Since before the first World War, the United States has experienced incredible prosperity due to the flourishing results of America’s agriculture industry. However, with such extended success, America has demonstrated a dependence on this sector and its commodities, and it’s only been increasing. Our heavy dependence on agriculture has even gotten to the point where heavy legislation has had to be enacted to make sure the industry and the goods derived from agriculture are protected so consumers never have to face the negative effects of a downfall. While this legislation has allowed increased stability in agribusiness and in the availability of products we rely on, it has given certain corporations, agricultural producers, and their stakeholders unfair advantages over the rights of the consumer and less powerful companies. By allowing these laws and regulations to persist without basic amendments, it has significantly affected the nature of how business is conducted in society.
Arguably, corporate business practice is now conducted in such a way that it violates the three antitrust laws by promoting anti-competitive business practices. The agricultural Corporation of Monsanto, in particular, has specifically configured their company business structure in just a way that they have been able to prosper from certain legislation such as the Capper-Volstead Act even though they are not a cooperative. By doing this through means of mergers and buyouts, the Monsanto Corporation has limited their competition and become a dominate threat in the agribusiness industry. The Federal Trade Commission describes this behavior as anti-competitive business practice, both by horizontal conduct and single firm conduct, and it must be eliminated for the sake of the fair market and the consumers of agricultural products. It is in the Federal Trade Commission and The Justice Department’s Antitrust Division’s best interest to reexamine how the Monsanto really carries out their business and has been gaining unjust advantages though legal loopholes for decades. The formation of the Capper-Volstead Act, and Monsanto’s resulting configuration of their corporation to gain unjust advantages, violates the three main antitrust laws, thus promoting anti-competitive and unethical business practices that are drastically hurting our society.
The first antitrust law was enacted in 1890. Dubbed the Sherman Antitrust Act, this legislation forbids “every contract, combination, or conspiracy in restraint of trade” as well as “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” Not every restraint of trade is prohibited under the Sherman Act, only those that are considered “unreasonable.” The Federal Trade Commission describes unreasonable restraint of trade as attempts to fix prices, divide markets, rig bids, and limit competition. By violating the Sherman Act, individuals and companies are subject to prosecution by the Department of Justice and heavy financial penalties. A corporation found guilty of violating the Sherman Act might be subject to pay $100 million, twice the amount gained from illegal manipulation of their market, or up to twice the money lost by the victims of the crime. It all depends on how bad the “unreasonable” their crimes were. While this sole law did a great job of “preserving free and unfettered competition as the rule of trade” for more than twenty years; during the first World War several challenges were brought against the Sherman Act for not allowing agricultural producers to collectively market their products, especially in such times of significant demand. In order to advocate for their rights and gain government support for agriculture’s relief demands, bipartisan organizations and farm producers coordinated together to establish a Farm Bloc in Congress on May 21, 1921. While this was led by Senator Arthur Capper of Kansas and Representative Andrew Volstead of Minnesota, the American Farm Bureau Federation was instrumental in its passing.
This Farm Bloc was successful in enacting sixty bills to aid the agriculture industry, most significantly the Capper-Volstead Act. This legislation allowed agricultural producers to form cooperatives, which is an “association of producers of agriculture products.” The purpose of the bill was to give these cooperatives an equal advantage against much larger corporations, like the Monsanto Corporation, that are considered “agribusinesses.” By establishing as a cooperative, a company is given certain legal collective bargaining and marketing protections, as well as being exempt from the antitrust laws. As a last resort in making sure that cooperatives are not able to monopolize the United States Secretary of Agriculture was given sole power, on their own discretion, to essentially prevent agriculture associations from gaining too much control in the marketing of their products. This is very significant for several reasons. The purpose of excusing cooperatives from the antitrust laws was so they would be able to collectively compete and join together as a stronger force without inhibition, however with such a grand measure to give these cooperatives an upper hand, the question must be asked. Is it really ethical for our government to institute an entirely new law, all for the sole reason of giving certain companies exemptions from basic laws just in order for those companies to have a mere chance in competing with other, more powerful companies? If the government feels so obligated to legally help and interfere with the advancement of these cooperatives, it would be much easier and argumentatively more logical to limit the expanse and influence of the agribusinesses, giving them both a fair playing field.
Over time the cooperative model of business has become increasingly popular, as the agriculture industry has become aware of the legal protections allowed under the Capper-Volstead Act and its unique ability in helping these companies to achieve their economic goals. What wasn’t expected in the creation of the law, is how corporations such as the Monsanto Corporation specifically, have been able to evade the antitrust laws and gain antitrust immunity even though they do not qualify as a cooperative themselves. Monsanto has achieved this privilege by buying or merging with cooperatives and then subsequently reconfiguring the cooperative’s brand to fall under Monsanto’s agribusiness industry label. Courts have previously decided that cooperatives will not lose their antitrust exemption even if they have a limited number of non-producers, that is individuals not directly involved with the process of the producing, marketing, and supplying the products of the agricultural company. As long as Monsanto maintains their influence while still maintaining this limitation, and so far its unknown if they have, reconfiguring the subsidiary will not lose them the antitrust exemption. While the cooperative alone has immunity and it is still a subsidiary of Monsanto, with enough purchasing, merging, and consolidating Monsanto does, they are likely to receive exemption from all antitrust regulation, regardless if the qualifications stated under the Capper-Volstead Act are met are not.
The second antitrust law is the Clayton Act which was passed in 1914. This law was established to clarify the legality of many of the practices that the Sherman Act left up for question but that obviously posed an antitrust issue. The Clayton Act is most notable for providing more regulation and making comprehensive rules surrounding practices such as mergers, interlocking directorates and even requiring companies to notify the government in very large mergers and acquisitions. An example of this is Bayer pharmaceutical’s proposal to buy the Monsanto Corporation. The government must be made aware of deal of this size, and in some cases even grant their approval before the sale can go through. Even with strict regulation imposed by the antitrust laws the Monsanto Corporation has still been able to prosper and become a threatening force in the industry for decades, making them the dominant force in any business situation.
The third and final main antitrust law is the Federal Trade Commission Act which was also passed in 1914 shortly after the passing of the Clayton Act. This law specifically prohibits “unfair methods of competition as well as unfair and deceptive acts or practices.” The Federal Trade Commission Act (FTC Act) is very similar to the violations expressed in the Sherman Act but is unique for describing additional harmful practices that were not previously written out in 1890.
First of all, the Monsanto Corporation is just that, a corporation. It is important to differentiate between a corporation, conglomerate and cooperative and the different benefits they receive under certain legislation. As an independent legal entity, corporations receive liability protection as well as increased ability to gain profit. When a business is organized as a corporation, the liability is placed on the shareholders while owners still retain a large fraction of the profit, free of tax. Corporations raise greater funds than most other business structures even though they still face heavy regulation, at both the state and federal government level. Conglomerates are another way to structure a business, usually by combining multiple corporations under one corporate parent company. Because conglomerates are multi-industry they are at increased risk for running into problems with the antitrust laws. Take for example one of Monsanto’s top competitors, the chemical company DuPont, which has run into several issues regarding violations with the Sherman Act and has been forced to divest some of their ownings. Arguably, by structuring their company as a corporation that’s only involved in agribusiness, the Monsanto Corporation is a more threatening force toward consumers and smaller agriculture producers.
There are two types of anticompetitive business practice that the Monsanto Corporation does against their competition, but still has managed to evade any repercussions. The first type is called “horizontal conduct” which is simple terms refers to agreements between competitors. The other type is simple monopolization which is known as “single firm conduct.” In terms of horizontal conduct, it is illegal for a corporation to “act together in ways that can limit competition, lead to higher prices, or hinder other businesses from entering the market.” Monsanto’s way of merging with their competition as well as their agreement with Baer pharmaceuticals is a clear example of this anti-competitive behavior. Smaller companies cannot compete and have no other choice but to agree to be bought out by Monsanto while Monsanto is in arrangements to become even larger and more powerful. Publicly, the Monsanto Corporation only claims to own and distribute seeds and crop technology. Their public mission statement is described as “developing products and tools to help farmed around the world grow crops while using energy, water, and land more efficiently. [They] believe innovation has the potential to bring humanity’s needs in balance with the resources of the planet.” The Monsanto Corporation owns at least 2,150 seed products, all with the “intellectual property” patent attached, which are both produced and distributed by either Monsanto directly or the hundreds of seed companies and subsidiaries they own. While this is legal, Monsanto’s influence is so far reaching simply by what they produce. Their seeds and products make up more than 90% of the available market for consumers and other companies to purchase. If a company dominates the seed and genetically engineered crop market and provides the consumer such limited options, Monsanto’s products end up being used for essentially everything. Companies such as Co because Coca-Cola, Kellogg’s and Nestle have no other choice but to get their ingredients from farms and companies that grow seed traced back to Monsanto.
While there is opposition to the claims that Monsanto is engaging in anti-competitive behavior, often the agricultural industry largely supports Monsanto’s way of doing business, claiming that “agriculture mergers won’t hinder consumer choices, they’ll better them.” Robert Young, who has had his fair share of positions through the revolving door of agriculture, states that these large mergers like Bayer/Monsanto will keep chemical and science focused in the United States, ensuring the groundbreaking technology that results will remain as American assets even though Monsanto specifically states on their main website that their products are for worldwide use. He also asserts that the Bayer/Monsanto deal is so large that no one would be able to acquire it without significant review by the United States Department of Justice’s Antitrust Division. However, there is significant evidence the Monsanto Corporation is already too large and has been using the exemptions allowed in the Capper-Volstead Act to become a dominant position in the agribusiness industry as well as excluding competition and any new entry (single frim conduct). This in itself is fine, but because Monsanto’s practices are “unreasonable” it calls for considerable action.
The Monsanto themselves claims not to be a be a monopoly directly on their main website. They state that they are simply providing the seeds and technology farmers need. It’s up to the farmer to decide what to actually purchase and where to plant. However, farmers have gradually lost this choice, as Monsanto and their products have become such a dominant threat on the market (Food, Inc. Documentary.) In 2012, The Justice Department declared they had officially ended the Monsanto probe that had launched in 2010 after following up on claims made by Monsanto’s competitor DuPont about anticompetitive business practices. During their investigation, The United States Justice Department held workshops to examine the validity of Monsanto’s practices, specifically in their seed sector and whether Monsanto had monopolized their Roundup Ready soybean trait by limiting other companies from entering the market. While the investigation was concluded, it would be more beneficial to examine how Monsanto’s configuration of their corporation in order to exploit the benefits allowed by the Capper-Volstead Act, violates all three main antitrust laws, thus promoting anti-competitive and unethical business practices that are drastically hurting our society and how business is carried out.
The Monsanto Corporation is promoting monopolistic behavior and manipulating legislation to their own advantage, the government’s personal interests are getting in the way of consumer rights, and unless something is done to stop them, consumers and the future of the fair market are at risk. The Federal Trade Commission and the United States Judicial Department are obligated to reexamine the practices of the Monsanto Corporation after they specifically configured their business in just a what to exploit the government, even more since the there’s a growing argument that the Capper-Volstead Act is outdated because with the technology and resources the America’s agribusiness has available, there’s no need to legally support and protect them. Additionally, the Monsanto Corporation has violated The Federal Trade Commission Act in that the corporation engages in unfair and deceptive acts toward the consumers and other, weaker companies. By not directly showing all of their seed companies, subsidiaries and alliances the consumers are being deceived by which products, seeds and genetically engineered crops are in fact Monsanto’s. If these products are reaching consumers in all aspects of our life, such as pharmaceuticals, energy sources, and food, its arguable that the American people do not have a choice to select and buy products at their own discretion. Consumers and the farmers growing Monsanto products have lost their most basic right of choice, and this will continue to be taken out right from under our noses unless the Federal Trade Commission and The United States Judicial Department set aside their personal interests and relationships to the Monsanto Corporation and do what they claim their job is, and that’s to stand up for the people, protect consumer rights, and promoting tangible
competition.