Attorney General Eric Holder on Wednesday cautioned farmers and producers at a workshop in D.C. that Justice Department antitrust enforcement in the agriculture industry won’t fix all their troubles.
Holder said the DOJ has heard the concerns of producers and farmers at several previous workshops about competition in the agriculture industry. The Attorney General said he and his colleagues in the Barack Obama administration are working to bring “market transparency, market access and market fairness” to the industry.
“Of course, we know that antitrust enforcement actions will not solve every problem. We know that,” Holder said. “But because of the insights that you have provided … I believe that we will be better prepared to take the steps necessary to ensure a fair and competitive marketplace both for producers as well as consumers.”
The Antitrust Division under Assistant Attorney General Christine Varney has been active in taking on antitrust concerns in the agriculture industry.
Varney has been a constant presence at agriculture workshops across the country about competition issues. And her division has acted on antitrust concerns, taking on companies including dairy giant Dean Foods. The DOJ sued the company in January to undo its 2009 purchase of some milk processing plants in Wisconsin.
The DOJ and Agriculture Department, which hosted the workshop Wednesday, also created a task force in June to review ways to encourage competition in the agriculture industry. Holder said the group created a “simple and accessible online submission process” for members of the agriculture community to submit complaints and concerns about industry and market issues.
The Attorney General said farmers and producers should continue to share their comments with the DOJ.
“I also want to be clear about something: the critical channel of communication that we have opened this past year … will remain open,” Holder said. “And the Departments of Justice and Agriculture will continue working in close coordination to address your concerns and to ensure fairness and opportunity for America’s farmers, producers and agriculture industry.”
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The Justice Department’s top antitrust cop, Christine Varney, joined New York Democratic Sen. Chuck Schumer in upstate New York on Monday to discuss the state of the dairy industry with farmers from the region.
The meeting in Batavia, arranged at Schumer’s request, attracted about 200 people, according to WCBS television.
The session follows a formal workshop in Iowa earlier this month that is part of a series hosted by the DOJ and the Department of Agriculture exploring competition in agricultural industries.
Schumer and other critics have complained that the prices paid to dairy farmers have dropped, but consumers haven’t seen any parallel decrease in the price of milk at the store. Schumer said prices paid to dairy farmers are the lowest in nearly four decades
“For too long farmers have been receiving rock-bottom prices for their product, while prices have not dropped commensurately for consumers at the stores. … It just doesn’t add up,” Schumer said in a statement according to The Buffalo News.
A Catskills-based Web site called the Watershed Post, along with several farmers and farm advocates, blogged about the event. Some highlights:
*Schumer went after Dean Foods, hard.
“Dean Foods is the largest fluid milk buyer in the country. … They dominate too much of the dairy industry, they thwart competition, and both farmers and consumers are hurt. … Dean Foods’ profits went up by a third while milk prices to farmers crashed,” Schumer said, according to Lissa Harris from Watershed Post.
The Justice Department sued Dean Foods in January alleging that the dairy processor’s acquisition of two plants in Wisconsin eliminated competition in the milk industry. In a filing last Thursday, Dean Foods argued that the DOJ did not define the geographic market in its complaint in a manner required by its own guidelines for challenging a merger.
*Varney, who grew up outside Syracuse and went to college in Albany, said she milked cows and is familiar with family farms.
*One speaker said the prices paid to dairy producers dropped more than 30 percent in 2007 and 2008, and 25 percent last year.
*Some speakers stressed the role that large retailers play — saying they pressure the processors, who in turn pressure producers to lower prices.
*One farmer with 1,800 cows lost half a million dollars last year. He said he used to sell to five processors, but they’ve all gone out of business or been sold to Dean Foods.
A local television news station in Rochester reported before the session that some farmers in the area are paid $5 per hundred pounds of milk, while others received more than $16 for the same amount.
“Our problem really is that we are getting a shrinking dollar … but the consumer is not seeing a lower price,” one farmer told the station, WHAM.
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After hearing from seed manufacturers and hog producers in Ankeny, Iowa, last week, Assistant Attorney General Christine Varney will meet with another agricultural group seeking her ear: New York’s dairy farmers.
According to Sen. Chuck Schumer (D-N.Y.), the antitrust chief will be traveling to upstate New York later this month to talk about anti-competitive conduct in the dairy industry.
The session, slated for March 29 at Genesee Community College in Batavia, is separate from a series of workshops the Justice Department and USDA are conducting this year on concentration in poultry, dairy, livestock and other agricultural markets.
Varney also traveled to Vermont last September at the behest of Sen. Patrick Leahy (D-Vt.) to speak with dairy farmers about the low price of milk.
Dairy farmers and other agricultural producers have complained that the prices they are paid have decreased more than retail prices for the products.
Varney is making the trip at Schumer’s request, according to WICZ, a Binghamton, N.Y., television station. “For too long farmers have been receiving rock-bottom prices for their product, while prices have not dropped commensurately for consumers at the stores,” Schumer said. “It just doesn’t add up.”
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Attorney General Eric Holder and the Justice Department antitrust chief Christine Varney joined farmers, state officials, economists, and industry representatives in Ankeny, Iowa, on Friday for the first of a series of hearings on competition in the agriculture industry.
In his opening remarks, Holder said: “We know that a growing number of American farmers find it increasingly difficult to survive by doing what they’ve done for decades. And we’ve learned that some of them believe the competitive environment may be, at least in part, to blame.”
The discussions, hosted by the Justice and Agriculture departments, are a “milestone event,” Holder said, because “not once” since federal antitrust laws were passed “have our nation’s departments of Justice and Agriculture come together for a public discussion on competition and regulatory issues” in the industry.
The backdrop of the debate is an antitrust battle between two huge seed companies, the St. Louis-based Monsanto Co. and Pioneer Hi-Bred International Inc., a Johnston, Iowa, based subsidiary of DuPont.
Monsanto patented a now-ubiquitous technology that makes seeds resistant to weed killers. DuPont has accused Monsanto of using restrictive licenses on that technology that shut out competitors and force farmers to pay higher prices for seeds.
The Justice Department is conducting a probe into competition in the seed industry, and DuPont has urged the agency to act against Monsanto.
The battle spilled over into Friday morning’s newspapers, with the Los Angeles Times and the New York Times focused on rising seed prices, while Business Week focused on Monsanto’s rights as the patent holder.
In a statement about the workshop, Monsanto’s vice president of industry affairs, Jim Tobin, said: “The fight to win the farmer’s business is intense and that has translated to not only more profitable choices for farmers over the past decade, but also more value for farmers.”
Tobin, who is appearing at the Iowa workshop, cited a study that found U.S. farmers have seen $20 billion in extra income in the past decade from growing corn, soybeans and cotton with engineered seed.
Monsanto said it invested in biotech research when that kind of technology was considered financially risky.
In a January ruling, a federal judge in Missouri said that DuPont had violated the terms of its contract with Monsanto when it combined its own herbicide-resistant gene with Monsanto’s popular Roundup Ready trait. But the judge did not say whether the license agreement was anticompetitive, which DuPont has alleged.
“Because Roundup Ready is in all seeds,” Denvir said in an interview, “the effect is to exclude competitors.”
Denvir likened Monsanto’s tactics to Microsoft’s practice of tying its web browser, Internet Explorer, to its popular operation system, Windows. That practice led to the government’s landmark antitrust case against Microsoft, which alleged that the software giant shut competing browser companies like Netscape and Opera out of the market.
No trip to Iowa would be complete without touching on the state’s role as the first primary in the presidential election season. In his speech, Holder said of his time in Iowa during Obama’s campaign: “That’s when the people of this great state taught me – and proved to our entire nation – that no matter how improbable the goal or difficult the task, there’s simply no better place to begin than here in Iowa.”
Main Justice contributor Geoffrey Manne is blogging from the workshop here.
updated at 3:45 p.m. to add comments from DuPont.
The Justice Department and three states filed suit against Dean Foods today, alleging that the dairy processor’s acquisition of two Foremost Farms dairy processing plants in Wisconsin last year removed competition in the milk industry.
The lawsuit asks Dean Foods, which is headquartered in Dallas, to sell off the milk processing plants in acquired in the April 2009 purchase.
The Justice Department and Illinois, Michigan, and Wisconsin filed the suit in federal court in Milwaukee, and said that the merger eliminated “substantial competition” in the sale of milk to schools and retailers in those states.
“The purpose of the department’s lawsuit is to restore competition so that schools, grocery stores and other retailers in Illinois, Michigan and Wisconsin, will pay lower prices for their milk,” said Assistant Attorney General for Antitrust Christine Varney, in a press release announcing the suit.
The deal was not originally presented to antitrust authorities for approval because it did not meet the size threshold required for regulatory review.
Sen. Herb Kohl (D-Wisc.) weighed in on the lawsuit: “Maintaining a competitive dairy market is a high priority of mine,” he said in a statement. “If the allegations are proven to be true, today’s lawsuit will result in lower prices for consumers and more competitive choices for dairy farmers in Wisconsin.”
The lawsuit comes amidst the Justice Department’s heightened interest in agriculture. The Antitrust Division confirmed it was conducting a probe in the seed industry last week. And it is hosting a series of town-hall discussions this year with the Department of Agriculture on competition issues in the industry. At Kohl’s request, one of the town-halls will explore dairy issues in Wisconsin.
Read the complaint here.
Here is the full text of the release.
This post was updated at 5:00pm to include Sen. Kohl’s comments.
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Monsanto won a small victory on Friday, when a federal judge ruled that rival Dupont had violated the terms of a contract in combining Monsanto technology with its own in producing genetically modified seeds.
But the ruling was only a partial victory for Monstanto because it left open the possibility that the St. Louis-based Monsanto may still be on the hook for antitrust violations.
“The Court does not express any opinion on the viability … that the license agreements … are unenforceable as a matter of patent law and on antitrust grounds,” wrote Judge E. Richard Webber of the Eastern District of Missouri, in his ruling. ”[Dupont] may be able to demonstrate that Monsanto may not recover for patent infringement or breach of contract.”
It is the latest development in a long-running war between the nation’s two largest seed manufacturers, who have sued each other in a patent and contract dispute. Dupont has also urged the Justice Department’s Antitrust Division to investigate Monsanto’s licensing practices which, Dupont alleges, shut out competitors and force farmers to pay higher prices for seeds.
At issue is Monsanto’s Roundup Ready gene, a technology used in corn and soybean seeds that can resist weed killers and is used by the vast majority of farmers.
Monsanto licensed the seed technology to Dupont subsidiary Pioneer Hi-Bred International Inc. in 2002 in exchange for royalties. Four years later, Dupont introduced its own herbicide-resistant gene and combined it with the Roundup traits it had licensed. Monsanto sued and said the contract did not allow Dupont to combine the two technologies.
Dupont then accused Monsanto of abusing its patent monopoly and using anti-competitive licensing tactics.
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The Justice Department requested information from seed manufacturer Monsanto Company about its soybean trait business, the company announced this morning.
Justice Department spokeswoman Gina Talamona confirmed that the agency is investigating the possibility of anticompetitive practices in the seed industry.
The agency issued a request, known as a civil investigative demand, seeking information about access that Monsanto will provide to certain soybean technology once the patent on that technology runs out, the company said.
“Monsanto continues to cooperate with the U.S. Department of Justice inquiries, just as we have over the last several months,” Scott Partridge, Monsanto’s Chief Deputy General Counsel, said in a statement. “We respect the thorough regulatory process. We believe our business practices are fair, pro-competitive and in compliance with the law.”
Also in the statement, the company said it has provided “extensive access to millions of pages of documents to ensure that regulators’ questions are addressed.”
The announcement comes amidst a DOJ review about competition issues in the agriculture industry. Monsanto rival E.I. du Pont de Nemours & Company filed a report with the Justice Department last week asking the agency to curtail what it deemed Monsanto’s “anticompetitive practices”.
Tensions between the two rivals have been simmering for years.
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Dupont attacked rival seed manufacturer Monsanto today, calling on the Justice Department to intervene and accusing the company of engaging in “anticompetitive practices” that limited innovation and raised prices in the market for genetically modified seeds.
In a report released today, the Dupont-owned Pioneer Hi-Bred International said Monsanto had 98% of the market for genetic traits created for soybeans, and 79% of that market in corn.
Dupont said Monsanto engaged in “anticompetitive practices designed to protect and extend that power.”
The report was filed with the Justice Department and the Department of Agriculture in the context of a series of workshops the agencies are holding this year on competition issues in agriculture.
The report details claims similar to those in a December report by the Associated Press about Monsanto’s tactics. Both accuse the seed giant of using restrictive licenses which shut out competitors and force farmers to pay higher prices for seeds.
“Monsanto’s license agreements prevent seed companies from combining different characteristics in a single seed,” the Dupont report said.
In its own filing last month, Monsanto said the seed market is a competitive one. “No single company has a dominant share of seed sales in corn, soybean or cotton,” the company said.
Monsanto also told farmers last month they could continue to use a popular soy bean product and would not have to switch to a new, more expensive, version when the patent expired.
In its report to the Justice Department, Dupont likened Monsanto’s behavior to the chip giant Intel Corp., which is under fire from multiple antitrust regulators, including the Federal Trade Commission, for allegedly using its monopoly power to keep rivals out of the market for computer chips.
“An important premise of the FTC case is that Intel has inordinate leverage because its processors are “must haves” for its customers,” the report says.
“And Monsanto, like Intel, is using its restrictive agreements and practices to foreclose new competitors from gaining access to customers.”
Dupont also suggested that Congress might explore legislation that would promote generic competitors to enter the seed trait market, similar to laws governing generic drug manufacturers.
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The Antitrust Division and the Department of Agriculture are moving ahead with workshops around the country on competition issues facing the agriculture industry.
The schedule, released today, includes hearings in 2010 in Iowa, Alabama, Colorado, Wisconsin, and Washington, D.C., and will explore issues in poultry, dairy, livestock and other topics in agriculture.
In August, Attorney General Eric Holder and Agriculture Secretary Tom Vilsack announced plans to host conversations between farmers, ranchers, consumer groups, packers and processors to guide “legal and economic analyses of these issues.”
Antitrust Policy Deputy Philip Weiser followed up with a speech in St. Louis, Mo., outlining the Division’s interest in concentration in the seed industry, and in the dairy and livestock markets.
(St. Louis is also home to Monsanto, the seed giant that disclosed last month the Justice Department was investigating licensing practices that rival seed makers claimed were anti-competitive.)
In September, Antitrust chief Christine Varney traveled to Vermont with Judiciary Committee Chairman Sen. Patrick Leahy (D-Vt.) for a hearing on competition issues in the dairy industry, where she called for “a careful review” of vertical integration in the industry.
In an unrelated hearing on Capitol Hill, Sen. Herb Kohl (D-Wisc.) also extracted a promise from Varney that she would also visit Wisconsin’s dairy farmers.
The hearings could prompt antitrust regulators to examine mergers that previously passed scrutiny, change the way milk is priced, address contracting practices in livestock, force changes in seed licensing terms, or smooth out differences between the USDA and the Justice Department, experts say.
Or, others say, the result could just be another report.
Farmers are a potent political constituency. They have long complained about being squeezed between the high prices they pay for seeds, fertilizer and other materials, and the low prices they receive for their crops, cattle, poultry and milk.
As farming has become more industrialized, large agri-processing companies have become more powerful. ”Farmers, ranchers, and dairymen have fewer and fewer places to sell their products,” says Peter Carstensen, who teaches antitrust law at the University of Wisconsin Law School and studies competition issues in agriculture. ”It’s a failure of merger enforcement over 15 or 20 years, and not just the Bush administration.”
Others raise questions of transparency in pricing. In the poultry industry, for example, farmers raise birds owned by poultry processors, according to Michael Stumo, an antitrust lawyer who focuses on agriculture, and are paid through an obscure ranking system that some deem unfair. “I think it’s more likely [USDA] will start looking at proposing new regulations to improve the competitive aspects,” he said.
The public hearing format isn’t entirely new for the Antitrust Division. During the Clinton years, then-Antitrust official Joel Klein held town hall meetings and appointed a special counsel for agriculture within the antitrust division.
But the publicity surrounding the current hearings has caused some antitrust lawyers to wonder privately whether the Division has set expectations too high that it will bring a case, and whether the hearings will lead to anything beyond letting farmers air grievances.
Even as political theater, some observers say, the strategy is already starting to pay off with increased public interest in issues that effect farmers. Top editorial boards are also weighing in more frequently on competition issues generally. “There were three New York Times editorials in 10 days,” Carstensen said “That’s unheard of.”
The strategy is “useful to neutralize political opposition or build support for litigation in these areas,” he said.
This post has been updated
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This Justice Department speech caught our eye for several reasons: Hometown (St. Louis), agriculture and antitrust. Three of our favorite things.
It’s been a while since we’ve considered agriculture in terms of antitrust enforcement, and we’re happy to do so now. On Friday, Philip J. Weiser, a telecommunications-law expert who was appointed deputy assistant attorney general in April, told a group of farmers (in Missouri!) that antitrust regulators are taking a hard look at the level of competition in several agribusiness sectors.
Click here for the WSJ story, and click here for Weiser’s full remarks, which include a well-presented history of the Sherman Act and its ties to ag biz, including the beef trust in Chicago.
As the WSJ notes, Washington has often sided with farmers who find themselves selling their commodities to fewer and larger processors. But the Obama administration is taking it a step further. Weiser said Antitrust has plans for workshops, in cooperation with the USDA, that will focus on a number of issues.
- Evaluating the state and nature of competition in a range of agricultural markets
- The impact of vertical integration
- Concerns about “buyer power”
- Relevant regulatory regimes
- The nature of transparency in the marketplace
Weiser, speaking in the hometown of St. Louis crop-biotechnology giant Monsanto Co., didn’t point any fingers during his speech at the annual convention of the Organization for Competitive Markets, a Nebraska-based non-profit that bills itself as “the only national think tank focusing strictly on antitrust and trade policy in agriculture.” Its Web site says it is funded by crop and livestock producers. OCM has complained about Monsanto’s dominance over genetically modified seeds.
Scott Kilman and Evan Perez report:
The vast majority of the genetically modified crops grown in the U.S. farm belt contains at least one gene from Monsanto. Its success has made the company a formidable rival of DuPont Co.’s Pioneer Hi-Bred seed unit, which has accused Monsanto of being a monopolist.
DuPont spokesman Dan Turner told the WSJ that the company has backed the OCM for years, but that it didn’t sponsor Friday’s meeting. A Monsanto spokesman told the newspaper that DuPont’s support for OCM was “extremely disappointing, because they are aligning themselves with an organization that is spreading false and misleading information about our business.”
This post contains information added after its original publication date of Aug. 8.
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