Six farmers from the U.S. and France, representing farmers worldwide, have launched a major anti-trust lawsuit against the Monsanto Corp. and nine other corporations that they allege conspired to fix prices of genetically modified crops.
The farmers -- Bruce Higginbottom, Terre Haute, Indiana; C-K Farms, Clear Lake, Iowa; George and Peggy Naylor, Churdan, Iowa, and Patrick de Kochko, Boussac, France, filed a class action complaint last month in U.S. District Court in the District of Columbia.
They allege that Monsanto and others:
• Formed a cartel through which it attempted to monopolize the genetically engineered corn and soybean seed markets;
• Conspired to unreasonably restrain trade in the genetically engineered corn and soybean seed markets;
• Conspired to fix the prices of genetically engineered corn and soybean seeds;
• Rushed genetically engineered seeds to market without adequate testing for risks to human health and the environment from such seeds and crops;
In 1996, they allege, Monsanto devised an anticompetitive scheme to control prices and restrain trade in the genetically corn and soybean seed markets by misusing its intellectual property rights over Yieldgard and Roundup Ready gene technologies;
At the same time Monsanto devised its licensing scheme, the suit alleges, Monsanto and other major chemical companies commenced a swift series of mergers and acquisitions of competing seed and gene technology companies, which resulted in concentrating virtually all of the genetically engineered production for corn and soybean seeds into the hands of Monsanto and a handful of others, and
Since that time, the lawsuit alleges, Monsanto and its co-conspirators entered into uniform or near-uniform licensing agreements for Monsanto's technology, with the knowledge and intent that the terms of those agreements were being imposed and effected by competitor-conspirators across the entire genetically engineered corn and soybean seed industry.
Monsanto's "unlawful conduct in aggregating the power to control all aspects of the production of corn and soy appear to be motivated by its desire to control the basic means of production of the global food supply" the suit charges.
The lawsuit also notes that in support of its attempt to monopolize the genetically engineered corn and soybean seed markets and conspiracy to restrain trade therein, Monsanto's cartel also:
1) exerted influence over the non-genetically engineered corn and soybean seed markets;
2) pursued legal actions, and engaged in other intimidating conduct, against farmers who are claimed to have violated the Technology User Agreement;
3) made deceptive statements to make genetically engineered seeds appear desirable to farmers making purchasing decisions; and
4) failed to carry out adequate human health and environmental safety testing pre- or post-marketing.
In the international marketplace, Monsanto and its alleged co-conspirators engaged in conduct paralleling their conduct in the United States markets, including, 1) attempting to monopolize the international genetically engineered corn and soybean seed markets; 2) acting in unreasonable restraint of trade in the international genetically engineered corn and soybean seed markets; 3) consolidating control of the international genetically engineered corn and soybean seed markets into the hands of the cartel through mergers and acquisitions for the purpose of restraining trade; and 4) engaging in the international imposition of excessive "technology fees" upon farmers.
The suit notes that "members of the cartel have even threatened to withhold non-genetically engineered seeds from farmers in countries where authorities that refuse to accept the cartel's genetic engineering technology, and have also promoted certain insect resistant genetically engineered seeds in farming regions where there is no need for that particular insect resistance."
In launching their suit the farmers are seeking treble damages, compensatory and punitive damages and injunctive relief under the antitrust laws of the United States, the common law, and customary international law, and are demanding a jury trial.
The suit was formulated by the law firm of Cohen Milstein Hausfeld & Toll, assisted by nine other law firms and the Foundation on Economic Trends and supported by the National Family Farm Coalition.
Corporations named as co-conspirators include:
• DELTA AND PINE LAND COMPANY, a seed company that had agreed to merge with Monsanto, pending approval of the United States Department of Justice.
• E.I. du PONT de NEMOURS and CO. ("DuPont"), a global chemical, materials, and energy company with total sales of approximately $46 billion in 1997. DuPont's Agricultural Products segment sells herbicides, pesticides, and fungicides.
• PIONEER HI-BRED INTERNATIONAL, INC., a wholly owned and controlled subsidiary or division of DuPont. In 1998, Pioneer alone controlled an estimated 42 percent of the corn seed market, and an estimated 16 percent of the soybean seed market, in the United States.
• DOW CHEMICAL COMPANY, a large, diversified worldwide producer and supplier of chemicals, plastics, and agricultural products. Dow Chemical participates in the genetically engineered corn and soybean markets through its subsidiaries identified below.
• MYCOGEN CORPORATION and MYCOGEN PLANT SCIENCES, INC., a wholly-owned and controlled subsidiary or division of Dow Chemical. Mycogen participates in the seed industry in part through its wholly-owned subsidiary corporation, AGRIGENETICS, INC., MYCOGEN SEEDS ("Agrigenetics"). Mycogen estimates that Agrigenetics ranks fourth in the United States in the sale of seed corn.
• NOVARTIS INTERNATIONAL, AG, together with its wholly-owned and controlled subsidiary or division NOVARTIS SEEDS, INC., which produces seeds for a variety of crops including corn, sugar beets, and oilseeds. Novartis sells seeds in the United States through its "NK" division, which was formerly an independent seed company known as Northrup King Co. prior to its acquisition.
• ASTRAZENECA, PLC, a food biotechnology company that specializes in corn, wheat, rice, and other crops. ZENECA, INC., is the American arm of AstraZeneca.
• GARST SEED COMPANY, a 50 percent-owned and controlled subsidiary or division of AstraZeneca.
• AGRIPRO SEEDS, INC., a wholly owned and controlled subsidiary or division of AstraZeneca.
Characterizing the six farmers and the NFFC's anti-trust lawsuit against Monsanto as "historic," NFFC President Bill Christison noted that "as a Missouri family farmer I can tell you that the farmers and consumers of the world have been sold a bill of goods because genetically engineered organisms do not perform as advertised.
"The truth is, genetically engineered crops cost more and yield less. There are four areas of concern farmers and consumers have about genetically engineered crops. They include the health, the environment, social and economic aspects," he added.
Christison pointed out that while genetic engineering is a relatively new technology in the countryside, groups like the NFFC have been working on its issues for years. On November 30, over 30 family farm and rural organizations joined together to release a Farmer's Declaration on Genetic Engineering. In Seattle during the recent World Trade Organization ministerial meetings, the issue of genetic engineering was a major focus of discussion within the Via Campesina, an international network of family farm and peasant organizations of which the NFFC is a member.
In their suit the farmers and NFFC charge that Monsanto and other "life science" companies have rushed genetically engineered crops, like corn and soybeans, to market without proper testing to determine long-term effects of their new creations.
Corn and soybeans are two staple food crops which are essential to the United States and global food supply. In 1998, the United States market for soybeans was estimated at $17.7 billion. In 1999, the United States market for corn was estimated at $20 billion. Yet, in 1998 alone, the European Union reduced its import of U.S. corn from 70 million bushels to three million bushels, resulting in a loss of export income to U.S. farmers of an estimated $200 million.
"Contrary to the USDA's position that genetic engineering is necessary to feed the world, today we have a world that is awash in surplus grain resulting in record low farm prices," he added.
"Today, Monsanto and its co-conspirators have a monopoly over our food system. Their operations threatens world food security. This litigation exposes their practices. A victory in this lawsuit will allow the family farmers of the world to retain ownership of their seeds, their farms, and produce a food supply that is safe, adequate, and reasonably priced for all consumers."
The NFFC, in announcing the lawsuit, also welcomes and is urging other farmers and farm organizations to join in the lawsuit. Interested parties may contact the NFFC in Washington, D.C. at 1-800-639-3276.
The NFFC is a membership based organization comprised of 32 family farm and rural advocacy organizations in 30 states and was founded in 1986. NFFC works on issues to ensure the survival of family farmers and to promote the increased economic viability of our nation's rural communities.
Only days after the filing of the lawsuit Monsanto announced that it and the U.S.-Swedish drug group Pharmacia & Upjohn Inc. have agreed to merge, forming a company with a market capitalization of more than $50 billion.
Yet-to-be-named, the new corporate entity would be the 11th largest pharmaceutical firm in the world, with $10 billion in prescription drug sales and with the inclusion of revenues from Monsanto's recently poorly performing agribusiness unit and other products, the combined company would have total sales of about $17 billion. Monsanto and Pharmacia said they expected to achieve annual cost savings of more than $600 million, a portion of which would be reinvested in the company.
The merged companies say that they plan to offer up to 19.9 percent of the agribusiness unit in an initial public offering (IPO), and would operate it as a separate legal entity with its own stock and board of directors.
In a telephone interview with Reuters' Emily Kaiser, Pharmacia's CEO Fred Hassan said the combined company was committed to the agribusiness unit despite moves by other drug firms to exit similar businesses.
"We have looked at this business," he said. "It is a technology-intensive business (with a) very good research pipeline. We want to run it as an autonomous subsidiary through this partial IPO because we believe that a lot of value can be unlocked in this great business."
Monsanto Chairman Robert Shapiro will become chairman of the new company; however he plans to step aside in 18 months at which time Hassan would then assume the role of chairman. Pharmacia shareholders will be allowed to exchange each of their shares for 1.19 shares of the combined company, while each of Monsanto shares will be worth one share. Monsanto shareholders will own 51 percent of the combined company.
Shortly after the news of the proposed merger became public Monsanto Co. announced that it was withdrawing its application for a proposed merger with Delta & Pine Land Co. citing delays in an antitrust review and demands by the U.S. Justice Department.
In a press release the St. Louis, Missouri-based company said it had been "unable to come to an understanding" with regulators and the Justice Department that would have allowed the merger.
The Delta & Pine Land merger had become the subject of much controversy due to Monsanto's proposed acquisition of the Scott, Mississippi, company which shares a 1998 patent on the terminator gene with the USDA. Delta & Pine Land sells 58 percent of all the seed bought by U.S. cotton farmers.
Steve M. Hawkins, president of Delta & Pine Land, said in an interview with the Wall Street Journal's Scott Kilman that the company will continue its research in what he preferred to call the "technology protection system."
"We think this technology is important," Hawkins said. "It could have applications we don't know about yet."
"Under the terms of the merger agreement, Monsanto is obligated to pay Delta and Pine Land a termination fee of $81 million," the company said in a statement. "In addition, we are evaluating our legal rights and will take all appropriate actions to protect our shareholders."
A. V. Krebs is Director of the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, Washington 98203-0201; email avkrebs@earthlink.net; web site: (www.ea1.com/CARP).