultural technology. They are path breakers in the advanced chemistry of crop protection products, such as herbicides and other pesticides, and the genetic engineering of seeds designed to work with those products. Each has bought or partnered with major pioneers in big data and the high technology applications of precision agriculture, which will allow farmers to optimize yields and promise a step change in productivity similar to the first Green Revolution.

{mosads}There is a close parallel between the proposed Bayer-Monsanto merger and the 1998 antitrust suit against Microsoft, a case in which retired Judge Bork joined as an advisor to the plaintiffs, much to the surprise of his fellow conservatives. But while Bork believed that government intervention often does more harm than good, he also believed the overriding principle of antitrust is to protect consumers, and that means in some cases the government must say “no.”

Post merger, there would be only three major competitive companies in this space, even with a sell-off of some assets. “Baysanto,” as the merger is sometimes called, would be massively dominant across the board. Such “horizontal mergers” between companies with directly competing products are exactly the kind that Bork believed demand extra scrutiny. They potentially diminish competition, allowing the newly dominant firm to engage in predatory and other actions that harm consumers.

In Bork’s analysis, Microsoft, which dominated computer software, was attempting to “bundle” its internet browser with other products to discourage use of alternative browsers. The browser was more than just another device. It was the doorway to the internet, which was then exploding and today creates most of the value for computers, iPhones, and other gadgets we all use. Had Microsoft captured and controlled that connection, the internet would look very different today and likely would be of considerably less value to consumers.

Similarly, a new “Baysanto” would have a dominant “platform” in seeds and crop protection. As with the Microsoft browser and the internet, its massive lead in digital farming would allow it to control future developments on the farm. A Google-sized storehouse of data covering every square inch of the farm would make it an indispensable partner to every farmer in America. It would give the company power to require farmers to plant only its seeds designed to use only its crop protection. Like Microsoft in the 1990s, Monsanto is well known for its aggressiveness in “bundling” by leveraging its dominance in one product line to force purchases in another.

But the antitrust issues don’t stop there. Computers and the internet are among the least regulated spaces in our economy. GMOs and crop protection are among the most. A massive, highly burdensome regulatory regime means it can take more than 10 years and more than $200 million to bring a new product to market. Much innovation never sees the light of day because the barriers to entry are so massive. We cannot pretend that government intervention hasn’t already tightly penned in this market. Taking a hands-off approach now would simply allow the biggest dog to dominate the rest.

Agriculture is the heart of our heartland’s economy. It creates millions of jobs that can’t be outsourced overseas and is the only U.S. industry that has run a trade surplus for 60 years. We lead the world because American farmers have always been the earliest and most enthusiastic adopters of technology, from the cotton gin to the combine harvester to recombinant DNA. Regions such as Europe, which is a net importer of food, are increasingly turning their backs on technology. That gives us a competitive advantage, but it also means that a decline in agricultural innovation will sap our greatest strength and hurt us worst of all.

One of America’s strongest industries stands on the brink of a new internet-style leap in productivity. Late in his illustrious career, Judge Robert Bork helped save the nascent internet from being strangled in its crib. Properly understanding his views on antitrust may help us preserve the full promise of this new digital age in agriculture.

James C. Miller III served as chairman of the U.S. Federal Trade Commission under under President Reagan from 1981 to 1985.

Tags Agriculture antitrust bayer mergers Monsanto Technology United States

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