United States v. Monsanto Company and Delta and Pine Land Company; Public Comments and Response on Proposed Final Judgment, 18612-18674 [E8-5578]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Monsanto Company
and Delta and Pine Land Company;
Public Comments and Response on
Proposed Final Judgment
Pursuant to the Antitrust Procedures
and Penalties Act, 15 U.S.C. 16(b)–(h),
the United States hereby publishes the
comments received on the proposed
Final Judgment in United States v.
Monsanto Company and Delta and Pine
Land Company, No. 1:07–cv–00992,
filed in the United States District Court
for the District of Columbia on May 31,
2007, and the United States’s response
to those comments.
Copies of the comments and the
United States’s response to the
comments are available for inspection at
the Department of Justice Antitrust
Division, 325 Seventh Street, NW.,
Room 215, Washington, DC 20530, (202)
514–2481, and at the Office of the Clerk
of the United States District Court for
the District of Columbia, 333
Constitution Avenue, NW., Washington,
DC 20001. Copies of any of these
materials may be obtained upon request
and payment of a copying fee.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for
the District of Columbia
[Civil Action No.: 1:07–cv–00992]
United States of America, Plaintiff, v.
Monsanto Company and Delta and Pine
Land Company, Defendants. Hon.
Ricardo M. Urbina
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Plaintiff United States’s Response to
Public Comments
Table of Contents
Plaintiff United States’s Response to Public
Comments
I. Background
A. The United States’s Investigation of the
Transaction
B. The Traited Cottonseed Markets
C. The Competitive Effects of the
Transaction
D. The Proposed Remedy
II. Developments Since the Filing of the
Complaint
A. Approval of Acquirers of the Enhanced
Stoneville Assets
B. VipCot Assets Offered to Syngenta
C. Third Party License Modifications
D. Filing of Public Comments
III. The Standards Governing the Court’s
Public Interest Determination
A. The Appropriate Legal Standard
B. The Appropriate Inquiry Is Whether the
Remedy Preserves Competition, Not
Whether It Replicates DPL
IV. Response to Comments Criticizing the
Sufficiency of the Remedy
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A. Divestiture of the Stoneville Business
Unit and Monsanto Germplasm Provide
the Acquirer a Firm Foundation on
Which to Compete in the MidSouth and
Southeast Markets
1. Stoneville Infrastructure
2. Monsanto/Stoneville Germplasm
a. The Breeding Process
b. Stoneville Germplasm
c. Additional Monsanto Germplasm
i. Advanced Exotic Yield Lines
ii. MAB Populations
B. Additional DPL Germplasm Provides
Important and Meaningful Value
1. The DPL germplasm is of high quality
2. The acquirer will be able to use this
germplasm effectively
3. Monsanto/DPL’s use of the germplasm
does not diminish its value to the
acquirer and provides farmers continued
benefits
C. The Remedy Preserves Incentives and
Opportunities for Effective Traited
Cottonseed and Trait Development
Competition
1. Syngenta will be able to effectively use
the VipCot Assets
2. The remedy will preserve opportunities
for trait developers to market nonMonsanto traits in competitive
cottonseed
3. The remedy should not—and does not—
guarantee the introduction of DuPont’s
OptimumGat trait
4. The remedy will preserve the number of
‘‘platforms’’ for trait development that
existed pre-merger
V. Response to Comments That the Remedy
Is Not Workable
A. The Divestitures and License Changes
Are One-Time Events, Not Ongoing
Behavioral Remedies
B. Monitoring Compliance With the
Remedy Will Not Unduly Burden the
United States or the Court
VI. Response to Comments That Raise Issues
Beyond the Scope of the Court’s Review
A. Crops Other Than Cotton
B. Conventional Cottonseed
C. The Southwest and West Traited
Cottonseed Markets
D. Prices for Cottonseed Sold for Livestock
Feed
E. Alleged Monsanto Exclusionary
Business Practices
VII. Conclusion
Plaintiff United States Response To
Public Comments
Pursuant to the requirements of the
Antitrust Procedures and Penalties Act,
15 U.S.C. 16(b)–(h) (‘‘APPA’’ or
‘‘Tunney Act’’), the United States
hereby responds to the public comments
received regarding the proposed Final
Judgment in this case. After careful
consideration of the comments, the
United States continues to believe that
the proposed Final Judgment will
provide an effective and appropriate
remedy for the antitrust violation
alleged in the Complaint. The United
States will move the Court for entry of
the proposed Final Judgment after the
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public comments and this Response
have been published in the Federal
Register, pursuant to 15 U.S.C. 16(d).
On May 31, 2007, the United States
filed the Complaint in this matter
alleging that the proposed acquisition of
Delta and Pine Land Company (‘‘DPL’’)
by Monsanto Company (‘‘Monsanto’’)
would violate Section 7 of the Clayton
Act, 15 U.S.C. 18. Simultaneously with
the filing of the Complaint, the United
States filed the proposed Final
Judgment and a Stipulation signed by
plaintiff and defendants consenting to
the entry of the proposed Final
Judgment after compliance with the
requirements of the Tunney Act.
Pursuant to those requirements, the
United States filed a Competitive Impact
Statement (‘‘CIS’’) in this Court on May
31, 2007; published the proposed Final
Judgment and CIS in the Federal
Register on June 15, 2007, see United
States v. Monsanto Co. and Delta and
Pine Land Co., 72 Fed. Reg. 33336–01,
2007 WL 1708314; and published
summaries of the terms of the proposed
Final Judgment and CIS, together with
directions for the submission of written
comments relating to the proposed Final
Judgment, in The Washington Post for
seven days beginning on June 28, 2007
and ending on July 4, 2007. The 60-day
period for public comments ended on
August 27, 2007, and eleven comments
were received as described below and
are attached hereto.
I. Background
A. The United States Investigation of the
Transaction
On August 14, 2006, Monsanto
entered into an agreement to acquire
DPL for approximately $1.5 billion.
Over the following nine and a half
months, the United States conducted an
extensive, detailed investigation into the
competitive effects of the proposed
transaction. As part of this investigation,
the United States issued Second
Requests to the merging parties, as well
as Civil Investigative Demands to all of
the major cottonseed companies and
cottonseed trait developers. The United
States received and considered more
than a million pages of responsive
material and deposed relevant
Monsanto and DPL executives. More
than 125 interviews were conducted
with customers, competitors, and others
with knowledge of the industry and
competitive conditions, including
national and regional agricultural
supply companies, grower organization
representatives, USDA cotton experts,
and agricultural economists and
academics. The United States met
repeatedly with concerned parties,
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including DuPont, one of the
commenters, analyzing their allegations
and submissions.1
In its investigation, the United States
considered the potential competitive
effects of this transaction on numerous
products and geographic areas. For
several of these, the United States
concluded that the proposed merger was
unlikely to reduce competition.2 As the
Complaint alleges, the transaction did,
however, threaten competition with
respect to traited cottonseed sales in two
geographic regions—the MidSouth and
the Southeast.3
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B. The Traited Cottonseed Markets
Most cottonseed sold today contains
‘‘transgenic traits’’—genetic material
from other organisms that is inserted
into the cottonseed germplasm to give
the cotton plant desirable
characteristics. Two types of transgenic
traits currently are available: (1)
Herbicide tolerance traits, such as
Monsanto’s ‘‘Roundup Ready’’ and
recently introduced ‘‘Roundup Ready
Flex’’ (‘‘Flex’’), which make the cotton
plant able to withstand spraying with
particular herbicides, and (2) insect
resistance traits, such as Monsanto’s
‘‘Bollgard’’ and new ‘‘Bollgard II,’’
which make the cotton plant toxic to
certain pests.
Cotton farmers overwhelmingly prefer
traited seeds because their use
significantly reduces labor and input
costs. In 2006, farmers planted about
87% of the cotton acres in the U.S. with
traited seeds. USDA Cotton Varieties
1 The United States also spoke multiple times
with representatives from the offices of the
Attorneys General of 27 states interested in the
progress of the United States investigation,
including representatives of 16 of the 17 states
where cotton is grown in the United States
(Georgia’s office elected not to participate). In this
proceeding, thirteen states, representing less than
20% of U.S. cotton production, have signed onto a
comment (discussed infra) questioning the
proposed Final Judgment. Of the states signing the
comment, Delaware, Kentucky, Rhode Island, Utah
and West Virginia elected not to participate in any
of the communications between the United States
and states’s representatives during the United States
investigation. The comment does not explain either
the scope of the investigation, if any, those nonparticipating states undertook to reach their
conclusions or the reasons why none of the
commenting states has initiated independent legal
action to enjoin the transaction.
2 Indeed, the United States concluded that,
viewed as a whole, the transaction was likely to
create some efficiencies that could benefit
consumers. A Monsanto-DPL combination brings
together firms with complementary strengths and
assets. Monsanto has proficiency in transgenic trait
development, and DPL had expertise in cottonseed
breeding. Merging allows the two programs to
operate in tandem. Through the integration of trait
development and cottonseed breeding, traited
cottonseed could reach consumers faster and at
lower cost
3 See Complaint at 12–13.
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Planted 2006 Crop Report. Most traited
cottonseed is ‘‘stacked’’ to include both
herbicide-tolerant and insect-resistant
traits. In the Southeast and MidSouth,
90.8% and 89.3% (respectively) of the
seed sold in 2006 included both types
of traits, and farmers now rarely
purchase seed that contains only an
insect-resistant trait.4
At the time the Complaint was filed,
DPL and Monsanto, via its Stoneville
business unit, were significant
producers of traited cottonseed in the
United States. Indeed, DPL and
Stoneville together accounted for over
90% of traited cottonseed sales in the
MidSouth and Southeast regions of the
United States where cotton farmers
place the most value on insect-resistant
and herbicide-tolerant traits. That
vigorous competition would have been
lost as a result of the transaction.
As the Complaint alleges, Monsanto is
currently the dominant provider of
insect-resistant and herbicide-tolerant
traits for cotton.5 Monsanto’s insectresistant and herbicide-tolerant traits
accounted for over 96% of the
transgenic traits in cottonseed
nationwide in 2006; over 98% of the
traited cottonseed sold in 2006 in the
MidSouth and Southeast contained
Monsanto’s traits. Indeed, Monsanto’s
traits are the only traits found in any of
the traited cottonseed DPL sold prior to
the merger.
DPL was, however, positioning itself
to move away from Monsanto’s traits by
exploring options with several trait
producers that were developing insectresistant and herbicide-tolerant cotton
traits. The most advanced of these
efforts was work with Syngenta to
introduce VipCot—an insect-resistant
trait that would compete with
Monsanto’s Bollgard traits. DPL’s work
with Syngenta had reached a stage
where DPL had successfully introduced
VipCot into 42 of its elite breeding
lines.6 DPL had already stacked five of
the VipCot traited lines with Flex prior
to the merger and anticipated
commercializing those lines in
approximately 2009. Following DPL’s
breeding protocols, DPL anticipated that
stacked versions of the other 37 VipCot
lines would have been ready for
4 Today, traited cottonseeds that contain only
insect resistance account for less than 2% of total
traited acres.
5 See Complaint at 2–3.
6 As discussed below, the relief provided by the
proposed Final Judgment calls for divestiture of 43
DPL lines containing VipCot. The 43rd line
included in the VipCot Assets is a line that DPL
acquired from Syngenta in 2006 that already
contained VipCot.
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commercialization sometime between
2012 through 2016.
DPL’s efforts with respect to a nonMonsanto herbicide-tolerant trait were
at a more preliminary stage. In the
summer of 2006, DPL entered into a
licensing agreement with DuPont to
introduce seed with OptimumGat, an
herbicide-tolerant trait that would
compete with Monsanto’s Flex trait. At
the time the Complaint was filed, DPL
had not successfully introduced
OptimumGat into any of its elite
breeding lines. Rather, development
work to advance the OptimumGat
project remained primarily with
DuPont. As a backup to the
OptimumGat venture, DPL had also
entered into agreements to test two
other herbicide-tolerant traits that
would compete with Monsanto’s Flex,
including a trait being developed by
Bayer called Glytol.
Using VipCot in combination with
one of the three herbicide tolerance
options that DPL was exploring, DPL
envisioned bringing a limited quantity
of cottonseed with a non-Monsanto
stack of insect-resistant and herbicidetolerant traits to market as early as 2012.
But in light of standard breeding and
testing time requirements, it likely
would have taken DPL several years
longer to entirely phase out Monsanto’s
traits. Equally important, DPL’s ability
or willingness to switch totally away
from Monsanto’s traits was dependent
on several assumptions—namely that
farmers were satisfied with VipCot’s
performance versus Monsanto’s
Bollgard traits, and that DPL found a
successful non-Monsanto herbicidetolerant trait in the next few years.
As the Complaint further alleges,
Monsanto knew that DPL was working
with other trait companies and feared
that a possible outcome of those
partnerships would be that DPL ceased
offering Monsanto’s traits in its
cottonseeds.7 Monsanto thus had begun
to take steps to strengthen its own
proprietary seed platform to support its
cottonseed trait business. In fact, the
United States’s investigation revealed
that Monsanto was making a concerted
effort to grow its share of traited
cottonseed sales.
Foremost among these efforts was
Monsanto’s acquisition in 2005 of
Stoneville, which had approximately
15% of the market for traited cottonseed
nationwide and a 33% and 9% share of
the MidSouth and Southeast markets,
respectively. After acquiring Stoneville,
Monsanto made significant investments
in the company, including: Investing in
upgrades of new buildings and
7 See
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Complaint at 9–10.
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greenhouses, lab equipment, ginning
and delinting equipment, and
warehouse and equipment storage;
hiring additional employees for the
breeding facilities, particularly at its
Maricopa, Arizona, breeding facility
which targeted creating varieties for the
Southeast; improving Stoneville’s
manufacturing facilities, such as adding
bagging, dust collection, and handling
equipment; and improving Stoneville’s
molecular marker capabilities and
library.
Monsanto also had been engaging in
other efforts to develop proprietary
cotton germplasm. Those included (a)
researching exotic strains of cottonseed
(which the proposed Final Judgment
refers to as the ‘‘Advanced Exotic Yield
Lines’’), (b) mapping molecular markers
for select breeding crosses that would
enable Monsanto to expedite
identification and further breeding of
the most promising progeny from those
crosses (which the proposed Final
Judgment refers to as the ‘‘MAB
Populations’’), and (c) establishing the
Cotton States program, through which
Monsanto obtains licenses to promising
germplasm from university breeding
programs and private breeders, and,
after introducing traits, licenses the
resulting traited cottonseed varieties to
small cottonseed companies and
distributors seeking to sell traited
cottonseed under their own brands.
Monsanto’s internal business plans
projected that as a result of these efforts,
Stoneville’s market share in the
Southeast and MidSouth would grow
substantially over the next few years.
Indeed, Monsanto projected that
Stoneville, with Monsanto traits, and
DPL, with non-Monsanto traits, would
have roughly equal market shares by
approximately 2015, with Dow and
Bayer traited seeds holding much
smaller shares. Accordingly, if
unremedied, the combination of
Monsanto and DPL would have
combined the two largest traited
cottonseed options for farmers in the
MidSouth and Southeast.8
8 The United States’s investigation found that
Bayer’s efforts prior to the merger to develop
germplasm for the Southeast and MidSouth, if
successful, would not likely bear fruit any sooner
than 2016. Given the early stage of Bayer’s breeding
efforts in those geographic areas, the United States
did not rely on this as a source of potential entry.
In contrast, Dow has developed some varieties
suitable for the MidSouth and potentially the
Southeast, which will enter the market some time
in the 2008 to 2011 time frame. However, given
limitations in its current trait licensing agreements
with Monsanto, it was unclear that entry of Dow
varieties would have a significant competitive effect
in those markets.
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C. The Competitive Effects of the
Transaction
investments would not reach farmers in
the MidSouth and Southeast.
Based on this evidence, the United
States determined that the merger of the
two companies would likely lessen
competition in the near, medium and
long term. In the near term, absent the
transaction, Monsanto’s efforts to
increase Stoneville share in the
MidSouth and Southeast would give
farmers more choices and could lead to
lower prices.9 Also in the near term
(beginning in approximately 2009), the
entry of DPL seed containing Syngenta’s
VipCot trait stacked with Monsanto’s
Flex trait could have offered farmers a
new insect-resistant trait option and put
some pressure on the price for insectresistant traits.10 The United States’s
investigation revealed that the most
significant competitive effect of the
transaction likely would have occurred
in the medium term (beginning in
approximately 2012) when DPL would
first be able to offer cottonseed stacked
solely with non-Monsanto traits and
farmers in the MidSouth and Southeast
would benefit from the emergence of
competition between two germplasm/
trait platforms, namely, Stoneville seed
with Monsanto traits and DPL seed with
VipCot and a non-Monsanto herbicidetolerant trait.
The United States also found that
Monsanto’s acquisition of DPL, if
unremedied, would threaten longer term
harm by deterring or delaying the entry
of new types of cotton traits in the
MidSouth and Southeast.11 Cotton trait
developers would not have a seed
partner independent of Monsanto with
seeds suitable for the MidSouth and
Southeast. Given the significance of the
MidSouth and Southeast cotton growing
regions, the inability to reach farmers in
these regions would reduce potential
returns from investments in developing
cotton traits. And even if other potential
sources of revenue for trait developers
were sufficient to support continued
investment in cotton trait
development,12 the benefits of these
D. The Proposed Remedy
The proposed Final Judgment
remedies the anticompetitive effects of
the acquisition alleged in the
Complaint-the elimination of
competition between DPL and
Monsanto for the development, breeding
and sale of traited cottonseed and the
elimination of DPL as a partner
independent of Monsanto for developers
of traits that would compete against
Monsanto-in three principal ways:
First, the proposed Final Judgment
requires Monsanto to divest the
Enhanced Stoneville Assets to an
acquirer who is capable of using the
assets to compete effectively. The
Enhanced Stoneville Assets include
Stoneville’s U.S. cottonseed business,
key cottonseed lines developed by DPL
for the MidSouth and Southeast, and
additional Monsanto cotton breeding
assets.
The Enhanced Stoneville Assets
provide the acquirer what it needs to
continue Monsanto’s efforts to increase
Stoneville’s share and be an effective
ongoing seed competitor in the near
term and beyond. Moreover, the
acquirer will be able to use these assets,
on its own or in partnership with other
trait developers, to breed and
commercialize high quality cottonseed
for the MidSouth and Southeast with
non-Monsanto traits, preserving
medium and longer-term competition
that would otherwise have been lost as
a result of the merger.
Second, the proposed Final Judgment
requires Monsanto to divest the VipCot
assets to Syngenta and to allow
Syngenta to breed with the VipCot
traited lines. This will preserve the
potential for near term benefits from
VipCot entry, as well as medium and
longer term benefits from stacking
VipCot with non-Monsanto herbicide
traits (including other nascent traits)
and developing improved germplasm.
Third, the proposed Final Judgment
requires Monsanto to modify two sets of
licenses to eliminate restrictions on the
use of non-Monsanto traits: (1) Its
cottonseed trait licenses with seed
companies to permit licensees to breed
and sell, without penalty, cottonseed
containing non-Monsanto traits and
cottonseed containing both licensed
Monsanto traits and non-Monsanto
traits, and (2) its Cotton States licenses
to remove any provision that allows
Monsanto to terminate the license if the
9 With its dominance in traits, Monsanto might
have recaptured any seed price reductions through
higher trait fees.
10 Because DPL would have had to combine
VipCot with a Monsanto herbicide-tolerant trait,
Monsanto might have recaptured any reduction in
fees for an insect-resistant trait through increases in
fees for Monsanto’s herbicide-tolerant trait.
11 In addition to potentially new insect resistant
and herbicide tolerant traits, there is current
transgenic trait research regarding, among other
things, drought tolerance, nematode resistance and
yield.
12 These other revenue opportunities arise from
the fact that (a) many potential cotton traits have
applications across other crops, including corn and
soy, that offer significantly more revenue potential
than cotton, (b) the demand for traited cottonseed
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outside the United States is significant and growing,
and (c) there is substantial cotton acreage within the
United States in regions other than the MidSouth
and Southeast, namely the Southwest and West.
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licensee sells cottonseed containing
other traits.
In the United States’s judgment, the
asset divestitures and license
modifications required by the proposed
Final Judgment remedy the competitive
harms identified in the Complaint.
II. Developments Since the Filing of the
Complaint
The United States filed the Complaint
and Proposed Final Judgment on May
31, 2007. The Court entered the Hold
Separate and Preservation of Assets
Stipulation and Order on June 1, 2007,
and Monsanto completed its acquisition
of DPL on that same date. Since the
filing of the Complaint, the following
events have occurred in furtherance of
the requirements set forth in the
proposed Final Judgment and the
Tunney Act:
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A. Approval of Acquirers of the
Enhanced Stoneville Assets
Section IV.E. of the proposed Final
Judgment requires defendants to divest
the Enhanced Stoneville Assets to an
acquirer acceptable to the United States.
The acquirer must have a credible
commitment to the traited cottonseed
market and have the intent and
capability of competing effectively.
Shortly after acquiring DPL, Monsanto
proffered Bayer CropScience (‘‘Bayer’’)
and Americot Inc. (‘‘Americot’’) to the
United States as potential acquirers of
the Enhanced Stoneville Assets, with
Bayer set to acquire all of the divestiture
package except for certain assets relating
to the Southwest market which would
be sold to Americot. The United States
evaluated the proposed acquirers,
including analyzing the terms of the
proposed purchase agreements, the
terms of other recent contracts between
Monsanto and Bayer, the market
presence of both proposed acquirers,
and other information bearing upon the
acquirers’ capabilities to use the
divested assets effectively in
competition with Monsanto/DPL.13
Bayer proposed to purchase the bulk
of the Enhanced Stoneville Assets for
$310 million. Its commitment to the
cottonseed market is demonstrated by,
among other things, its successful entry
into the Southwest cottonseed market
under the Fibermax and AFD brands.14
13 The United States was already familiar with
both Bayer and Americot’s existing U.S. cottonseed
operations, having interviewed representatives of
these companies on numerous occasions and
reviewed business documents provided by both
companies during the Monsanto/DPL investigation.
14 Bayer’s willingness to commit such a large
amount of capital to acquiring the assets also tends
to indicate Bayer’s interest in using the Enhanced
Stoneville Assets to create a viable competitor to
Monsanto/DPL.
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Bayer’s growth in this market has been
impressive; it entered the Southwest
market in 1999 and, by 2006, had a
significant share of seed sales in that
region and had displaced DPL as the
market leader. In addition to cottonseed
sales, Bayer has had an active
cottonseed trait development program,
which has resulted in the marketplace
introduction of its Liberty Link
herbicide-tolerant trait.15 In addition to
these cottonseed efforts, Bayer also
operates one of the world’s largest crop
protection and agricultural chemical
companies, providing it ready access to
agricultural distribution channels in the
MidSouth and Southeast as well as
pesticide, herbicide, and seed treatment
products to complement its cottonseed
offerings.
Despite these strengths, Bayer has not
been successful in cottonseed sales in
the MidSouth and Southeast, largely as
a result of inferior germplasm for those
regions. Acquiring the Enhanced
Stoneville Assets will enable Bayer to
become a more effective competitor in
the MidSouth and Southeast 16 by giving
Bayer high-quality germplasm
specifically targeted toward the regions’
growing conditions, breeding stations
focused on developing varieties for
those regions, and experienced
personnel.17
To avoid creating any competitive
issue in the Southwest where Bayer is
strong, Bayer did not acquire that
portion of the Enhanced Stoneville
Assets best suited for producing traited
cottonseed for the Southwest region of
the United States—i.e., the assets related
to Stoneville’s NexGen brand of
cottonseed.18 Those assets, which
15 Liberty Link makes cotton tolerant to
glufosinate herbicides and is only available in
Bayer’s FiberMax cottonseeds, which are primarily
used in the Southwest where they perform well.
16 Upon acquiring Stoneville, Bayer publicly
noted, ‘‘[t]he new germplasm and the geographic
reach of the Stoneville business East of Texas
ideally complement Bayer’s cotton seed and trait
business.’’ See May 31, 2007 press release, ‘‘Bayer
CropScience agrees to acquire U.S. cotton seed
company Stoneville for US-$310 million,’’ available
at .
17 In its submitted comments, DuPont specifically
questions Bayer’s ability to compete in the
MidSouth and Southeast, citing the fact that Bayer
had not successfully penetrated those markets in
the past. DuPont Comments at 18. See also AAI
Comments at 16. However, DuPont’s claim merely
highlights Bayer’s prior difficulty in accessing or
developing competitive germplasm for these
regions, rather than speaking to Bayer’s ability to
succeed once it has such germplasm. That Bayer
can fully succeed when it has access to competitive
germplasm is well documented by its successful
entry in the Southwest market.
18 Stoneville started its NexGen germplasm
program to develop cottonseed adapted to growing
conditions in the Southwest growing region. Bayer’s
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include cottonseed lines and a
dedicated breeding program targeting
the Southwest, generated over $16
million in sales for Stoneville in 2006,
and Monsanto projected they would
generate $36 million in sales by 2010.
Americot, a regional cottonseed
company founded in 1987 that sells
seed predominantly in west Texas,
acquired the NexGen assets for just over
$6 million. With a recently upgraded
breeding facility dedicated to
developing lines for the Southwest,
Americot is well positioned to use the
NexGen assets effectively.
Based on analysis of these factors, the
United States determined that
divestiture of the Enhanced Stoneville
Assets to Bayer and Americot satisfied
the objectives of the proposed Final
Judgment and approved the proposed
acquirers. Monsanto divested the
Enhanced Stoneville Assets on June 19,
2007.19
B. VipCot Assets Offered to Syngenta
Section V of the proposed Final
Judgment requires Monsanto to offer
certain DPL cottonseed lines containing
Syngenta’s traits (the ‘‘VipCot Assets’’)
to Syngenta. Under the proposed Final
Judgment, Monsanto cannot satisfy the
required divestiture of the VipCot
Assets without the United States first
approving the terms of the licenses
pursuant to which Monsanto offers
Syngenta the assets. Since May 31,
2007, the United States had numerous
discussions with Monsanto and
Syngenta regarding the terms of these
licenses. On August 27, 2007, Monsanto
and Syngenta entered into an interim
Material Transfer and Use Agreement to
facilitate transfer of VipCot traited
cottonseed to Syngenta for further
development prior to Monsanto
providing final licenses that meet the
Fibermax and AFD brands also have a significant
presence in this region.
19 The sale of divestiture assets during the
pendency of the Tunney Act review of a proposed
final judgment is consistent with the United States’s
standard practice, as is permitting closing of the
transaction challenged in the Complaint. The
materials filed with the Complaint included a Hold
Separate and Preservation of Assets Stipulation,
requiring the parties to maintain certain assets
separate after the close of the merger (in this
instance, DPL’s assets) until the United States was
assured that the acquirer or acquirers proposed by
Monsanto for the Enhanced Stoneville Assets
would meet the standards set forth in the proposed
Final Judgment (i.e., the acquirer was capable of
operating a viable cottonseed business using the
divested assets). This procedural setting allowed
Monsanto and DPL to close their merger shortly
after the Complaint and Proposed Final Judgment
were filed and to expeditiously complete the sale
of the Enhanced Stoneville Assets to Bayer and
Americot, thereby ensuring that neither the
Enhanced Stoneville Assets nor DPL were held in
competitive limbo during the pendency of the
Court’s review.
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competitive harms not alleged in the
Complaint. Upon careful review, the
United States believes that nothing in
the comments warrants any changes to
the proposed Final Judgment or is
sufficient to suggest that entry of the
proposed Final Judgment is not in the
public interest. We address these issues
below and explain why the criticisms
raised in the comments are not valid.
C. Third Party License Modifications
Section VI of the proposed Final
Judgment requires Monsanto to revise
certain third-party cottonseed licenses
and gives the United States sole
discretion to approve the proposed
revisions. The United States engaged in
continuing negotiations with Monsanto
to ensure that the revisions satisfied the
terms of the proposed Final Judgment.
On November 15, 2007, Monsanto,
pursuant to Section VI.B. of the
proposed Final Judgment, provided to
the United States for its approval copies
of the modified licenses Monsanto
intended to offer to third party seed
companies; the United States approved
the modified licenses on November 20,
2007. Monsanto then provided to the
licensees the offers containing the
modified license language. The offers
remain open until March 31, 2008.
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terms of the proposed Final Judgment.
Pursuant to that agreement, Monsanto
delivered to Syngenta certain seeds that
the proposed Final Judgment requires
Monsanto to offer to Syngenta. After
obtaining approval from the United
States, Monsanto, on November 27,
2007, offered to Syngenta the licenses
required by the proposed Final
Judgment.
III. The Standards Governing the
Court’s Public Interest Determination
D. Filing of Public Comments
During the 60-day public comment
period called for by the Tunney Act, the
United States received comments from
the following eleven organizations and
groups: the American Antitrust Institute
(‘‘AAI’’); Attorneys General of Virginia,
Arkansas, Delaware, Kentucky,
Maryland, New Mexico, North Carolina,
Ohio, Oklahoma, Rhode Island,
Tennessee, Utah, and West Virginia (the
‘‘States’’); California Consumers United
(‘‘CCU’’); E.I. du Pont de Nemours & Co.
(‘‘DuPont’’; the Illinois Stewardship
Alliance (‘‘ISA’’); the International
Center for Technology Assessment/Food
Safety (‘‘ICTA’’); a comment signed by
the president of Plains Justice, the
president of the Women, Food, and
Agriculture Network, and the president
of the Iowa Farmers Union (‘‘Plains
Justice’’); a comment signed by a group
of Texas cotton gins and other cotton
based associations (‘‘Texas Cotton
Associations’’); the Ohio Farmers Union
(‘‘OFU’’); the Organization for
Competitive Markets (‘‘OCM’’); and the
Wisconsin Farmers Union (‘‘WFU’’).
The criticisms offered by the
Commenters generally fall into four
areas: (1) The appropriate standard of
review; (2) the sufficiency of the
divestiture to preserve competition in
the relevant markets; (3) the workability
of the remedy; and (4) purported
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A. The Appropriate Legal Standard
As discussed in detail in the
Competitive Impact Statement (at 23–
27), the Court, in making the public
interest determination called for by the
Tunney Act, is required to consider
certain factors listed in the Act relating
to the competitive impact of the
judgment and whether it adequately
remedies the harm alleged in the
complaint.20 This public interest
inquiry is necessarily a limited one as
the United States is entitled to deference
in crafting its antitrust settlements,
especially with respect to the scope of
its complaint and the adequacy of its
remedy. See generally United States v.
Microsoft Corp., 56 F.3d 1448, 1458–62
(D.C. Cir. 1995); United States v. SBC
Commc’ns, 489 F.Supp.2d 1, 12–17
(D.D.C. 2007).
With respect to the scope of the
complaint, the Tunney Act review does
not provide for an examination of
possible competitive harms the United
States did not allege. See, e.g.,
Microsoft, 56 F.3d at 1459 (stating that
the district judge may not ‘‘reach
beyond the complaint to evaluate claims
that the government did not make’’).21
The reviewing court may look beyond
the scope of the complaint only when
the complaint has been ‘‘drafted so
narrowly as to make a mockery of
judicial power.’’ SBC Commc’ns, 489
F.Supp.2d at 14. That is not the case
here as the Complaint properly alleges
the harm the transaction is likely to
20 See 15 U.S.C. 16(e)(1)(A) & (B). The Microsoft
court explained that a court making a public
interest determination under the Act should
consider, among other things, the relationship
between the remedy secured and the specific
allegations set forth in the government’s complaint,
whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and
whether the decree may positively harm third
parties. Microsoft, 56 F.3d at 1458–62.
21 Were a court to reject a proposed decree on the
grounds that it failed to address harm not alleged
in the complaint, it would offer the United States
what the Court of Appeals for the D.C. Circuit
referred to as a ‘‘difficult, perhaps Hobson’s
choice,’’ in that the United States would have to
either redraft the complaint and pursue a case it
believed had no merit, or drop its case and allow
conduct it believed to be anticompetitive to go
unremedied. Microsoft, 56 F.3d at 1456.
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cause in the relevant product and
geographic markets. Indeed, multiple
commentors recognized the sufficiency
of the Complaint: The States, for
example, note that ‘‘the United States
acknowledges the significant
anticompetitive effects that the
acquisition will have on the
development, production and
distribution of cotton biotech traits and
seeds.’’ 22 DuPont similarly states that
‘‘the Complaint filed by the Justice
Department’s Antitrust Division details
the serious harm to farmers and
consumers that will result,’’ and further
acknowledges that the ‘‘Complaint sets
forth a clear and compelling story of the
competitive injury that will result from
the proposed transaction.’’ 23
With respect to the sufficiency of the
proposed remedy, a district court must
accord due respect to the United States’s
views of the nature of the case, its
perception of the market structure, and
its predictions as to the effect of
proposed remedies. E.g., SBC
Commc’ns, 489 F.Supp.2d at 17 (United
States entitled to ‘‘deference’’ as to
‘‘predictions about the efficacy of its
remedies’’); see also CIS at 24–26. Under
this standard, the United States ‘‘need
only provide a factual basis for
concluding that the settlements are
reasonably adequate remedies for the
alleged harms.’’ SBC Commc’ns, 489
F.Supp.2d at 17. DuPont, referencing
the Division’s review of Monsanto’s
abandoned attempt to purchase DPL in
1998, suggests that the ‘‘government has
an extra burden * * * when it changes
its view on an identical transaction.’’ 24
But the assertion finds no support in the
language of the statute or the caselaw.
This is not surprising given that it
contravenes long-established precedent
holding that a prosecutor’s exercise of
discretion carries no estoppel effect.
Moreover, DuPont’s position would
inappropriately require the court to
engage in extensive fact finding of
historical events—in essence, a trial
within a trial—simply to determine
whether the two transactions were in
fact ‘‘identical’’ and whether the
government accepted a less effective
remedy than it would have the first
time.25
22 States
Comments at 6.
Comments at 2 & 19.
24 DuPont Comments at 3.
25 In fact, DuPont’s factual premise is flawed.
Contrary to DuPont’s suggestion, the fact that
Monsanto abandoned its initial proposed
acquisition of DPL in the face of a threatened
enforcement action by the United States does not
imply that no remedy would have been acceptable
to the United States in 1999. Rather, it implies only
that Monsanto was at that time unwilling to agree
to remedies deemed necessary by the United States.
23 DuPont
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B. The Appropriate Inquiry Is Whether
the Remedy Preserves Competition, Not
Whether It Replicates DPL
Some of the commentors criticize the
remedy, particularly the Enhanced
Stoneville Assets divestiture, for not
creating a competitor that mirrors DPL
in scope and independence.26 But they
pose the wrong standard for evaluating
the effectiveness of the remedy. Because
the antitrust laws seek to protect
competition, the purpose of the remedy
is not to recreate DPL but to preserve the
competition that DPL brought to the
market—to ensure that cotton farmers
continue to realize the competitive
benefits they would have had but for the
merger.
Thus, the key questions in evaluating
the remedy are: (1) Does it ensure that
farmers will continue to benefit from
competition to develop, commercialize
and sell cottonseed in the MidSouth and
Southeast?, and (2) Does it preserve the
likely benefits to competition that
would have arisen from development of
cottonseed for the MidSouth and
Southeast containing non-Monsanto
traits? The proposed remedy does both,
as we explain in more detail below.
For some commentors, however, no
remedy would suffice for this
transaction or even any other potential
acquisition of DPL. They essentially
argue not only that the sole effective
remedy in this case would be to block
the transaction outright but that DPL
must be kept as it is—independent of
any trait provider—in perpetuity,
available at any time for partnership
with any trait provider that chooses to
work with it.27 This is a extraordinary
proposition, and it is wrong. It relies on
a static view of the market, presuming
that DPL is essential to a competitive
traited cottonseed market; it discounts
the incentives and abilities of others,
such as Bayer and Syngenta, to compete;
it ignores market facts, such as
Stoneville’s efforts and growing success
in the MidSouth and Southeast; and it
would deny DPL and consumers the
efficiencies that would come from
vertical integration with a trait provider
(evidenced by the significant number of
26 See, e.g., States Comments at 7 (‘‘divested
Stoneville is not the equivalent of DPL’’); WFU
Comment at I (proposed remedy ‘‘does not even
come close to replacing independent DPL’’).
27 See, e.g., States Comments at 7 (‘‘[S]toneville
has been divested to Bayer, a trait development
competitor of Monsanto. Because of this, Stoneville
can never duplicate DPL’s unique position as an
independent cotton seed company that can use its
successful and high-quality germplasm to partner
with several different biotech companies to develop
viable competitive alternatives to Monsanto’s
monopolies in traits.’’); OFU Comments at 1
(Enhanced Stoneville Assets do ‘‘not take the place
of an independent Delta and Pine Land’’).
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seed companies that are vertically
integrated into trait development).
In short, the remedy, when
considered in light of the applicable
legal standard and the appropriate
inquiry, satisfies the public interest
requirements set forth in the Tunney
Act.
IV. Response to Comments Criticizing
the Sufficiency of the Remedy
Several commenters offer criticisms
regarding the sufficiency of particular
aspects of the remedy.28 Before
addressing these criticisms, it is
important to note that the remedy
should be evaluated as a whole. It is not
necessary that each asset included
within the remedy package, on a standalone basis, sufficiently preserves
competition. Rather, the key
determination is whether, as directed by
the proposed Final Judgment, the entire
remedy maintains competition for the
development, commercialization and
sale of traited cottonseed in the relevant
markets. The remedy here accomplishes
this goal by bringing together:
• An ongoing, historically successful
cottonseed company, Stoneville, that
has sold cottonseed in the MidSouth
and Southeast since 1922, and in which
Monsanto has recently invested heavily;
• Changes in Stoneville’s trait
licenses with Monsanto that give the
purchaser of the Enhanced Stoneville
Assets terms similar to those held by
DPL;
• All of Monsanto’s ongoing
germplasm enhancement efforts that
supported its internal predictions of
substantial Stoneville market share
growth over the next five years;
• Eight DPL elite conventional
breeding lines that serve as the
germplasm source for approximately
60% of DPL’s sales in the MidSouth and
Southeast;
• Twelve DPL elite conventional
breeding lines that DPL anticipated
would be the germplasm source for its
next generation of traited seed in the
MidSouth and Southeast;
• The requirement that the purchaser
of the Enhanced Stoneville Assets be
capable of and committed to using the
assets to compete for traited cottonseed
sales in the relevant markets;
• Divestiture to Syngenta of the
VipCot development work to prevent
any significant delay in bringing
cottonseed with non-Monsanto traits to
the marketplace; and
28 See States Comments at 6–8; ICTA Comments
at 6–8; AAI Comments at 8–16; DuPont Comments
at 9–18; OFU Comments at 1; WFU Comments at
1; Texas Cotton Associations at 2; ICTA Comments
at 1; Plains Justice Comments at 1; ISA Comments
at 1; 0CM Comments at 2.
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• Changes in Monsanto’s trait license
agreements with other cottonseed
companies to allow them, without
penalty, to stack non-Monsanto and
Monsanto traits and to sell cottonseed
that includes non-Monsanto traits.
This far-reaching remedy does not
depend on the future success of each
and every one of its components. Even
if some component of the remedy were
to fall short of expectations—e.g., one of
the next-generation DPL lines fails to
continue exhibiting the high
performance characteristics that it has
exhibited thus far—it would not
jeopardize the efficacy of the remedy.
Taken as a whole, there is no question
that the remedy satisfies its goal of
curing the competitive harms alleged in
the Complaint. Nevertheless, we
respond below to commentors’
particular concerns.
A. Divestiture of the Stoneville Business
Unit and Monsanto Germplasm Provide
the Acquirer a Firm Foundation on
Which To Compete in the MidSouth and
Southeast Markets
Some commenters claim that
Stoneville will not provide the acquirer
of the Enhanced Stoneville Assets with
an adequate foundation on which to
compete against Monsanto/DPL.29
Stoneville, however, is an ongoing
business, which has operated in the
relevant markets for over 80 years and
has significant capabilities and growth
potential. It offers high quality
germplasm and has a strong
developmental pipeline. Its divestiture,
coupled with additional cotton
germplasm from Monsanto’s breeding
programs, will provide the principal
acquirer—Bayer—a well-developed
infrastructure and significant
germplasm assets.
1. Stoneville Infrastructure
When Monsanto acquired Stoneville
in 2005, Stoneville was a freestanding
cottonseed company with a strong
breeding program, as well as a national
sales and marketing force. These
existing assets had been sufficient to
position Stoneville as a national
provider of traited cottonseed—second
only to DPL in the MidSouth and
Southeast. As described above,
Monsanto nonetheless took several steps
to enhance Stoneville’s breeding
capabilities. With these investments,
Stoneville is poised for significant
growth, as reflected by Monsanto’s
internal projections.
DuPont nevertheless suggests that
Stoneville’s lack of viability as an
29 See DuPont Comments at 6, 13 and 14; 0CM
Comments at 2; States Comments at 4 and 7.
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ongoing business is evidenced by trait
developers choosing not to work with
Stoneville between 1999 and 2005,
when Stoneville was independent of
Monsanto.30 In making this argument,
DuPont fails to note the fundamental
reason why trait companies, including
DuPont, chose not to work with
Stoneville; namely, that under
Stoneville’s licenses with Monsanto at
that time, Stoneville could not stack a
non-Monsanto trait with a Monsanto
trait.31 Similarly, Stoneville was likely
to be reluctant to provide a platform for
an unproven trait because the terms of
its Monsanto licenses became less
lucrative if it worked with a nonMonsanto trait (e.g., it received a
smaller share of the trait fee collected by
Monsanto from farmers). In contrast,
DPL could freely work with nonMonsanto traits, including stacking
them with Monsanto traits, without
risking reduction in its fee share or
losing its Monsanto trait license
altogether. The Enhanced Stoneville
Assets include trait licenses from
Monsanto that are comparable to those
held by DPL pre-merger, and free of the
restrictions that previously existed in
Stoneville’s licenses.
DuPont also claims that the
divestiture is insufficient in that it does
not provide the acquirer enough
breeding stations, comparing DPL’s
eleven global breeding stations with
Stoneville’s two breeding stations.32
That comparison, however, is
misleading. Though DPL has eleven
breeding stations worldwide, only five
develop varieties for the MidSouth and
Southeast. The divestiture includes the
two breeding facilities that Stoneville
used for developing MidSouth and
Southeast varieties,33 and Bayer has two
additional breeding stations located in
DuPont Comments at 15.
further suggests that Stoneville’s
inferiority as a trait partner is evidenced by
Monsanto choosing to purchase DPL. DuPont
overlooks the important fact that DPL had a
pending lawsuit against Monsanto under which
Monsanto faced a potential $2 billion liability. By
purchasing DPL, Monsanto eliminated that liability.
Although not a merger-specific efficiency,
eliminating this potential liability provides an
explanation for Monsanto’s decision to undertake
the acquisition. Monsanto’s desire to resolve that
litigation also contradicts ISA’s assertion that ‘‘the
clear reason for Monsanto’s acquisition of Delta is
elimination of competition in seeds.’’ ISA
Comments at 1.
32DuPont Comments at 15; see also States
Comments at 3.
33Monsanto also used facilities in Georgia and
North Carolina in part for cottonseed development.
Because Monsanto used those facilities for
development of several crops besides cotton, and
Monsanto included in the Enhanced Stoneville
Assets the cottonseed-related tangible assets kept at
those sites, the United States did not require
divestiture of the real property supporting those
facilities.
30
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31DuPont
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those regions, bringing Bayer’s total to
four after the divestiture. Accordingly,
as a result of the sale of Enhanced
Stoneville assets to Bayer, DPL–
Monsanto and Bayer will have breeding
infrastructures similar in size and scope
focused upon developing varieties
suited for the MidSouth and Southeast.
2. Monsanto/Stoneville Germplasm
The remedy provides the acquirer of
the Enhanced Stoneville Assets all U.S.
Stoneville cotton germplasm, as well as
germplasm from Monsanto’s Advanced
Exotic Yield and Marker Assisted
Breeding programs. For various reasons,
commentors fail to understand the
significance of these divestitures.
a. The Breeding Process
Much of the criticism results from
lack of familiarity with the cottonseed
breeding process. To address that
deficiency, we provide below a short
primer on cottonseed development.
There are two breeding stages in the
development of quality, traited
cottonseed. Breeders first develop elite
conventional (nontraited) lines and,
from those, they proceed to develop
commercial traited varieties. In
developing an elite conventional line,
the breeder begins by crossing two elite
lines that the breeder anticipates will
produce quality offspring. The result of
that cross will be many progeny plants
with differing characteristics. The
breeder then evaluates and selects some
subset of the progeny as promising
enough to continue in the breeding
process. In the greenhouse, the breeder
then self-pollinates the progeny plant
(i.e., crosses the plant with itself),
evaluates its progeny, and makes further
selections. This process is typically
repeated four times in the greenhouse as
the breeder continues to make selections
based on observable plant
characteristics. Promising lines then are
grown in the field and subjected to
additional testing.
At the end of this process, which
takes approximately six years, the
finished line can take either or both of
two paths. If the seed company intends
to commercialize the line as a
conventional variety, the company will
subject the line to an additional year of
field trials and then over the course of
the next two years ‘‘bulk’’ the line up for
commercial sale. If the seed company
intends to use the finished line as a
traited variety, the seed company will
subject the line to a separate procedure.
The finished line (the ‘‘recurrent
parent’’) will first be crossed with a
donor plant that contains the desired
trait to introduce or ‘‘introgress’’ the
trait into the recurrent parent line. After
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that initial cross, progeny plants are
selected on the basis of agronomic
characteristics and the presence of the
trait. Those plants are then typically
‘‘backcrossed’’ with the recurrent
parent, which involves pollinating the
plants with pollen from the recurrent
parent. Backcrossing brings the plant
closer to the genetics of the recurrent
parent, except that the trait is now
present. Breeders typically backcross
three to five times. Once the
backcrossing is completed, the seed
company puts the resulting traited seed
through a period of increased testing
and eventually bulking up for
commercialization. Limited quantities
of a traited variety from that recurrent
parent will be commercially available
approximately five years after the
recurrent parent is available for
breeding.34
b. Stoneville Germplasm
The proposed Final Judgment
provides the acquirer of the Enhanced
Stoneville Assets with all of Stoneville’s
U.S. germplasm.35 DuPont, however,
questions the likelihood that the
varieties in Stoneville’s development
pipeline will be successful.36 The
evidence, however, shows the strength
of the pipeline and, as Monsanto itself
had predicted, its strong likelihood of
commercial success.
Stoneville has over fifty lines in its
pipeline for possible commercialization
in the MidSouth and Southeast between
2008 and 2012. Stoneville’s pipeline is
the product of its traditional focus on
mid- to full-season varieties found in
the MidSouth as well as a more-recent
sustained and intensive research effort
to develop germplasm suitable for the
Southeast.37 Stoneville has historically
been more successful at capturing sales
in the MidSouth than in the Southeast
(as evidenced by its 2006 share of 16%
in the MidSouth versus 8% in the
Southeast) because its breeding program
had focused primarily on varieties
34 Breeding a traited variety from elite parents can
take as little as four years or as long as seven. The
seven year outer time frame can be reduced by
several means, including: using counter-seasonal
breeding; using molecular markers to reduce the
number of crosses used in introgression and
increase stages; using high quality germplasm as the
trait donor, in the case of creating a stacked variety,
using a trait donor that contains both of the desired
traits; limiting the number of official variety trials
prior to making the seed available for sale; and
bringing a more limited volume of seed to market
in the launch year.
35 As discussed above, this includes all
germplasm with the exception of the NexGen
varieties Americot acquired.
36 DuPont Comments at 9–10.
37 Full-season varieties typically perform better in
the Southeast than the early- to mid-season varieties
that excel in the MidSouth.
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harvestable early in the growing season.
When Emergent Genetics (‘‘Emergent’’)
acquired Stoneville in 1999, however, it
saw the Southeast as a lucrative growth
area and began taking steps to increase
Stoneville’s efforts to breed mid- to fullseason varieties (i.e., varieties better
suited to the longer growing season
afforded in the more southern growing
areas). To this end, in 2001 Emergent
acquired Helena Chemical’s breeding
program, which included germplasm
lines suited for the Southeast. In
addition, Emergent established a
breeding station in Arizona with the
specific mission of breeding mid- and
full-season varieties.
When Monsanto acquired Stoneville
in 2005, it continued these efforts to
breed varieties suitable for the
Southeast, significantly increasing the
number of testing plots and aggressively
using counter-season production to
accelerate the introduction of fullseason varieties. According to
Monsanto’s internal field tests,
conducted prior to entering the
agreement to acquire DPL, several of
Stoneville’s lines are performing in
yield trials on par with DPL’s most
successful varieties in the MidSouth
and Southeast, DP555 and DP444.
Indeed, Monsanto anticipated that its
efforts to improve Stoneville’s breeding
program would result in Stoneville
gradually increasing its national share
from 13% in 2006 to nearly 20% by
2010 (this estimate did not include the
likely share increases that would stem
from germplasm being developed by
Monsanto outside of Stoneville that the
proposed Final Judgment also requires
to be divested).38
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c. Additional Monsanto Germplasm
The proposed Final Judgment also
requires Monsanto to divest cotton lines
from its valuable internal research and
development efforts—the Advanced
Exotic Yield lines and the Marker
Assisted Breeding (‘‘MAB’’)
populations—regardless of whether
Monsanto considered those lines to be
part of Stoneville. In this way, the
remedy ensures that the acquirer has the
breadth of Monsanto’s cottonseed
38 DuPont notes that Stoneville’s share in the
Southeast and MidSouth has been in decline as
evidence that its potential to compete in the future
is not bright. DuPont Comments at 14. However,
because Emergent’s and Monsanto’s investments in
Stoneville’s breeding capabilities are so recent,
Stoneville’s share declines do not accurately reflect
Stoneville’s potential. In 2007, Stoneville reversed
the trend of declining share. According to USDA’s
annual reports on cotton varieties planted,
Stoneville’s breeding efforts are, as Monsanto
predicted, beginning to produce results. From 2006
to 2007, Stoneville’s share increased from
approximately 13% to 15% nationwide and from
just over 8% to 11% in the Southeast.
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development programs that would have
been used to compete against DPL
absent the transaction.
i. Advanced Exotic Yield Lines
DuPont implicitly criticizes the
inclusion of the Advanced Exotic Yield
Lines in the divestiture package,
suggesting that because the CIS
describes the value of these
developmental lines as ‘‘promising,’’ the
lines likely will be of little commercial
value to the acquirer of the Enhanced
Stoneville Assets.39 Although Monsanto
started its Advanced Exotic Yield
program as a means of identifying traits
in exotic cotton plants that would
increase yields when bred into more
traditional commercial lines, that
program also resulted in the creation of
finished elite lines that have achieved
significantly better yields in field tests
than the current leading varieties in the
MidSouth and Southeast. As noted in
the CIS, Monsanto planned to bring the
first traited varieties from these lines to
market by 2009. Monsanto forecasted
that these traited varieties would be a
significant driver of market share for
Stoneville.40
AAI suggests that the acquirer will
have little incentive to commercialize
these varieties because they contain
Monsanto traits. The comment offers no
explanation of why the acquirer would
forgo a significant profit opportunity by
abandoning germplasm that appears to
have significant advantages relative to
competing germplasm that also contains
Monsanto traits. In any case, Bayer has
already publicly touted its acquisition of
the Enhanced Stoneville Assets as
including ‘‘access to additional high
performing cotton products with insectresistant and herbicide-tolerant
Monsanto traits.’’41
AAI also contends that many of the
Advanced Exotic Yield Lines ‘‘are of
extremely limited value to the acquirer’’
because they already contain Monsanto
traits and ‘‘[b]reeding out Monsanto
traits and then breeding in competing
traits will take a long time.’’42 AAI’s
criticism, however, reflects a
misunderstanding of the value of the
lines and the various methods by which
the acquirer can use them. In the near
term, the acquirer can commercialize
varieties from the Advanced Exotic
Yield Lines that currently contain
Monsanto traits. Sales of such varieties
likely would be important for the
39 DuPont
Comments at 11 and 15.
their origin in a trait research program,
further breeding and commercialization of these
lines requires only traditional breeding techniques.
41Bayer, Investor Handout, Q2 2007, https://
www.investor.bayer.de/user_upload/2747/.
42 AAI Comments at 13.
40 Despite
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acquirer in growing Stoneville’s market
share. In the medium and longer terms,
the acquirer can use the lines as
breeding stock to introduce varieties
containing, in whole or in part, nonMonsanto traits. It can do this by two
different methods. First, it could
simultaneously breed out any Monsanto
traits that are not desired while breeding
in new traits. Under this method, it
could use any of the lines, including the
four recurrent parents,43 as a parent in
crosses that ultimately result in
commercial varieties containing the
desired traits, including varieties
containing only non-Monsanto traits.
Such a process could be carried out
within the five year time horizon during
which DPL anticipated it could bring
non-Monsanto traited seed to market.44
Under the second method, which would
take additional time, the acquirer could
breed out the Monsanto traits to make
new conventional lines 45 and then use
those conventional lines as breeding
stock to launch varieties containing
non-Monsanto traits.
Commenters’ concerns regarding the
rights retained by Monsanto to the
Advanced Exotic Yield Lines also lack
merit.46 The rights retained by
Monsanto to these lines merely allow
Monsanto to continue a trait research
program that, if successful in identifying
a yield trait that could be introgressed
into cotton varieties, would significantly
benefit cotton farmers. Moreover, the
proposed Final Judgment makes clear
that, whether or not its research
program is successful, Monsanto cannot
encumber in any way the acquirer’s use
of the Advanced Exotic Yield Lines.
ii. MAB Populations
AAI and DuPont question the value of
the MAB lines to the acquirer of the
Enhanced Stoneville Assets, pointing to
language in the CIS which states that
43 One of the recurrent parents is a conventional
line and can be used immediately for breeding a
variety that contains only non-Monsanto traits. The
other three recurrent parents were originally created
by crossing a variety containing Bollgard with an
exotic variety and those parents accordingly contain
the Bollgard I trait. If Bayer chooses, it can use these
three parents immediately to breed varieties that
contain a stack of a non-Monsanto herbicide trait
and Bollgard II (breeding in Bollgard II does not
require breeding out Bollgard I).
44 Under this method, a breeder would cross an
Advance Exotic Yield Line containing Monsanto
traits with a line that contains non-Monsanto traits.
The breeder can then select from the progeny
offspring that lack the Monsanto traits and advance
those offspring through traditional breeding
methods to create the desired variety.
45 Breeders can create a finished conventional
line by crossing an Advanced Exotic Yield Line
containing Monsanto traits with a conventional line
and then selecting progeny that lack traits for
further breeding.
46 See ICTA Comments at 7; AAI Comments at 9.
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some of the MAB lines contain
Monsanto’s traits.47 In essence, such
comments suggest that the Enhanced
Stoneville Assets divestiture is only
effective as a remedy to the extent the
divestiture gives the acquirer access to
conventional cotton lines. Since the
acquirer would need to breed
Monsanto’s traits out of some of the
MAB lines to create non-Monsanto
traited lines, the commenters conclude
that the competitive value of the MAB
lines to the acquirer is limited in the
near term and at most questionable in
the longer term. That conclusion is
incorrect.
Monsanto’s MAB cotton program
involved identifying genetic markers for
important agronomic characteristics in
the progeny resulting from the cross of
two elite lines. The goal of the MAB
program was two-fold. First, breeders
could use these markers to make better
informed selections from the progeny
plants and could thereby produce a
variety that likely was agronomically
superior to, and bred more quickly than,
a variety derived from traditional
breeding selection methods. Monsanto
anticipated that commercial varieties
from the MAB program would become
available as early as 2012. Second, and
in the longer term, a large library of
such genotypic information would offer
breeders the ability to make better
decisions about what elite varieties to
cross in the first instance. Accordingly,
divesting the MAB populations and the
accompanying molecular mapping data
provides the acquirer of the Enhanced
Stoneville Assets with germplasm and
genetic information that will enhance its
offerings over the medium term and
provide a significant informational
foundation for successful competition
over the longer term.
With respect to the specific concern
that the MAB populations are of little
value to the acquirer because some
contain Monsanto traits, the AAI
overstates the scope of the limitation
articulated in the CIS. While many of
the MAB populations are based on a
cross involving a parent that contains a
Monsanto trait, approximately 37% of
them are not. Moreover, as explained
above, the time line for creating and
commercializing conventional versions
from lines containing Monsanto traits,
or creating versions containing traits
other than Monsanto’s, is approximately
five years.
B. Additional DPL Germplasm Provides
Important and Meaningful Value
Given the growth projections in
Monsanto’s business documents, the
47 AAI
Comments at 13; DuPont Comments at 11.
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Stoneville germplasm combined with
the Monsanto Advanced Exotic Yield
and MAB cottonseed lines arguably
would be sufficient to enable the
acquirer of the Enhanced Stoneville
Assets to compete effectively against
DPL cottonseed. However, the proposed
Final Judgment seeks to further ensure
effective competition by supplementing
the Monsanto assets with certain key
DPL germplasm lines consisting of 20
lines representing the pedigrees of many
of DPL’s popular current varieties in the
MidSouth and Southeast as well as a
significant portion of DPL’s breeding
pipeline for these areas. Commenters
had several concerns regarding these 20
lines,48 which we address below.
1. The DPL Germplasm Is of High
Quality
Some commenters question whether
the 20 DPL lines will produce
competitive traited varieties.49 The
United States used two methods to
select the 20 lines, both of which were
designed to identify the lines that had
the greatest chance of commercial
success in the MidSouth and the
Southeast. First, the United States
looked to the germplasm in the
pedigrees of the DPL varieties currently
performing best in the MidSouth and
Southeast (based on total sales). The
eight divested DPL lines that fall into
this germplasm category 50 are prevalent
in the pedigrees of the DPL varieties
most successful in the MidSouth and
Southeast today; five of these lines 51 are
the recurrent parents of the DPL
varieties accounting for about 60% of
DPL’s 2006 cottonseed sales in the
Southeast—the growing region where
DPL holds the greatest share
advantage.52 Any of these lines could be
48 See AAI Comments at 12; DuPont Comments at
12; and OCM Comments at 3.
49 For example, DuPont raises questions about the
process used in selecting these 20 lines. DuPont
Comments at 12. The AAI suggests that the chances
of the government picking good varieties is low.
AAI Comments at 13.
50 Lines DP 5690, DP 491, DP 2156, DP 565, DP
5305, DP 5415, and Delta Pearl.
51 Lines AZ2099, DP 491, DP 565, DP 415, and
Delta Pearl. Delta Pearl is the recurrent parent of
DPL’s wildly successful DP 555 BGIRR (which
accounted for over 18% of all U.S. cottonseed sales
in 2007 and over 80% of total cottonseed sales in
the Southeast in 2007). Dupont notes ‘‘the CIS does
not disclose how many other DPL germplasm lines
are represented in the lineage of these currently
popular varieties.’’ DuPont Comments at 12. No
other DPL germplasm lines are represented in the
lineage of the traited varieties derived from these
five lines.
52 OCM’s and AAI’s representation that these
eight lines reflect only 1% of cotton acreage is
based only on their share of sales when offered as
conventional commercial varieties. OCM Comments
at 3; AAI Comments at 12. However, the relevant
statistic is the one cited above and in the CIS;
namely, the role these lines have had in fostering
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used immediately as a recurrent parent
for a traited variety, as well as for
breeding stock for developing new elite
lines.
Second, the United States examined
what germplasm DPL was counting on
for its future seed sales, recognizing that
breeding programs are not static. Thus,
the other twelve DPL lines included in
the divestiture package—even though
not currently offered for sale or found in
the pedigrees of current bestsellers—
were selected because DPL gave them
the highest rating of the select group of
lines that it had in the pipeline for trait
introduction in its MidSouth and
Southeast breeding programs.53 DPL
had in fact already introgressed
Syngenta’s VipCot trait—the foundation
of DPL’s effort to move away from
Monsanto—into these lines, revealing
DPL’s confidence that they were most
likely to produce high yielding varieties
suitable for the MidSouth and
Southeast.54 These lines would likely
have been the source for any nonMonsanto traited varieties that DPL
would have brought to market in the
MidSouth and Southeast from 2012 to
2016. Because these lines are finished
elite lines, any competent breeder (such
as the breeding personnel at Stoneville
and Bayer) could have traited versions
of any of these lines ready for
commercialization within
approximately the next five years, i.e.,
within the same time frame that DPL
could bring a non-Monsanto herbicidetolerant seed to market.55
Finally, some commenters opine that
the mere fact that this germplasm has
not yet been tested in the marketplace
DPL’s current share of traited varieties in the
MidSouth and Southeast.
53 The United States’s investigation revealed that
over the past several years DPL’s breeders have
established a four-tier system for ranking the
potential of germplasm the breeders have under
development. From 2004 (when DPL set up the
rating system) to 2007, only fifteen lines across
DPL’s five MidSouth and Southeast oriented
breeding stations received DPL’s highest internal
ranking. The ranks assigned by DPL reflect the
results of extensive field testing. Under the
proposed Final Judgment, twelve of those lines will
go to the acquirer of the Enhanced Stoneville
Assets.
54 Similarly, in 2006 DPL attempted to introduce
potential OptimumGat events into seven DPL lines,
hoping by that process to create a plant in which
OptimumGat successfully imparted herbicide
tolerance. While that attempt by DPL and DuPont
failed to produce any potential candidates for use
as an OptimumGat donor parent, the fact that all
seven of the lines used in that experiment are
among the twelve divested further demonstrates the
high regard DPL had for these lines.
55 Thus, AAI’s criticism (p. 12) that the ‘‘acquirer
is therefore obtaining only the raw inputs necessary
to breed varieties that could be commercially viable
in the future and only after considerable
expenditure’’ is incorrect.
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inherently diminishes its value.56 As
discussed above, the divested material
is hardly of unpredictable quality. The
twelve lines of DPL germplasm were
selected precisely because those lines’
superior performance had already been
observed and relied upon by DPL’s
breeders.57 DPL was developing the next
generation of germplasm that it planned
to use in connection with marketing
non-Monsanto traits. Divestiture of this
germplasm will allow the acquirer to
continue these efforts and not rely
solely on currently available material.
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2. The Acquirer Will Be Able To Use
This Germplasm Effectively
Some commenters suggest that it will
take the acquirer anywhere from eight to
fifteen years to commercialize traited
varieties from these 20 lines.58 To fact,
it should take far less time. Because all
20 of the DPL lines in the Enhanced
Stoneville Assets are finished elite
conventional lines, they can be
immediately used as a recurrent parent
for a cross with a trait donor. Assuming
competing traits are available to breed
into them, traited varieties from these
lines could reach the market in
approximately five years—the same
general time frame in which DPL could
have introduced non-Monsanto traited
varieties absent the merger.59
56 See, e.g., ICTA Comments at 7 (‘‘Twelve of the
20 lines are experimental lines with unproven and
hence uncertain commercial potential.’’).
57 In further support of its claim that 20 lines are
insufficient, DuPont claims that ‘‘DPL introduced
64 unique cotton varieties in the past eight years,
but only 14 ever came to represent 1% or more of
annual U.S. cottonseed acres.’’ DuPont Comments
at 16. The statistic, however, is misleading. One
elite breeding line can result in multiple unique
varieties in two independent ways: varieties with
the same recurrent parent can be differentiated
based on their trait composition; additionally, the
process of introgressing a trait into a conventional
elite parent may yield multiple promising and
distinctive progeny that have commercial potential.
For example, Delta Pearl is the recurrent parent of
five traited varieties introduced by DPL between
2000 and 2006 as well as being offered as a
conventional variety. Similarly, DP491 is the
recurrent parent of four traited varieties as well as
being offered as a conventional variety. Thus,
divesting 20 lines provides the potential for many
more than 20 commercial varieties.
58 Several commenters, citing provisions in the
Complaint (¶ 15) and the CIS (at p. 16), provide
time frames ranging from eight to fifteen years for
how long it would take the acquirer to bring traited
varieties of the DPL germplasm to market. E.g.,
States Comments at 6 (8–10 years); AAI Comments
at 12 (10 years); and OCM Comments at 2 (8–15
years).
59 Commenters ignore the fact that DPL has
already completed the bulk of the breeding process
on the divested lines (i.e., the first six or seven years
of making crosses and winnowing progeny).
Commenters’ citations to the Complaint and CIS are
thus inapplicable. See Complaint ¶ 15 (referring to
the time period for bringing a new variety to market
from an initial cross of two cotton lines—the
divested lines are well past that stage) and CIS at
16 (referring to DPL using the divested lines to
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Contrary to DuPont’s suggestion,60 the
acquirer of the Enhanced Stoneville
Assets will not be at a disadvantage
with respect to effectively using the DPL
germplasm lines included in the
package. The proposed Final Judgment
specifically provides that the acquirer
will receive applicable performance
data and other information.61 Such
information transfers are a routine
practice in the seed industry when
germplasm or seed companies are
bought or sold (which also occurs
routinely)—the books, logs, and other
documentation about a breeding line are
transferred with the line even if the
breeder does not go to the new owner
of the line. These materials will readily
allow the Stoneville breeders to
understand the work that has been done
on these lines to date and to move the
lines forward in their breeding
program.62
The States also contend that ‘‘even
post-acquisition, Monsanto retains the
right to * * * preclude [the acquirer of
the divested DPL lines from us[ing]
them with non-Monsanto cotton biotech
traits.’’ States Comments at 7. Under the
proposed Final Judgment, the acquirer
of the DPL lines can freely use them to
create varieties that contain (a) solely
non-Monsanto traits, (b) Monsanto’s
Bollgard II and non-Monsanto herbicide
tolerant traits, and (c) Monsanto’s Flex,
non-Monsanto insect resistant traits and
non-Monsanto herbicide tolerant traits.
The only limitation regarding use of
non-Monsanto traits is that for a period
of seven years the acquirer cannot
commercialize varieties from the DPL
lines that solely have Bollgard II, Flex
and a non-glyphosate cotton herbicide
tolerant trait currently commercialized
in cotton. The only non-glyphosate
cotton herbicide tolerant trait currently
commercialized in cotton is Bayer’s
Liberty Link. This limitation adds to
Bayer’s incentive to introduce a nonMonsanto glyphosate tolerant cotton
trait as a substitute for Monsanto’s Flex.
3. Monsanto/DPL’s Use of the
Germplasm Does Not Diminish Its Value
to the Acquirer and Provides Farmers
Continued Benefits
Some commenters claim that the fact
that Monsanto retained the right to
continue working with the DPL lines, so
long as the commercialized variety
bring varieties to market ‘‘over’’ the course of the
next decade, not, as AAI suggests, for at least
another ten years).
60 DuPont Comments at 13.
61 See proposed Final Judgment Schedule B,
Section 2.
62 Bayer has already received this information
from DPL in conjunction with the divestiture of the
20 DPL lines.
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contains Monsanto-only traits, means
that these lines have little value to the
acquirer 63 and provides Monsanto an
improper benefit.64 First, to the extent
that the DPL germplasm provides the
acquirer of the Enhanced Stoneville
Assets with a variety that has strong
agronomic characteristics, the acquirer
will have every incentive to market that
product. Indeed, rather than being
reason for concern, Monsanto’s desire to
retain rights to these lines is further
indication of the value of this
germplasm within DPL’s breeding
program.
Second, the licensing back of the lines
to Monsanto/DPL benefits cotton
farmers. For example, if Monsanto did
not have a license for the to-be-divested
DPL lines that are recurrent parents to
existing DPL traited varieties (including
DP555, which contains Monsanto’s
traits), Monsanto would have to remove
these varieties from the market,
significantly limiting options for cotton
farmers. Similarly, without such a
license, Monsanto would have to
discard any varieties in DPL’s
developmental pipeline that have the
divested lines as a recurrent parent,
even if those lines already contain only
Monsanto’s traits. The commenters do
not explain why competition would be
served by denying cotton farmers these
varieties.65
C. The Remedy Preserves Incentives and
Opportunities for Effective Traited
Cottonseed and Trait Development
Competition
Commentors expressed concern about
the opportunities for trait developers.
Those concerns, however, are misplaced
as discussed below.
1. Syngenta Will be Able to Effectively
Use the VipCot Assets
Some commenters 66 express concern
that certain provisions of the license
63 States Comments at 7 (‘‘even post-acquisition,
Monsanto retains the right to sell the most popular
seeds from those lines’’); OAG at 3 (20 lines ‘‘is not
even a true divestiture’’); DuPont Comments at 13
(divestiture of DPL germplasm is non-exclusive).
64 ICTA Comments at 7; see also AAI Comments
at 10; DuPont Comments at 13.
65 ICTA’s concern about the provision allowing
DPL to sell conventional versions of the DPL
divested lines is also misplaced. ICTA Comments
at 4 (‘‘DoJ has absolutely no basis for proposing, or
assessing the adequacy of the remedy cited above’’).
At the time the Complaint was filed, the 2007 seed
purchasing season was already under way and DPL
was selling some of the divested lines as
conventional varieties. Thus, the provision
permitting DPL to continue to sell these varieties in
2007 merely avoided disruption to farmers who
wanted to buy these conventional varieties for that
season.
66 See e.g., ICTA Comments at 7–8; AAI
Comments at 10.
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agreements accompanying the
divestiture of the VipCot Assets will
unnecessarily restrict Syngenta’s use of
the assets.67
As noted above, the development of
Syngenta’s VipCot trait in DPL seed was
at an advanced stage when Monsanto’s
acquisition of DPL was proposed. The
United States required the divestiture of
the most advanced of DPL’s VipCot
lines not to ensure that Syngenta could
replace Stoneville as a competitor
against DPL the Enhanced Stoneville
Assets divestiture addresses that harm
but to prevent any delay to VipCot’s
commercialization as a result of the
merger. The terms of the proposed Final
Judgment will provide Syngenta the
rights it needs to bring VipCot to market
and, thus, fulfill the goal that the VipCot
Assets divestiture is intended to
accomplish.
As provided in the proposed Final
Judgment, the divestiture of these 43
lines to Syngenta offers several possible
paths to market for this traited
germplasm.68 Syngenta could start its
own seed company using this
germplasm as a base either on its own
or via a joint venture—and make sales
of the traited seed directly to
distributors or farmers. Syngenta
already operates soy and corn seed
companies in the United States and is
one of the largest providers of cottonrelated herbicides and insecticides in
the world. Syngenta also is a partner
with DuPont in a recently formed joint
venture called Greenleaf Genetics,
which the companies established to outlicense the companies’ proprietary corn
and soybean genetics and
biotechnology. In addition, Syngenta
has the option of licensing the traited
germplasm to other seed companies,
such as Bayer, Dow and Americot,
which already have breeding and
distribution programs in place.69
The requirement in the proposed
Final Judgment that a commercialized
variety derived from the VipCot Assets
contain one of four listed Syngenta
insect-resistant events is not unduly
restrictive.70 These are the four
67 The proposed Final Judgment requires
Monsanto to divest to Syngenta 43 advanced DPL
germplasm lines traited with VipCot and related
assets necessary to bring varieties from these lines
to market.
68 The United States has worked with Monsanto
and Syngenta to ensure that the divestiture
(including access to any required licenses) is
accomplished under terms that do not restrict
Syngenta’s competitiveness and are commercially
reasonable.
69 Of course, Syngenta also could license just the
VipCot trait to seed companies if the DPL-traited
germplasm is not attractive to potential licensees or
if Syngenta wished to keep the DPL germplasm for
its own branded seed product.
70 See AAI Comments at 10.
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‘‘versions’’ of the insect-resistant trait
that Syngenta and DPL were most
confident could achieve commercial
success in the near-to-medium-term.
This restriction, therefore, is directly
tied to the harm that divesting the
VipCot Assets is designed to remedy;
namely, delay in the introduction of the
VipCot traits that DPL and Syngenta had
been positioning to enter the market.71
It is unlikely that any new insectresistant traits developed by Syngenta
other than VipCot would be available
for more than a decade, and any such
trait likely could in any event be stacked
with one of the four existing events
consistent with the proposed Final
Judgment.
2. The Remedy Will Preserve
Opportunities for Trait Developers to
Market Nonmonsanto Traits In
Competitive Cottonseed
Some commenters expressed concern
that post-merger there will no longer be
a sufficient base of non-Monsanto
controlled cottonseed to support future
trait development.72 However, the
Enhanced Stoneville Assets divestiture
provided for in the proposed Final
Judgment establishes a substantial
future platform for cotton trait
developers to use to reach farmers in the
MidSouth and Southeast.
In addition, the third party license
changes required by the proposed Final
Judgment promote the development and
commercialization of competitive
cottonseed with non-Monsanto traits by
giving cottonseed companies the ability
to partner with trait developers other
than Monsanto without any financial
penalty. Currently, DPL seed accounts
for approximately 43 percent of U.S.
cottonseed acres, leaving over half of all
U.S. cottonseed acres available to trait
developers who seek to compete against
the merged Monsanto/DPL. Commenters
fail to explain why this amount of
acreage is insufficient, especially given
the additional returns on investment in
cotton trait research that could be
gained from Stoneville’s likely growth
in the MidSouth and Southeast, possible
cross-crop trait applications, and
international cottonseed markets.
With regard to the license changes,
AAI suggests that Monsanto’s trait
licensing practices should be addressed
in a separate case, claiming that the
required licensing modifications do not
help to remedy the loss of competition
alleged in the Complaint.73 To the
contrary, the modifications specifically
address competition lost from
Monsanto’s acquisition of DPL, since
DPL’s licenses did not limit its ability
and incentive to work with nonMonsanto trait providers.74 These trait
providers will now be able to work with
cottonseed companies who previously
had restricted licenses.
3. The Remedy Should Not—and Does
Not—Guarantee the Introduction of
DuPont’s OptimumGat Trait
Several commenters express concern
that the remedy is insufficient because
it does not ensure that DuPont’s
OptimumGat trait will reach the
market.75 As discussed above, the
proposed remedy preserves the
potential for the development and
introduction of competing herbicidetolerant traits in the MidSouth and
Southeast. OptimumGat may prove to be
such a trait, but there was never any
certainty of that even without the
merger.76 Indeed, DPL was itself
exploring herbicide-tolerant trait
alternatives with developers other than
DuPont. For example, Bayer and
Syngenta independently have been
working on herbicide-tolerant traits for
cotton that could be commercialized on
or before the time when DPL could have
brought OptimumGat to market absent
the merger. Thus, there was never any
guarantee that OptimumGat would
ultimately be commercialized in cotton
even if DuPont were able to continue
working with an independent DPL,77
and it would be inappropriate for an
antitrust remedy to establish a guarantee
that the market would not have
provided.
73 AAI
Comments at 15.
requiring these changes, the United States
made no determination as to whether any
provisions in Monsanto’s licenses violated the
antitrust laws.
75 See, e.g, DuPont Comments at 2 (DuPont
terminating research and development for
OptimumGat in cotton); States Comments at 4
(claiming that ‘‘because of DeltaMax’s termination,
Monsanto’s cotton herbicide-tolerant trait
dominance is assured for the foreseeable future’’).
76 As noted above (supra p. 5), development
efforts for introducing OptimumGat in DPL
germplasm were at a preliminary stage.
77 See DPL 2006 Form 10K.
74 In
71 Contrary to the apparent perception of some
commentors (see, e.g., ICTA Comments at 8), this
aspect of the proposed Final Judgment is not
designed to ensure, by itself, an adequate platform
of high-quality germplasm for future trait
developers. The limitations on Syngenta’s use of the
germplasm are appropriate to match this aspect of
the remedy to its more-narrow objective preventing
the merger from delaying VipCot’s
commercialization—and unrestricted access to this
germplasm is unnecessary in light of the other
elements of the proposed Final Judgment.
72 See, e.g., OFU Comments at I (‘‘competing seed
trait developers will have great difficulty gaining
access to the market’’); OCM Comments at 3.
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4. The Remedy Will Preserve the
Number of ‘‘Platforms’’ for Trait
Development That Existed Pre-Merger
Commenters suggest that because
Bayer itself develops traits it will not
work with other trait developers and
that the remedy thus fails to preserve
trait development opportunities.78 Even
if the claim were true, the competitive
harm identified in the Complaint is still
addressed: pre-merger, farmers in the
MidSouth and Southeast looked forward
to a choice between Stoneville/
Monsanto and DPL/non-Monsanto
traited cottonseed; post-merger they still
will have a choice as they will look
forward to competition between
Stoneville/Bayer and DPL/Monsanto.
It is important to bear in mind that
DPL itself might not have continued to
work with multiple competing trait
developers. Contemporaneous DPL
business documents indicate that DPL
likely would have selected only one
non-Monsanto stack to bring to market
in light of the costs associated with
breeding traited varieties, commercially
distributing multiple varieties, and
managing the requirements and earning
potentials of licences with trait
developers. Thus, DPL likely would
have chosen only one non-Monsanto
insect-resistant trait and one nonMonsanto herbicide-tolerant trait to
promote. It is also likely that DPL would
have continued offering a Monsanto
stack because of the apparent market
demand for Monsanto’s traits.79
In any event, Bayer has very strong
incentives to use other third-party traits
if those traits are better than the traits
it can develop on its own. Indeed,
Monsanto will have the same incentive.
Competition from one will spur the
other to try to offer the best product,
regardless of whether the included trait
is developed in-house or licensed from
a third-party.80 (And, it bears
remembering, such development of
traits is, and would have been absent
the merger, likely to occur nearly a
decade in the future.)
V. Response to Comments That the
Remedy Is Not Workable
A number of commenters posit that
the remedy provided for in the proposed
Final Judgment is not in the public
78 States
Comments at 7.
agreements with Syngenta and DuPont
did not require exclusivity, and future market
conditions (especially demand by farmers for
Monsanto’s proven traits) might have dictated that
DPL continue offering Monsanto traits. Internal DPL
business documents suggest that it planned to
follow this course.
80 Recognizing this dynamic, third-party trait
developers will have incentives to continue
research efforts.
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79 DPL’s
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interest because the remedy is
‘‘conduct-based’’81 as opposed to
‘‘structural,’’ and because the required
divestitures have ‘‘strings attached,’’
such as licenses running between
Monsanto and the acquirers of the
divested assets. These commenters
further assert that these provisions
essentially render the remedy too costly
to administer, or will require too much
ongoing involvement and policing by
the United States or the Court to be
effective. As explained below, the
proposed Final Judgment provides an
effective remedy that is clean and
certain (i.e., consisting of one-time,
well-defined events that do not involve
costly government regulation of the
market), is consistent with the Merger
Remedy Guide issued by the United
States,82 and does not involve
cumbersome monitoring by the United
States or the Court.
A. The Divestitures and License
Changes Are One-Time Events, Not
Ongoing Behavioral Remedies
The remedies proposed by the United
States are one-time events calling for the
divestiture of identifiable and
transferable assets and intellectual
property as well as modifications to
certain licenses. These are not conduct
remedies that involve ongoing
entanglement in market operations or
regulation of Monsanto’s ongoing
conduct.83
Specifically, the proposed Final
Judgment calls for the divestiture of
Stoneville, an ongoing cottonseed
business that has been bought and sold
on several occasions, including all of
Stoneville’s domestic germplasm,
breeding, and sales and marketing
assets, together with the information
and intellectual property necessary to
use those physical assets. In addition to
the Stoneville business unit, the remedy
calls for the divestiture of additional
complementary assets, i.e., the 20 DPL
cotton germplasm lines.84 The transfer
of this package of assets is a one-time
event that constitutes a workable
remedy to preserve competition and
provides clear lines of ownership, with
81 See e.g., AAI Comments at 9–10; CFS
Comments at 7–9; DuPont Comments at 13–14;
States Comment at 7.
82 See U.S. Dep’t. of Justice, Antitrust Div.,
Antitrust Division Policy Guide to Merger
Remedies, (October 2004), available at https://
www.usdoj.gov/atr/public/guidelines/205108.pdf
(hereinafter ‘‘Merger Remedy Guide’’).
83 See Merger Remedy Guide at 7–12 (describing
the differences between structural and conduct
remedies).
84 The Merger Remedy Guide recognizes that
there may be instances when ‘‘additional assets
from the merging firms will need to be included in
the divestiture package.’’ Merger Remedy Guide at
12.
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Bayer owning outright the Stoneville
business, as well as the 20 lines
formerly belonging to DPL. In its basic
structure, this remedy is not different
from the commercial transfer and
licensing of germplasm and related
intellectual property that occurs
routinely in the marketplace.
Some commenters suggest that
aspects of the remedy involving
licensing arrangements are unworkable
conduct remedies that are inconsistent
with the United States’s policies on
merger remedies.85 The United States’s
Merger Remedy Guide, however,
explains that proper merger remedies
can ‘‘involve the sale of physical assets’’
as well as the ‘‘sale or licensing of
intellectual property.’’ 86 Licensing is
routine in this industry, where
companies often combine the work of
others (e.g., germplasm, traits,
intellectual property) with their own
useful developments and introduce
better products for the market. The
licenses in this case were crafted so that
each company would know which
rights it would retain after the
divestiture to help ensure a workable
remedy.
The divestiture of the VipCot Assets
to Syngenta is also a workable remedy.
The germplasm divestiture is
accomplished though a license to
Syngenta rather than absolute
ownership, but the method of transfer
will not affect Syngenta’s ability to
compete effectively as Syngenta will
have a non-terminable and royalty-free
license to use the divested lines.87 As
discussed above, the provisions in the
proposed Final Judgment offer Syngenta
several alternatives for bringing the DPL
germplasm to market, and entry of
VipCot-traited varieties will alter the
structure of the traited cottonseed
market regardless of the means selected.
Finally, the proposed Final
Judgment’s requirement that Monsanto
modify existing third party licenses is
also a one-time event. The changes to
these licenses require modification of
certain terms that will enable those
third parties to work more readily with
non-Monsanto trait providers.
B. Monitoring Compliance With the
Remedy Will Not Unduly Burden the
United States or the Court
Contrary to some commenters’
suggestions, the terms of the proposed
Final Judgment do not require
cumbersome monitoring of the
85 ICTA
Comments at 6–8; AAI Comments at 9.
Remedy Guide at 7.
87 Merger Remedy Guide at 15 n.22 (describing
requirements that the Division typically imposes on
structural remedies involving licensing).
86 Merger
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marketplace by the United States or the
Court.88 For example, pointing to
certain conditions and limitations
placed on the germplasm to be divested
under the proposed Final Judgment,
AAI asserts that the divestitures are a
‘‘conduct-based, regulatory-style ‘fix’
that imposes on this Court a monitoring
and compliance burden that it should be
loathe to undertake.’’ 89 These criticisms
grossly overstate monitoring issues
associated with the proposed Final
Judgment.
As stated above, the asset divestitures
and license modifications are one-time
events that, in fact, have already been
accomplished in their entirety or have
been implemented successfully in
significant part. There remains, of
course, the possibility that a dispute
under one of the asset purchase
agreements or licenses will arise in the
future. Such a possibility exists in
nearly every case in which the United
States requires divestitures. As a general
matter, such disputes would not require
intervention by the United States, as the
parties to the dispute can rely on
contract procedures and other remedial
steps to reach a resolution. Accordingly,
while the United States will continue to
monitor Monsanto’s behavior to ensure
compliance with the judgment, the
prospect of the United States and this
Court becoming enmeshed in the types
of disputes enumerated by the
commenters is both exaggerated and
remote.
VI. Response to Comments That Raise
Issues Beyond the Scope of the Court’s
Review
Several commenters express concerns
about competitive issues not raised in
the Complaint. As discussed above in
Section III.A., issues beyond the scope
of the Complaint are outside the
purview of the Court. However, even if
the Court were to consider the merits of
these alleged concerns, the United
States appropriately concluded that
permitting the transaction will not give
rise to the posited harms.
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A. Crops Other Than Cotton
Several commenters expressed
concern that the merger will have a
detrimental impact on the development
of traits for corn and soy.90 These
commenters argue that a reduced
revenue opportunity in cotton will make
trait producers hesitant to develop traits
as they will have fewer opportunities to
88 See
ICTA Comments at 8–9; AAI Comments at
11.
89 AAI
Comments at 11.
e.g., States Comments at 5, 9; ISA
Comments at 1; OFU Comments at 1; OCM
Comments at 2; Plains Justice Comments at 1.
90 See,
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profit from their investment. Market
conditions belie that prediction.
The revenue opportunities for corn
and soy traits far exceed those for
cotton, based on available acres. The
market for biotech soy is more than four
times greater than the market for biotech
cotton in the United States, and more
than three times greater worldwide. The
market for biotech corn is at least four
times greater than that for cotton in the
United States, and at least 1.3 times
greater than that for cotton worldwide.
Within the United States, the combined
market opportunity to sell biotech soy
and biotech corn is roughly 130 million
acres, whereas there are only 15 million
cotton acres.91 That revenue
opportunity has proven sufficient for
DuPont to continue its
commercialization of OptimumGat in
corn and soy and to continue research
and development of other transgenic
traits 92 and likely would provide
similar incentives for other trait
developers.
B. Conventional Cottonseed
ICTA suggests that the transaction
will result in harm to a conventional
cottonseed market.93 The merger does
not, however, substantially alter
incentives of seed companies to offer
conventional varieties. Absent the
merger, DPL’s share of the trait fee
charged by Monsanto reflected a
significant share of DPL’s revenues, and
DPL’s revenues from trait fees would
have become even larger as it shifted to
non-Monsanto traits. Accordingly, even
without the merger, DPL would have
had substantial incentives to shift sales
from conventional to traited seed so as
to earn these fees. Further, ICTA fails to
explain why, assuming there is a core
set of farmers committed to using
conventional seed, Monsanto or Bayer
would not continue to have sufficient
incentives to provide conventional seed
to them.94
C. The Southwest and West Traited
Cottonseed Markets
ICTA contends that the transaction
will harm competition for traited
91 Monsanto estimates, from Hugh Grant,
Chairman, President, and CEO, Monsanto,
Presentation at Sanford Bernstein Strategic
Decisions Conference, slide 11 (May 30, 2007),
https://www.monsanto.com/pdf/investors/2007/0530-07.pdf.
92 See Investor Day Presentation at slides 34, 36
and 40.
93 See, e.g., ICTA at 28, 43.
94 ICTA notes that ‘‘40%’’ of the 36 conventional
varieties planted in 2006 were DPL varieties.
According to USDA 2006 data, DPL offered fifteen
conventional varieties, with seven of those fifteen
having sales in the MidSouth and Southeast. Six of
those seven were divested to Bayer as part of the
Enhanced Stoneville Assets.
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cottonseed in the Southwest and West
regions of the United States. A close
examination of the facts reveals the lack
of support for ICTA’s claim.95
With respect to the Southwest,96 DPL
and Stoneville have a much smaller
competitive presence than they do in
the MidSouth or Southeast, in large part
because their germplasm is not uniquely
suited for the Southwest region. As
reflected by the 2006 market shares for
traited cottonseed in this region, there
are a number of competing companies:
Bayer 46%; DPL 26%; Stoneville 15%
(Stoneville branded seed 5% and
NexGen branded seed 10%); Americot
5%; All-Tex 3%; UAP 3% and Croplan
1%.97 The divestiture of the Enhanced
Stoneville Assets to Bayer and Americot
does not significantly alter the
competitive situation. Because
Stoneville developed its NexGen brand
seed specifically for the Southwest
market and Americot acquired
Stoneville’s NexGen-related assets, the
Southwest market will continue to have
three seed companies with significant
shares (Bayer/Fibermax, Monsanto/DPL
and Americot/NexGen) and three
additional companies with a smaller
presence (All-Tex, Croplan, and UAP).
With respect to the West, a proper
analysis must recognize that Arizona
and California are very different and
relatively small markets.98 In California,
nearly all of the cotton grown is either
pima or acala (a form of upland
cotton) 99 Stoneville does not sell pima
95 ICTA
Comments at 5.
the USDA classifies the Southwest as
comprising Texas, Oklahoma and Kansas, we have
included New Mexico in our analysis of the region.
New Mexico has two distinct cotton growing areas
that can be roughly described as Eastern New
Mexico and the Mesilla Valley. The same cotton
varieties that grow successfully in Texas and
Oklahoma are used in Eastern New Mexico whereas
acala varieties are primarily grown in the Mesilla
Valley. Because the vast majority of cotton acreage
in New Mexico is in the eastern region, we have
included data from that region in our analysis of the
Southwest.
97 The United States derived the above estimated
shares of traited cottonseed sales in the Southwest
(including New Mexico for the reasons discussed
above) from USDA data and other data received
during the course of the United States’s
investigation. These shares discount ‘‘saved seed’’—
conventional seed that a farmer saves from one
year’s crop to plant the next year (a practice that
is more prevalent in the Southwest than the other
regions due to the greater use of conventional seed
which seed companies do not prohibit farmers from
saving). USDA data ascribes saved seed to the seed
company that originally produced the seed—even if
the actual sale of that seed occurred in a previous
year—and thus significantly overstates branded
seed companies’ shares in the region.
98 As noted above, while classified by the USDA
as part of the West, most of New Mexico’s cotton
production occurs in the eastern part of the state
and requires the same varieties that perform well in
the Southwest.
99 There are two species of cotton grown in the
United States: Pima and upland. Furthermore, there
96 Though
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or acala varieties. Based on 2006 market
shares for traited upland varieties grown
in California (which ignores the large
volume of pima cotton grown in
California), Stoneville has only a 3%
share, while Dow has a 43% share,
Bayer 38%, DPL 13% and UAP 3%.
Accordingly, the transaction does not
significantly affect traited cottonseed
competition in California.
Like the MidSouth and Southeast, the
USDA data suggest there are two
significant sources of upland cottonseed
in Arizona: DPL with 73% and
Stoneville with 20%. Because the
proposed Final Judgment adequately
addresses competition issues in the
MidSouth and Southeast by requiring
divestiture of the Enhanced Stoneville
Assets, it also resolves any potential
issues for Arizona. Further, because
Arizona’s geography is well-suited for
seed production of Southeast and
MidSouth varieties, a significant
amount of the upland cotton planted in
Arizona is grown by farmers under
contract with DPL and Stoneville for the
purpose of producing cottonseed (rather
than cotton fiber).100 Thus, DPL’s and
Stoneville’s shares in Arizona primarily
reflect that they perform a substantial
amount of seed production there.
price of seed for feed has averaged $107
per short ton, a fraction of what farmers
pay per bag of transgenic seed.103
Moreover, the price of cottonseed sold
for feed is likely affected by other
sources of livestock feed. Finally, even
if the price paid by farmers for
cottonseed for planting did affect the
price of feed cottonseed, since the
proposed Final Judgment preserves
traited cottonseed competition, the
merger should have no adverse impact
on the price of feed cottonseed.
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D. Prices for Cottonseed Sold for
Livestock Feed
OFU predicts that prices paid for
cottonseed used in livestock feed will
increase due to the merger.101 The
comment appears to misunderstand the
source of cottonseed used for feed. Such
seed does not come directly from the
cottonseed companies. Rather, seed
used for feed is the by-product of the
cotton production process. The
licensing agreements farmers sign in
order to plant transgenic seed prevent
them from planting the seed from their
crop; hence, they typically sell any seed
extracted from the cotton during the
ginning process for oil or feed.102 That
seed does not pass through the hands of
a cottonseed company on its way to be
sold as feed. Nor does the OFU explain
how the merger would affect prices of
cottonseed sold for feed. Historically,
the price of cottonseed used as livestock
feed has remained fairly stable even as
the price of transgenic planting seed has
increased. Over the past ten years the
E. Alleged Monsanto Exclusionary
Business Practices
The States contend that Monsanto
will engage in exclusionary business
practices post merger, such as
‘‘acquisitions of independent seed
companies and germplasm providers to
enhance its monopoly position in both
seed and traits; long-term, highly
restrictive licensing agreements that
encourage the sale of Monsanto’s
biotech traits exclusively; licensing
restrictions that prevent independent
seed companies from combining
Monsanto biotech traits with nonMonsanto traits; and bundling rebates
on seeds, traits and chemicals to
exclude competitors from retail
distribution channels.’’104
Given both the breadth and lack of
specificity of this contention, it is
difficult to discern how it relates to the
transaction at issue here. The actions on
the laundry list articulated by the States
are ones Monsanto could undertake
with or without this merger, and the
States do not explain why the
transaction would change Monsanto’s
incentive or ability to engage in them.
Nor do the States explain why such
actions, if designed to have an
anticompetitive effect, would be
successful in light of the preservation of
competition achieved by the required
divestiture of the Enhanced Stoneville
Assets.105
Furthermore, though the United
States made no determination regarding
the competitive effect of certain
business practices, some aspects of the
proposed Final Judgment would make it
difficult for Monsanto to engage in
certain of the purportedly
anticompetitive practices suggested by
the States. For example, the proposed
are different types of upland cotton grown in the
United States. In California, most of the upland
cotton grown are acala varieties.
100 The USDA survey data does not distinguish
between cotton grown primarily for seed
production and cotton grown as a crop.
101 OFU Comments at 1.
102 There would be excess seed even if farmers
were able to replant transgenic seed because an acre
of cotton yields far more seed than is necessary to
replant that acre.
103 USDA, Oil crop Situation and Outlook
Yearbook, May 2007, at 47. The price of $107 per
short ton translates to a price of $2.75 per 50 pound
bag. In contrast, a 50 pound bag-equivalent of
DP555BGRR would cost a farmer in Georgia roughly
$130 for the seed alone, plus an additional $292 for
the trait fee.
104 States Comments at 8.
105 Bayer, Dow, DuPont and Syngenta all have
agricultural products that could be added to a
bundle that includes cottonseed.
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Final Judgment requires Monsanto to
remove anti-stacking provisions in its
licenses to other seed companies and
penalties for working with competing
trait providers. Also, it requires
Monsanto to notify the United States in
advance of purchases of independent
cottonseed companies and germplasm
providers, affording an opportunity to
investigate and if necessary challenge
any that might be anticompetitive.106
Finally, and most fundamentally, the
antitrust laws will continue to apply
and would proscribe conduct by
Monsanto that runs afoul of applicable
legal standards.
VII. Conclusion
After careful consideration of the
public comments, the United States
remains of the view that the proposed
Final Judgment provides an effective
and appropriate remedy for the antitrust
violation alleged in the Complaint and
that its entry would therefore be in the
public interest. Although the proposed
Final Judgment, like any settlement, was
a product of negotiation and
compromise,107 it fully achieved the
United States’s goals in this action. Even
if the court might be inclined to view
the issues differently, the purpose of
Tunney Act review is not for the court
to engage in an ‘‘unrestricted evaluation
of what relief would best serve the
public’’ 108 or to determine the relief
‘‘that will best serve society,’’ 109 it is
simply to determine whether the
proposed decree is within the reaches of
the public interest—‘‘even if it falls
short of the remedy the court would
impose on its own.’’ 110
The Court is to consider ‘‘the impact
of entry of such judgment upon
competition in the relevant market or
markets, upon the public generally and
individuals alleging specific injury from
the violations set forth in the complaint
including consideration of the public
benefit, if any, to be derived from a
determination of the issues at trial’’ 111
Because the markets identified in the
Complaint are the only ones in which
competition is likely to be lessened as
a result of the merger, the impact of
106 Proposed
Final Judgment at 19.
this context, it is important to bear in mind
that because Monsanto had committed to selling
Stoneville as a condition of its acquisition
agreement with DPL, a challenge to the acquisition
by the United States would have had to overcome
the adequacy of a Stoneville divestiture to remedy
any alleged harm.
108 United States v. BNS, Inc., 858 F.2d 456, 462
(9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir. 1981)).
109 Bechtel, 648 F.2d at 666.
110 United States v. AT&T Co., 552 F. Supp. 131,
151 (D.D.C. 1982).
111 15 U.S.C. 16(e)(l)(B).
107 In
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entry of the proposed Final Judgment
will be to restore any competition lost
as a result of the merger. Farmers in the
MidSouth and Southeast who might
have otherwise suffered injury from the
violation set forth in the Complaint will
retain their current and prospective
competitive choices for traited
cottonseed by virtue of the
contemplated divestitures. Based on the
factors set forth in the Tunney Act, the
proposed Final Judgment is in the
public interest.
Pursuant to Section 16(d) of the
Tunney Act, the United States is
submitting the public comments and its
Response to the Federal Register for
publication. Our response is also being
provided to each of the commenters.
After the comments and the United
States’s Response to Comments are
published in the Federal Register, the
United States will move this Court to
enter the proposed Final Judgment.
The American Antitrust Institute
(AAI) is an independent Washingtonbased nonprofit education, research,
and advocacy organization. The AAI’s
mission is to increase the role of
competition, assure that competition
works in the interests of consumers, and
challenge abuses of concentrated
economic power in the American and
world economy. The AAI has had an
interest in this proceeding because it
raises critical issues of competition
policy and consumer choice involving a
key agricultural supply chain cotton.
The AAI White Paper issued in
November 2006 discusses some of the
key issues raised by the merger.1
Pursuant to Section 2(b) of the
Antitrust Procedures and Penalties Act
(APPA), 15 U.S.C. 16 (the ‘‘Tunney
Act’’), The AAI submits these comments
on the Proposed Final Judgment (PFJ or
consent decree) in the above-mentioned
case. Congress has made this Court the
final arbiter of the propriety of mergers
under the antitrust laws. The Court
must ‘‘determine that the entry of such
I. Competitive Issues Raised by the
Proposed Merger
At first blush, the products and
markets affected by the proposed merger
of Monsanto and Delta and Pine Land
(Monsanto/D&PL) appear technical and
complex. But some background
provides ample basis for a clear
understanding of the competitive issues
raised by the merger. Cotton can be
grown with three major types of seed:
(1) Organic; (2) conventional, and (3)
genetically modified or ‘‘traited.’’ Cotton
is also grown in four regions of the
U.S.—the Southeast, Mid-South,
Southwest, and West. This has
generated demand for cotton varieties
that thrive in different soil types and
climates.
Cotton is also an insect-intensive crop
and competes for space with weeds. As
a result, agricultural biotechnology has
played a major role in the development
of cotton varieties that contain
genetically engineered ‘‘traits’’ that
make the plants resistant to insects
(insect-resistant) and tolerant to
herbicides (herbicide-tolerant), which
are sprayed on the plants. Conventional
cottonseed does not contain such
genetic traits. Organic cotton contains
neither genetic traits and is grown in a
way that meets organic growing
standards.
The merger involves two major
markets. One is the market for
development of ‘‘cotton traits.’’
Monsanto has a 95% share of this
market with its hugely attractive and
successful insect-resistant traits
Bollgard and successor Bollgard II and
herbicide-tolerant traits Roundup Ready
and successor Roundup Ready Flex. The
second market is that for ‘‘traited
cottonseed.’’ Cotton traits are
‘‘introgressed’’ (i.e., inserted through
genetic engineering) into cotton
‘‘germplasm,’’ which is the genetic
material that gives a cotton variety its
specific characteristics. Commercially
successful varieties are obtained at the
very high risk of failure, i.e., after years
of costly breeding and cross-breeding
that ultimately produces desirable plant
characteristics demanded by cotton
1 See https://www.antitrustinstitute.org/Archives/
552.ashx.
2 15 USC. 16(e). See. e.g., United States v.
Microsoft Corp., 56 F.3d 1448, 1458 (D.C. Cir. 1995).
Dated: March 05, 2008.
Respectfully submitted,
For Plaintiff:
Jill A. Ptacek (WA Bar #18756)
Trial Attorney, U.S. Department of Justice,
Antitrust Division, Transportation, Energy &
Agriculture Section, 325 7th Street, NW.,
Suite 500, Washington, DC 20004,
Telephone: (202) 307–6607, Facsimile: (202)
307–2784.
Tunney Act Comments of the American
Antitrust Institute on the Proposed
Final Judgement
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judgment is in the public interest.’’ 2 If
the Court cannot make this finding, it
must reject the PFJ unless more
adequate provisions are made to protect
the public interest. In the following
analysis, the AAI respectfully argues
that for the numerous reasons set forth
in these comments, the PFJ is not in the
public interest and must be rejected by
the Court.
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farmers. D&PL has a 79–87% share of
the Mid-South and Southeast relevant
markets for traited cottonseed. The
merger raises three competitive issues:
• Horizontal-elimination of actual
competition. The merger combines two
competitors—Monsanto’s Stoneville
business and D&PL—in the market for
traited cottonseed.
• Horizontal-elimination of a
potential competitor. The merger
eliminates D&PL as a potential partner
for cotton traits developers that compete
with Monsanto.
• Vertical-combination of two firms
in a vertically integrated chain. The
merger combines upstream cotton traits
developer Monsanto with downstream
traited cottonseed seller D&PL in a
vertical combination.
II. Summary of the DOJ Documents
A. Complaint/Competitive Impact
Statement
The Complaint focuses on two of the
three major competitive effects listed
above. It first alleges that the merger of
Monsanto and D&PL will substantially
lessen competition in the product
market for the ‘‘development,
commercialization and sale of traited
cottonseed.’’ Farmers likely would have
fewer choices of, and face higher prices
for, traited cottonseed (Complaint at 11–
12.) Relevant geographic markets are the
Southeast and the Mid-South.
(Complaint at 10.) Together, these
regions account for 50% of cotton grown
in the U.S. Cottonseed containing both
(i.e., ‘‘stacked’’) insect-resistant and
herbicide-tolerant traits comprises the
vast majority of cottonseed planted in
these regions.
In the Southeast, D&PL has an 87%
market share and Monsanto’s Storteville
has 8%. Combining Monsanto and
D&PL increases concentration by 1,489
HHI, for post-merger concentration of
9,184 HHI. In the Mid-South, D&PL has
a 79% market share and Monsanto’s
Stoneville has 17%. The merger
increases concentration by 3,310 HHI
for a post-merger HHI of 9,110.
(Complaint at 11.)
The Complaint explains that entry
into the traited cottonseed market
requires both the assets and expertise to
breed high-performing varieties of
cottonseed and to develop or access
traits to breed into the cottonseed. Each
step requires many years and tens of
millions of dollars. (Complaint at 12.)
Moreover, traits developers must have
access to a sufficient supply of highquality cotton germplasm. (CIS at 11.)
The Complaint thus alleges that:
If there were a small but significant
increase in the price of traited cottonseed
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within regions such as the Mid-South and
Southeast, it is not likely that farmers would
switch to other crops or switch purchases to
conventional (non-traited) cottonseed or
cottonseed varieties that are not suited to
their region in sufficient volumes to make the
price increase unprofitable. (Complaint at
10–11.)
The second adverse competitive effect
identified by the Complaint is the
elimination of D&PL as a partner for
traits developers that compete with
Monsanto. D&PL has partnered with
Monsanto to produce traited cottonseed.
However, D&PL has recently pursued
more lucrative alternative partnerships
with rival firms such as Syngenta. After
the merger, those efforts would be
‘‘substantially delayed or prevented,’’ as
would ‘‘efforts to develop other traits
that would compete with Monsanto
traits and that would provide benefits to
United States cotton farmers * * *’’
This would likely reduce choice and
raise prices for traited cottonseed.
(Complaint at 12.)
B. Proposed Final Judgment
The PFJ sets forth a three-pronged
remedy to address horizontal issues
raised by the merger: (1) Divestiture of
the Enhanced Stoneville Assets; (2)
divestiture to Syngenta of D&PL
germplasm containing the jointly
developed VipCot traits; and (3)
modification of Monsanto’s Cotton
States and other third-party traits
licenses.
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1. Enhanced Stoneville Assets
The PFJ proposes divestiture of the
Enhanced Stoneville Assets. Three
components make up the package of
assets. First, Monsanto’s Stoneville
cotton business will be sold, including:
Breeding facilities, tangible assets,
brand names, breeder records, and other
intangible assets. Second, the PFJ
requires that Monsanto germplasm be
divested. This includes four sources: (1)
The ‘‘exclusive right’’ to commercialize
varieties from the Advanced Exotic
Yield lines; (2) all germplasm from the
Marker-Assisted Breeding populations—
the primary development source for
Stoneville varieties; (3) a ‘‘nonexclusive, royalty free license’’ to sell
and breed with varieties from the Cotton
States program currently sold by
Stoneville; and (4) all other germplasm
in Monsanto’s possession. Third, the
PFJ requires the divestiture of 20 lines
of ‘‘elite’’ D&PL germplasm. (CIS at 12–
19.)
2. Syngenta/VipCot Divestiture
This divestiture includes 43 lines of
‘‘promising’’ D&PL germplasm into
which D&PL has incorporated the
VipCot insect-resistance traits. The lines
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will be sold to rival traits joint
developer Syngenta along with
performance data and certain other
information. Anticipated
commercialization of five of the
germplasm lines is expected by 2009,
three lines by 2010/2011, and the
remaining lines by 2011 or beyond.
Under the divestiture, Syngenta has
exclusive rights to commercialize
varieties developed from the lines to be
divested as long as they contain one or
more Syngenta-developed traits,
including the VipCot traits.3 (CIS at 19–
20.)
3. Modifications to Monsanto’s Cotton
States and Seed Company Licenses
The PFJ requires that Monsanto
modify their Cotton States and thirdparty cottonseed traits licenses to
remove restrictions on ability of
licensees to develop, market, or sell
cottonseed containing non-Monsanto
traits. This includes combining (i.e.,
stacking) Monsanto with non-Monsanto
traits. The PFJ also requires Monsanto to
modify its Cotton States license to
eliminate any provision that allows for
termination if the licensee sells
cottonseed containing non-Monsanto
traits. (CIS at 20–21.)
III. Mismatches Between the Complaint
and the PFJ
The AM respectfully argues that the
PFJ falls seriously short of remedying
the violations alleged in the Complaint.
In Microsoft, the Court explained that in
making a public interest determination
under the APPA, it should consider
(among other things), the relationship
between the remedy secured and the
specific allegation set forth in the
government’s complaint, whether the
decree is sufficiently clear, whether
enforcement mechanisms are sufficient,
and whether the decree may positively
harm third parties.4
The Supreme Court has emphasized
that the purpose of a remedy is to
restore or protect competition.5 The CIS
recognizes that ‘‘the acquirer of the
Enhanced Stoneville Assets’’ * * *
must have a credible commitment to the
traited cottonseed market and have the
intent and capability of competing
effectively in the market.’’ (CIS at 12.)
The Antitrust Division Policy Guide to
3 Monsanto will also provide the recurrent parent
conventional germplasm for each line until
December 21, 2014 and offer Syngenta a license to
its Roundup-Ready Flex so that it can
commercialize VipCot lines with stacked traits.
4 Microsoft, 56 FJd at 1458–62.
5 Ford Motor Co., 405 U.S. at 573; du Pont, id.
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Merger Remedies (‘‘Policy Guide’’) 6
emphasizes this point:
The goal of a divestiture is to ensure that
the purchaser [footnote omitted) possesses
both the means and the incentive to maintain
the level of premerger competition in the
market(s) of concern. * * * (Policy Guide at
9.)
The Policy Guide further states that:
There must be a significant nexus between
the proposed transaction, the nature of the
competitive harm, and the proposed remedial
provisions (Policy Guide at 2.)
The consent decree meets neither of
these objectives, for four major reasons.
Any and all of these reasons undermine
the requisite nexus between the remedy
and the alleged violation that is required
for the PFJ to fully restore competition
and therefore be in the public interest.
A. The ‘‘strings attached’’ approach to
the divestitures of Monsanto and D&PL
germplasm make it, in effect, a conductbased remedy.
Divestiture of germplasm is a key
component of the remedial approach
taken in the consent decree. The
Complaint recognizes the crucial role of
germplasm in developing and
commercializing traited cottonseed
when it states:
A company with a large collection of high
quality, or elite, germplasm has a competitive
advantage because the company has the
ability to identify the best genetic material
and use it in a wide variety of possible cross
combinations, resulting in a greater
likelihood of developing a successful variety.
(Complaint at 5.)
In attempting to address the
Complaint’s concerns regarding actual
and potential competition, the consent
decree requires Monsanto and D&PL to
divest various lines of germplasm.
However, these divestitures come with
significant ‘‘strings attached,’’
essentially making it an inadequate
conduct-based remedy that masquerades
as structural reform.
The consent decree is replete with
exceptions, exclusions, and conditions
on the to-be-divested lines of
germplasm. For example, Monsanto will
be allowed to obtain a license back from
the acquirer to continue to use the
Advanced Exotic Yield lines for its
ongoing trait research project. (CIS at
15.) The PFJ also requires the divestiture
of a ‘‘non-exclusive, royalty-free
license’’ to sell and breed with varieties
from the Cotton States program sold by
Stoneville. (CIS at 15.) And Monsanto
‘‘* * * may retain, with certain
limitations, certain categories of [other]
Monsanto germplasm used
6 United Statement Department of Justice,
Antitrust Division. Antitrust Division Policy Guide
to Merger Remedies. October 2004. pp. 3–4.
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predominantly in its trait development
and licensing business.’’ (CIS at 16.)
Moreover, under the terms of the PFJ,
the merged company can retain a
license to use the 20 lines of D&PL
germplasm to breed new varieties and
sell exclusively varieties that contain
only Monsanto traits. Monsanto/C&PL
can continue to sell (for a limited time)
conventional versions of divested
varieties. The merged company may
also prevent the acquirer from triplestacking Monsanto’s herbicide-tolerant
and insect-resistant traits and nonMonsanto traits for a period of seven
years after the divestiture. (CIS at 17–
18.) Finally, divestiture of the exclusive
right to the D&PL VipCot germplasm is
contingent on Syngenta
commercializing varieties that contain
at least one of the VipCot insectresistance traits. (CIS at 19–20.)
There is little precedent, or logic, to
support the highly-qualified divestiture
of tangible germplasm assets set out in
the consent decree.7 For example, the
contingency on the VipCot divestiture
ignores the possibility that Syngenta
might undertake development of traits
that are superior to or supersede the
VipCot lines. The divestiture thus binds
Syngenta to a current ‘‘snapshot’’ of the
market and undermines the possibility
that to effectively compete, the firm
might make changes to its R&D strategy.
The remedy will require: (1)
Compliance with complex and varied
licensing terms; (2) monitoring of the
applicable time periods attached to
various exclusions and limitations; and
(3) policing of the specific purposes for
which the merged company can retain
use of the divested germplasm lines. All
of this is costly, burdensome baggage
that the consent decree necessarily
attaches to the divestiture.
As a result, the germplasm
‘‘divestitures’’ required in the PFJ are
really not a structural remedy at all.
Rather, they are a conduct-based,
regulatory-style ‘‘fix’’ that imposes on
this Court a monitoring and compliance
7 The remedy is still problematic even if the PFJ
treats the various lines of germplasm to be divested
as intangible property. For example, the PFJ
provides no explanation as to why germplasm
would be considered an intangible asset or, lilt is,
why anything short of relinquishing all rights to the
germplasm assets is justified. Moreover, even if
germplasm legitimately constitutes intangible
property, the PFJ fails to address key issues such
as how non-exclusivity and other restrictions on the
use of the germplasm assets will fully restore
competition. Such conditions may make it more
difficult for the acquirer to differentiate its product
from the merged firms’ products. Moreover, if the
acquirer is required to ‘‘share’’ rights to the
germplasm, it may not invest in R&D and marketing
to the extent that it would have if the Monsanto and
D&PL had fully relinquished all rights to the
germplasm.
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burden that it should be loathe to
undertake. The logic behind the
antitrust agencies’ preference for
structural antitrust remedies is well
known. For example, the Policy Guide
states that:
A carefully crafted divestiture decree is
‘‘simple, relatively easy to administer, and
sure’’ to preserve competition [footnote
omitted]. A conduct remedy, on the other
hand, typically is more difficult to craft, more
cumbersome and costly to administer, and
easier than a structural remedy to
circumvent. (Policy Guide at 8.)
In sum, the ‘‘divesture’’ of germplasm
is crippled by competition-impairing
restrictions and provides the merged
company with ongoing access to the
assets. This ‘‘strings attached’’ approach
to the divestiture of tangible property is
unprecedented and will virtually ensure
that the acquirer does not possess the
means or incentive to maintain the level
of pre-merger competition in the
relevant markets.
B. The PFJ fails to create a viable
competitor because it creates a
patchwork of assets with no proven
track record in the market.
The Antitrust Division’s policy
guidelines make the point that time and
incentive are of the essence in restoring
competition lost by the merger:
The package of assets to be divested must
not only allow a purchaser quickly to replace
the competition lost due to the merger, but
also provide it with the incentive to do so
[footnote omitted]. (Policy Guide at 11.)
The CIS appears to recognize this
imperative when it explains that the
divestiture of Stoneville alone would be
inadequate to restore the lost
competition between Monsanto and
D&PL (CIS at 14.) Thus, the PFJ requires
that additional Monsanto and D&PL
germplasm accompany Stoneville,
collectively making up the Enhanced
Stoneville Assets. This approach,
however, is inadequate to remedy the
alleged violation because it creates a
‘‘patchwork’’ of assets with no proven
track record in the market. A number of
facts clearly illustrate this problem.
First, the PJF merely requires the
transfer of some ‘‘promising’’ and
‘‘developmental’’ lines of Monsanto and
D&PL germplasm to the acquirer that
have no demonstrated, immediate
commercial value. For example, the CIS
explains that four of the eight lines of
elite D&PL germplasm include the
‘‘recurrent conventional parents’’ that
account for 55% of the cotton varieties
sold in the Southeast.8 (CIS at 16.) It is
important to note, however, that the
commercial varieties that make up this
8 This 55% encompasses cotton grown in only
one of the two relevant markets.
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55% resulted from breeding and crossbreeding the recurrent conventional
parents. The acquirer is therefore
obtaining only the raw inputs necessary
to breed varieties that could be
commercially successful at some time in
the future and only after considerable
expenditure. As they currently exist
(i.e., without further breeding), the eight
D&PL germplasm lines to be divested
account for varieties that are planted on
a mere 1% of the cotton acres in the
Mid-South and Southeast.9
Moreover, twelve of the 20 D&PL
germplasm lines are only in the
breeding ‘‘pipeline,’’ and could produce
commercial varieties only over the next
10 years. (CIS at 16) This is perilously
close to the expiration of the PFJ and the
time frame the CIS identifies as
necessary for new entry into the market
for developing, commercializing, and
selling traited cottonseed. Eighty
percent of the D&PL VipCot germplasm
to be divested under the decree is also
unlikely to prove up commercially
success varieties for at least another five
years. (CIS at 19.)
Finally, the Advanced Exotic Yield
lines and Marker-Assisted Breeding
populations of germplasm are of
extremely limited value to the acquirer.
The CIS itself notes that this germplasm
provides a ‘‘* * * limited platform for
introducing non-Monsanto traits
because many are already introgressed
with Monsanto traits.’’ (CIS at 15, n. 2.)
The consent decree requires the merged
company to allow the acquirer to breed
out Monsanto traits. Breeding out
Monsanto traits and then breeding in
competing traits will take a long time,
assuming the acquirer even has the
wherewithal to do so.
Second, the success of the Enhanced
Stoneville Assets, in part, rides on the
ability of the government to pick
‘‘winning’’ lines of germplasm that can
be bred into commercially successful
cotton varieties. The Complaint
emphasizes the importance of
possessing both high-quality, and large
quantities of, germplasm for competitive
success. (Complaint at 5.) And the CIS,
for example, describes the importance of
D&PL’s ‘‘ * * * extensive breeding
programs, elite germplasm collection,
technical service capabilities, knowhow, brand recognition, and market
position.’’ (CIS at 8.) Given this
complexity, the chances that the
government picked winners in selecting
9 See U.S. Department of Agriculture, Agricultural
Marketing Service—Cotton Program. Cotton
Varieties Planted: 2006 Crop, Memphis, Tennessee,
August 2006, Table I and U.S. Department of
Agriculture, National Agricultural Statistics
Service, Louisiana Farm Reporter 7(10), May 17,
2007.
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the germplasm lines to be divested are
low. And it is possible that Monsanto/
D&PL influenced the selection of
germplasm lines through the
information they did or did not disclose
to the government (which would have
been at an information disadvantage). If
so, the merged firm would have no
incentive to provide germplasm lines
that could strengthen a rival in the
market.
Pairing a smattering of unproven lines
of germplasm that could be years away
from producing successful, commercial
cottonseed varieties with Stoneville in
an untested combination will not create
the capability for extensive breeding
and cross-breeding that is essential for
commercial success. Arguably, to fully
restore competition, the acquirer would
need access to sufficiently large
quantities of germplasm that is currently
producing commercial varieties or that
could produce successful commercial
varieties in far less than 10 years. As it
stands, there exists no compelling
evidence that the unproven, untested
combination called the Enhanced
Stoneville Assets would survive in the
market, regardless of the identity of the
acquirer.
C. The proposed divested assets, if
acquired by Bayer, will not provide the
firm with the tools necessary to be a
viable competitor.
Under the terms of the consent
decree, it is highly unlikely that the
proposed acquirer (Bayer) of the
Enhanced Stoneville Assets will be a
viable competitor to the verticallyintegrated firm created by the merger.
The Policy Guide specifically addresses
the importance of the size and market
position of the merged firm in crafting
divestitures. For example, it states that:
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* * * integrated firms can provide scale
and scope economies that a purchaser may
not be able to achieve after obtaining the
divested assets. When available evidence
suggests that this is likely to be the case (such
as where only large integrated [emphasis
added] firms manage to remain viable in the
marketplace), the entity that needs to be
divested may actually be the firm itself, and
blocking the entire transactions rather than
accepting a divestiture may be the only
effective solution. (Policy Guide at 14–15.)
The Complaint acknowledges that the
merged firm is enormous, with a 95%
share of the cotton traits market and a
79–87% share of the relevant traited
cottonseed markets. (Complaint at 2.)
Presumably, it was the integration of
traits development and traited seed that
Monsanto wanted to achieve when it
stated that the purpose of the merger
was to ‘‘ * * * provide a complete
platform of cutting-edge seed
technologies to our global farmer
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customer base for years to come.’’ 10 To
address the alleged violation, therefore,
the remedy must consider both the
vertically-integrated nature and the
scale and scope of the merged firm. The
consent decree stops well short of
fulfilling these requirements, for the
following reasons.
First, without a complement of
sufficient, market-tested assets in both
the cotton traits and traited seed
markets, it will be extraordinarily
difficult for the acquirer to effectively
engage in head-to-head ‘‘platform’’
competition with a behemoth
Monsanto/D&PL—a firm that is likely to
be impervious or even hostile to
competition. Even the government
recognizes the importance of this level
of competition. For example, the CIS
explains that the purpose of divesting
the Enhanced Stoneville Assets is to
provide:
‘‘* * * the scale and scope necessary in
the Southeast and MidSouth to be an
effective and competitive platform for trait
development.’’ (CIS at 16.) and a ‘‘ * * *
foundation on which to replicate the
platform for trait development and
commercialization that D&PL previously
provided.’’ (CIS at 13.)
Moreover, the Complaint admits the
inextricable link between the upstream
traits development and downstream
traited cottonseed market:
‘‘Entry into the traited cottonseed business
requires the assets and expertise both
[emphasis added] to breed high-performing
varieties of cottonseed and to develop or
access traits to breed into the cottonseed.’’
(Complaint at 12.)
Second, the consent decree’s failure to
include a requirement that human
capital and know-how accompany the
Enhanced Stoneville Assets only
increases the chances that the buyer will
have neither the wherewithal nor the
incentive to compete against Monsanto/
D&PL. Pairing only ‘‘promising’’ and
‘‘developmental’’ lines of germplasm
with Stoneville in an untested,
inadequate combination is injury
enough. Omitting the human capital
that is essential for viably maintaining
the specific, technically complex assets
that are being divested is akin to turning
10 ‘‘Monsanto Company to Acquire Delta and Pine
Land Company for $1.5 Billion in Cash,’’ Press
Release dated August 15, 2006. Online, Available
https://www.monsanto.com/monsanto/layout/
media/06/08–15–06.asp. Many a commentator has
noted the logic of vertical integration in traits
development and traited seed: ‘‘A new gene is
worthless without a quality seed base to put it in
and the infrastructure to deliver it. William Lesser,
‘‘Intellectual Property Rights and Concentration in
Agricultural Biotechnology,’’ AgBioForum 1(2),
1998, p. 59, quoting from Furman Seltz LLC
investment report.
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over the keys to a nuclear power plant
without any personnel to operate it.
Third, and significantly, Bayer
operates primarily in the Southwest
where it sells its Fibermax brand of
long-fiber cottonseed. As a result, it
lacks experience with cotton varieties
planted in the Mid-South and
Southeast.11 Bayer has also been a
limited player in traits development,
with one commercially successful
herbicide-tolerant trait—Liberty Link.
In light of the large, vertically
integrated nature of the merged
company, it is incumbent upon the
government to ensure that the consent
decree produces a strong rival that can
quickly and fully restore competition in
the affected markets. This imperative
takes on even more importance when
the consent decree maintains the
duopoly market structure in the MidSouth and Southeast markets. In sum,
the remedy delivers none of the basic
requirements to ensure that the acquirer
has the tools necessary to compete with
a large, integrated Monsanto/D&PL.
D. The PFJ requirement that Monsanto
modify its Cotton States and other thirdparty seed licenses fails to address the
alleged violation.
The final condition set forth in the
consent decree is that Monsanto will
modify its Cotton States and third-party
seed licenses to remove restrictions on
the ability of licensees to develop,
market, or sell cottonseed containing
non-Monsanto traits. The intent of this
requirement is to:
‘‘* * * give these rival cottonseed
companies the ability to partner with trait
developers other than Monsanto without
financial penalty * * * and to provide traits
developers with ‘‘* * * access to close to
half of the current U.S. cottonseed market
without having to deal with Monsanto/
D&PL’’ (CIS at 21.)
This prong of the consent decree fails
on numerous counts to establish a nexus
with the alleged violations in the
Complaint.
First, the consent decree essentially
directs Monsanto to cease and desist
from restrictive, potentially
anticompetitive practices. The
Complaint notes that ‘‘Monsanto’s trait
licenses with most other cottonseed
companies * * * severely restrict the
ability of these companies to work with
other trait developers * * *’’
(Complaint at 8.) Indeed, competitors
have alleged that Monsanto’s trait
licensing and pricing practices for
cotton and other crops go beyond
11 ‘‘Bayer’s Fibermax brand has only a 2–3%
share of cotton planted in the Mid-South and
Southeast markets. See USDA, Cotton Varieties
Planted: 2006 Crop, p. 2.
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intellectual property protection and
punish licensees if they sell nonMonsanto traits or other competing
products.12 By imposing the licensing
modification requirement, the
government seems to be trying to correct
for these practices through the remedy,
although they are not alleged violations
in the Complaint. These practices
deserve to be the subject of a complaint
in an appropriate case 13 and not merely
mentioned on a list of conditions here.
Second, the license modifications are
designed to eliminate prohibitions on
rivals stacking their own traits with
Monsanto traits. Such a restraint
prevents—among other things—a rival
producer of traited cottonseed from
bringing varieties to market with both
the insect-resistant and herbicidetolerant traits that farmers demand. At
the same these restrictions are
ostensibly to be removed in one part of
the PFJ, however, they are to be
imposed in another. For example, the
consent decree prevents the acquirer of
the 20 lines of D&PL germplasm from
stacking Monsanto and non-Monsanto
traits for a period of seven years.
Perversely, therefore, the remedy
attempts to finally deal (albeit in the
wrong venue) with Monsanto’s
restrictive practices but allows
Monsanto to continue to apply them to
the acquirer of the Enhanced Stoneville
Assets.
Third, the licensing modification
requirement does not address the
alleged violation that competition in the
Mid-South and Southeast relevant
markets will be adversely affected by
the merger. The CIS refers instead to a
‘‘U.S. cottonseed market,’’ which is not
defined in the Complaint at all. Had the
remedy been tied to the alleged
violation, it would be clear that rivals
12 For a summary of pending legal proceedings,
see, e.g., Monsanto Company, Form 10-K. 2005.
Online. Available https://www.monsanto.com/
monsanto/content/media/pubs/2005/
MON_2005_10-K.pdf. More detail on specific
allegations regarding Monsanto’s conduct involving
cotton and corn is available in, e.g., American Seed
Co., Inc. v. Monsanto, Case I:05–cv–00535–SLR,
U.S. District Court for the District of Delaware, July
26, 2005, Monsanto Company v. Syngenta Seeds,
Inc., Second Amended Complaint, Civil Action No.
04–305–SLR (consol.), U.S. District Court for the
District of Delaware, August 12, 2005; and E.I.
DuPont de Nemours and Company v. Monsanto
Company, Amended Complaint and Jury Demand,
Civil Action No. 4:00–952–23, U.S. District Court
for the District of South Carolina, May 24, 2001.
These cases are provided for illustrative purposes—
some are still pending and therefore outcomes are
undecided.
13 Moreover, Monsanto’s practices should be
examined not only with regard to the licensing of
cotton traits, but corn and soybeans as well. It is
not unusual for a company to adopt parallel
competitive practices in various of its divisions,
and what has been advantageous in another market
might well be applied in the cottonseed market.
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would have access—not to half of the
market—but only to between 8% and
17% of the market not occupied by
D&PL in the Mid-South and Southeast.
Fourth, the consent decree contains
little information on the scope of the
license modification requirement. The
Policy Guide warns explicitly against
vagueness and lack of clarity in crafting
merger remedies:
‘‘Remedial provisions that are vague or that
can be construed when enforced in such a
manner as to fall short of their intended
purposes can render the enforcement effort
useless’’ (Policy Guide at 5.) and that ‘‘A
defendant will scrupulously obey a decree
only when the decree’s meaning is clear
* * *’’ (Policy Guide’’ at 5–6.)
It is unclear as to whether the
requirement applies to current and/or
prospective licenses or how the specific
language of the Monsanto licenses will
be revised. Moreover, the license
modification requirement will require
burdensome monitoring and compliance
which, as noted earlier, the Court
should be loathe to undertake.
In sum, the licensing modification
requirement contained in the PFJ
represents a vague, inconsistent, and
misplaced attempt to finally address
restrictive, potentially anticompetitive
practices long-employed by Monsanto.
And while these practices should be
addressed elsewhere, they do not
respond to any particular violation in
any defined relevant market in the
Complaint. As such, the remedy will not
fully restore competition in the relevant
markets.
IV. Conclusion
The Court should not give DOJ ‘‘a
pass’’ in its review of this merger. The
merger raises serious questions
regarding a key agricultural supply
chain and the many consumers that it
will indelibly affect. There is little in
the PFJ that is likely to preserve
effective competition in the relevant
markets, or to prevent the consumer
harm that will flow from the
impairment of competition. The
proposed remedies are largely
conductbased and really do not go
beyond the scope of the original
proposals offered up-front by Monsanto.
Moreover, the PFJ ignores the fact that
the acquirer of the divested assets must
have both the means and incentive to
compete with a large, vertically firm
that possesses an unrivaled ‘‘platfonn’’
for trait development and traited seed
commercialization. On this basis, the
Court should reject the PFJ as
insufficient and contrary to the public
interest.
Respectfully Submitted,
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Diana Moss,
Vice President and Senior Fellow American
Antitrust Institute, 2919 Ellicott Street, NW.,
Washington, DC 20008, phone: 720–233–
5971, e-mail: dmoss@antitrustinstitute.org,
web: https://www.antitrustinstitute.org.
August 20, 2007
Ms. Donna N. Kooperstein,
Chief, Transportation, Energy & Agriculture
Section, Antitrust Division, United States
Department of Justice, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530.
Re: United States v. Monsanto Company, et
al.
Dear Ms. Kooperstein:
I am writing you today as the Board
President of California Consumers United to
voice my concerns not only for the State of
California but for the nation as a whole. As
a consumer protection coalition, California
Consumers United advocates for sound
legislation and strong regulations that
safeguard all California consumers against
unfair business and marketplace predatory
practices.
Increased agricultural concentration,
which is occurring at an alarming rate, is
harmful to our nation’s economy and wellbeing. This concentration harms consumers
and farmers in the state of California—and
throughout the country—by leading to
limited choices, higher prices, and increased
costs. Monsanto’s acquisition of Delta & Pine
Land Company is one more example of this
distressing trend.
Monsanto, an agriulture conglomerate,
already has monopoly-like shares of biotech
traits in several crops, including cotton. The
Department of Justice’s consent decree
regarding Monsanto’s acquisition of Delta &
Pine Land Company will only reinforce
Monsanto’s control over the markets for
cotton seeds and cotton biotech traits. This
likely will result in severe consequences to
Californians and cause damage to consumers
in the form of higher prices and fewer
choices. The remedy proposed by the
Department of Justice to cure the
anticompetitive effects of this deal—
divestiture of a weak cotton seed company
and a few lines of germplasm—are incapable
of safeguarding competition.
There is already not enough competition in
agriculture; the Department of Justice should
not allow one company to control access to
the cotton market. We therefore urge the
Department of Justice to reconsider its
consent decree or, if the Department will not
change course, for the Court to reject it.
Sincerely,
Linda Love,
Board President, California Consumers
United.
Submitted August 27, 2007
United States of America, Department of
Justice, Antitrust Division, 325 7th Street,
NW., Suite 500, Washington, DC 20530,
Plaintiff, v. Monsanto Company, 800 North
Lindbergh Boulevard, St. Louis, MO 63167
and Delta and Pine Land Company, 1 Cotton
Row, Scott, MS 38772, Defendants.;
Case: I:07–cv–00992
Assigned To: Urbina, Ricardo M.
Assign Date: May 31, 2007
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Comments of Dupont on Proposed Final
Judgment
This case raises critical issues
regarding the future competitiveness of
American agriculture. The transaction at
issue combines the dominant supplier
of biotech traits with the dominant
cottonseed company. Among other
things, it eliminates head-to-head
competition in the development of new
traits to challenge Monsanto’s
established monopoly. Since biotech is
as important to agriculture as
agriculture is to the U.S. economy, the
competitive implications cannot be
overstated.
There is no question that Monsanto’s
acquisition of DPL would violate the
antitrust laws, and the Complaint filed
by the Justice Department’s Antitrust
Division details the serious harm to
farmers and consumers that will result.
Nor is there any question that
significant remedies are necessary,
including divestitures and reform of
Monsanto’s restrictive licensing
practices as proposed. The only
question before the Court under the
Tunney Act is whether the Antitrust
Division settled for too little, i.e.,
whether the patchwork quilt of
proposed remedies provides a viable
alternative to the competitive presence
of an independent DPL, such that trait
developers will continue to incur the
significant cost and risk of competing
with Monsanto.
The answer to that key question,
DuPont respectfully submits, is ‘‘no.’’
The objective facts on the face of the
Complaint make plain that the
‘‘Enhanced Stoneville’’ collection of
assets, even combined with their new
owner Bayer, does not come close to
creating a viable trait development
partner that can replace DPL in terms of
resources and market access for
cottonseed. Accordingly, DuPont has
determined that it cannot justify further
investment in developing competing
cotton traits, and is terminating that
work. The bottom line is that, without
substantial additional remedies, this
transaction will reduce choices and
raise prices for farmers and consumers.
A. Standard of Review
The Tunney Act imposes a duty on
the reviewing court to evaluate the
remedies proposed in light of the
competitive injury detailed in the
Division’s Complaint. The statute
requires that ‘‘[b]efore entering any
consent judgment proposed by the
United States * * *, the court shall
determine that the entry of such
judgment is in the public interest.’’ 16
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U.S.C. 15(e)(1). In applying this ‘‘public
interest’’ standard, the burden is on the
government to ‘‘provide a factual basis
for concluding that the settlements are
reasonably adequate remedies for the
alleged harms.’’ United States v. SBC v.
Verizon, 2007 WL 1020746, *16 (D.D.C.
2007), citing United States v. Microsoft
Corp., 56 F.3d 1448, 1460–61 (D.C. Cir.
1995).
The Government has an extra burden,
we submit, when it changes its view on
an identical transaction within a span of
only a few years. In 1999, the Division
decided to challenge Monsanto’s
proposed acquisition of DPL,1
indicating that no acceptable remedy
was available. Since that time, the
marketplace has changed in ways that
make this combination even more
competitively harmful:
• Monsanto’s share of traits in cotton
is higher;
• DPL’s seed share in key cottongrowing regions is higher;
• DPL is actively engaged in joint
development of traits that, but for this
acquisition, would compete with
Monsanto’s trait monopoly.
In light of these heightened
competitive concerns, the Court should
expect that the Division will explain in
detail the basis for the different
outcome.
B. Acknowledged Competitive Harm
For the benefit of the reviewing Court,
this section will distill the salient
allegations underlying the violation
alleged in the Complaint.
The Complaint begins with an
arresting fact: Monsanto’s share of
biotech traits in cotton is ‘‘over 96%.’’
Complaint ¶ 3. The Division’s
subsequent characterization of
Monsanto as the ‘‘dominant’’ supplier of
traits thus is an understatement. Id. at
¶ 6. For important traits that are used in
‘‘almost all’’ cottonseed planted today to
lower farming costs and increase yield
(i.d. at ¶ 18–19, 22), Monsanto is
essentially the only game in town.
There are challengers to Monsanto’s
trait monopoly, and that competition is
what is at stake in this proceeding. As
the Complaint recognizes, DPL was
working with other biotech companies
including DuPont to develop and
commercialize traits and seed ‘‘that
would compete with’’ Monsanto’s
1 As a senior Antitrust Division official testified
before Congress, Monsanto called off its 1999
attempt to purchase DPL after DOJ ‘‘indicated that
it was prepared to sue to prevent consummation of
the transaction.’’ John M. Nannes, Statement Before
the Subcommittee on Antitrust, Business Rights,
and Competition, United States Senate Judiciary
Committee (Sept. 8, 2000) (available at https://
www.usdoj.gov/atr/public/testimony/6581.pdf).
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existing traits. Id. at ¶ 26. DPL’s
competitive activity ‘‘jeopardized’’
Monsanto’s trait monopoly, id. at ¶ 6, as
Monsanto ‘‘recognize[ed] the potential
for a successful pairing of DPL’s
cottonseed with competing traits.’’ Id. at
¶ 7. So Monsanto now has acquired DPL
in a transaction that ‘‘will * * *
eliminate DPL as a partner independent
of Monsanto for developers of traits that
would compete against Monsanto,’’ and
therefore ‘‘will likely delay if not deter
efforts to develop other traits that would
compete with Monsanto traits.’’ Id. at
¶ 42 (emphasis added). As a result,
‘‘farmers likely will have fewer choices
of, and face higher prices for, traited
cottonseed.’’ Id. (emphasis added).
Importantly, the Complaint backs up
these conclusions of severe competitive
harm in violation of the Clayton Act
with key facts regarding DPL’s unique
role as a trait development partner.
Developing and commercializing a new
trait to compete with Monsanto’s
entrenched position is no mean feat. It
not only takes time and money, but
requires specialized resources that
DuPont and others do not have so were
relying on DPL to supply, in several
categories.
1. Germplasm: First, the Complaint
explains the importance of germplasm,
which is the genetic material that
encodes agronomic characteristics of a
plant, such as yield. Id. at ¶¶ 14–16.
Successful cottonseed is created by
combining (or ‘‘crossing’’) different lines
of germplasm to enhance the
performance characteristics of the plant.
Id. As stated in the Complaint, this is
not a one-shot effort, but rather an ongoing one: ‘‘to be competitive,
cottonseed companies must continually
work on developing new and improved
cottonseed varieties through their
breeding programs.’’ Id. at ¶ 15
(emphasis added). The product of the
initial cross is then ‘‘further cross[ed]’’
with still other germplasm lines. Id.
This breeding process ‘‘often requires
thousands of attempts’’ before
germplasm with the right genetics is
created that will be the basis for a
successful commercial variety. Id. at
¶ 28 (emphasis added). It generally
‘‘takes eight to ten years * * * until a
new cottonseed variety is ready for
market.’’ Id. at ¶ 15 (emphasis added).
So there is no dispute that one very
important key to successful breeding is
the ‘‘quantity and quality’’ of germplasm
lines available to be used in the
thousands of crosses required to breed
competitive cottonseed. Id. at ¶ 16. The
Complaint states that a ‘‘large collection
of high quality * * * germplasm’’
creates a ‘‘competitive advantage.’’ Id.
The obvious reason is that a company
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with such assets is best positioned to
engage in the ‘‘wide variety of possible
crossing combinations’’ necessary to
produce a ‘‘successful variety.’’ Id.
In this regard, the Complaint
acknowledges that DPL is unique. Not
only is it the ‘‘largest cottonseed
producer in the world,’’ but it has ‘‘the
largest cotton germplasm collection.’’
ID. at ¶¶ 13, 17 (emphasis added).
Indeed, the Complaint recounts that
Monsanto itself chose DPL as its
development partner because it had,
quite simply, ‘‘the best germplasm.’’ Id.
at ¶ 20 (emphasis added). And DPL
remains an ‘‘attractive partner’’ because
of ‘‘the strength and breadth of its
germplasm base.’’ Id. at ¶ 26 (emphasis
added).
2. Breeding Infrastructure: Another
key factor is the specialized facilities to
effectively use the germplasm collection
in a successful breeding program over
time. Again, the Complaint sets DPL
apart from other cotton companies. Its
large network of facilities gives it ‘‘more
breeding capabilities than any
competitor.’’ Id. at ¶ 17 (emphasis
added).
3. Experienced Breeders: The
Complaint recognizes DPL has
‘‘experienced and knowledgeable cotton
breeders’’ (id. at ¶ 5) with the ‘‘know
how’’ and ‘‘technical service
capabilities’’ to use all these assets in a
highly effective manner that well
exceeds that of any alternative
cottonseed company. Id at ¶ 26. The
Complaint states in unequivocal terms
that DPL’s ‘‘over ninety years of
germplasm development’’ has produced
not just the greatest breeding track
record, but ‘‘by far the greatest track
record of success’’ in the breeding of
cottonseed varieties that are attractive to
farmers. Id. at ¶ 17 (emphasis added).
4. Market access: This success is
manifest in DPL’s high share. It is again
an understatement for the Complaint to
say DPL has the best ‘‘brand
recognition’’ and ‘‘market position’’ to
support development and
commercialization of competing traits.
Id. at ¶ 26. In the ‘‘important’’ cotton
growing regions of the Southeast and
MidSouth, id. at ¶ 8, DPL has
breathtakingly high shares of 87% and
79%. Id. at ¶ 4. Obviously, this level of
market access is not only unique, but is
extremely valuable to a trait
development partner seeking a return on
investment through a successful
commercial launch.
5. Stacking rights: Another advantage
of partnering with DPL is it has IP rights
that the Complaint says ‘‘most other
cottonseed companies’’ do not. Id. at
¶ 27. Since farmers want multiple traits,
seed increasingly is sold with multiple
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traits ‘‘stacked’’ in it. Monsanto
generally uses licensing terms that
‘‘severely restrict’’ the ability of a seed
company to stack a non-Monsanto trait
with a Monsanto trait. Id. DPL, as
further evidence of its strong
competitive presence, had stacking
rights that are important in introducing
new traits.
6. Business Strategy: Finally, DPL was
motivated to support Monsanto’s
competitors like DuPont. It ‘‘publicly
stated its intent’’ to work with other trait
developers to ‘‘replace Monsanto traits
in its products.’’ Id. at ¶ 6. This business
‘‘strategy to replace (or ‘trade-out’) the
Monsanto traits’’ would be ‘‘profitable
for DPL.’’ Id. at 25 * * *.
For all these reasons, DPL was not just
an ‘‘attractive partner’’ for Monsanto’s
trait competitors (id. at ¶ 26), it was ‘‘an
unparalleled avenue through which to
commercialize and market’’ traits. Id. at
¶ 5 (emphasis added). No other
cottonseed company has the
combination of key resources, again in
the superlative terms of the Division’s
Complaint:
• The ‘‘LARGEST’’ cotton germplasm
collection, and
• The ‘‘BEST’’ germplasm, and
• ‘‘MORE’’ breeding capabilities
‘‘than any competitor,’’ and
• ‘‘BY FAR THE GREATEST’’ track
record of success in breeding new
cotton varieties, and
• ‘‘87% and 79%’’ of cottonseed sales
in ‘‘important’’ regions, and
• STACKING RIGHTS ‘‘most other
cottonseed companies’’ do not have, and
• An announced ‘‘STRATEGY’’ of
working with Monsanto’s competitors to
develop and commercialize competing
traits.
DuPont agrees with the Antitrust
Division that this combination of
resources is what makes DPL
‘‘unparalleled’’ in its ability to support
the development and launch of
competing traits. That is why DuPont
was partnered with DPL to develop
Optimum(tm) GAT(tm) for cotton, a new
trait offering resistance to two different
classes of herbicide that would provide
a competitive alternative to Monsanto’s
RoundUp Ready monopoly. And
DuPont agrees that significant
divestitures and reform of Monsanto’s
‘‘severely restrict[ive]’’ licensing terms
are necessary parts of effective relief.
But DuPont respectfully submits that,
even upon cursory review, the
Complaint’s exposition of DPL’s
competitive significance as a trait
development partner makes clear that
the remedies proposed fall far short of
creating a viable alternative. Therefore
they do not satisfy the legal standard of
‘‘restoring competition’’ to Monsanto’s
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current trait monopoly. The following
section analyzes why the proposed
remedy does not adequately address the
violation alleged in the Complaint.
C. Inadequacy of the Proposed Remedy
To settle the case, the Division offers
a Proposed Final Judgment (‘‘PFJ’’) that
is explained in the Competitive Impact
Statement (‘‘CIS’’). The CIS sets the bar
correctly: To ‘‘ensure the continued
presence of a cottonseed company
independent of Monsanto with
sufficient germplasm and breeding
capabilities to serve as an effective
platform for development of cottonseed
traits in competition with Monsanto.’’
Id. at 12. But the PFJ does not deliver:
The remedies are self-evidently
insufficient to provide a viable
alternative to DPL as a trait
development partner and thereby
restore the competitive harm alleged in
the Complaint. As discussed below,
there is no ‘‘factual basis’’ on which the
Court could conclude that the Proposed
Final Judgment contains ‘‘reasonably
adequate remedies for the alleged
harms’’ and is in the public interest.
1. Proposed Remedy
a. Stoneville: First, Monsanto is
required to divest its U.S. Stoneville
business, including Stoneville’s
germplasm and assets, together with
expanded stacking rights. PFJ at 3–4;
CIS at 13–14. Describing Stoneville as
‘‘the second largest traited cottonseed
company in the MidSouth and
Southeast’’ (CIS at 9) greatly overstates
its relative position. The CIS itself
contains the share data making clear
Stoneville pales in comparison to DPL:
‘‘In the MidSouth, DPL and Stoneville
account for approximately 79% and
16%, respectively, of traited cottonseed
sales. In the Southeast, DPL and
Stoneville account for approximately
87% and 8%, respectively, of traited
cottonseed sales.’’ Id. at 10. Further,
published data from USDA
demonstrates that Stoneville’s share in
those regions has declined over the past
three years.2
Stoneville’s germplasm pipeline is
said to include: ‘‘Approximately 35
mid-to full- and full-season lines for
potential commercialization in the
MidSouth and Southeast between 2008
and 2012.’’ Id. at 13. The CIS does not
explain what the likelihood this
‘‘potential’’ will come to fruition is, nor
what share Stoneville predicts it could
achieve. Nor, tellingly, does it state
2 USDA Agricultural Marketing Service—Cotton
Program, ‘‘Cotton Varieties Planted’’ 1998–2006,
Table 1 [hereafter ‘‘USDA Cotton Data’’].
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comparable figures for the number of
lines DPL will offer in the same regions.
Although divesting Stoneville
‘‘remedies’’ the horizontal effect of
increased concentration at the
cottonseed level, it does not address the
competitive harm at the trait level, as
Stoneville is clearly an inadequate trait
development platform.
b. Additional Monsanto Cotton
Germplasm: Because of the inferiority of
the Stoneville assets, Monsanto is
required to divest other cotton
germplasm that was not integrated into
the Stoneville business. PFJ at 3–4,
Schedule B. These assets are described
as follows:
(i) ‘‘Advanced Exotic Yield Lines:’’
These ‘‘promising developmental
germplasm lines’’ are derived from
‘‘exotic cotton plants that could be bred
into commercial varieties to increase
yield.’’ Monsanto reportedly
‘‘anticipated’’ that seed varieties that
could be developed from this
germplasm would be ‘‘well-suited’’ for
the Mid-South and Southeast regions.
Although the rights are termed
‘‘exclusive,’’ Monsanto retains the
ability to obtain a ‘‘license back’’ for
‘‘ongoing trait research.’’ CIS at 14–15
(emphasis added).
(ii) ‘‘Marker Assisted Breeding (MAW)
Populations:’’ This germplasm was
developed in a ‘‘program * * *
intended to enable breeders to use
sophisticated molecular technology to
aid in the selection of promising lines
* * *’’ Id. at 15. Again, Monsanto is
said to have ‘‘anticipated’’ that this
germplasm could be used to develop
seed products over four years. But the
CIS acknowledges it is only a ‘‘limited
platform’’ for competing traits because
the purchaser will have to take the time
and expense of first breeding out
Monsanto traits. Id. at n. 2.
(iii) ‘‘Cotton States Germplasm’’ and
‘‘Other Germplasm:’’ Monsanto must
divest only a non-exclusive license ‘‘to
sell and breed with varieties from
Monsanto’s recently established Cotton
States program that Stoneville currently
sells today.’’ Monsanto also must divest
only its rights ‘‘to commercialize
varieties that result from pre-existing
crosses of Stoneville germplasm and
Cotton States Licensors germplasm.’’
And Monsanto must divest ‘‘all other
germplasm’’ it currently holds, ‘‘except
* * * certain categories of germplasm
used predominantly in its trait
development and licensing business.’’
Id. at 15–16.
c. DPL Germplasm: Yet a third
tranche of divested germplasm consists
of twenty DPL conventional varieties,
including eight ‘‘in the pedigrees of
many of DPL’s popular current varieties
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in the MidSouth and Southeast.’’ PFJ at
Schedule B; CIS at 16 (emphasis added).
The CIS does not disclose how many
other DPL germplasm lines are
represented in the lineage of these
currently popular varieties. Nor does it
explain how many ‘‘parents’’ are
required to develop a single competitive
cotton variety.
The other twelve varieties reportedly
‘‘constitute a significant portion of
DPL’s breeding pipeline for the
MidSouth and Southeast and represent
the varieties, and breeding stock for the
varieties, that DPL had chosen to bring
to market over the next decade.’’ Id.
Although we are told that ‘‘[o]ver the
past four years, each of these twelve
varieties has been ranked by DPL * * *
as falling within DPL’s top category for
conventional lines * * *’’ Id. at 17,
important questions remain
unanswered, including:
• Where do these lines rank?
• How many other varieties are so
ranked?
• How many other germplasm lines
were required to create the twelve lines
to be divested?
• How many would be required to
create the next generation of these
varieties?
The twenty DPL varieties to be
divested will, like the non-Stoneville
Monsanto germplasm, be released to
their purchaser as stand-alone assets.
They are not integrated within the
Stoneville cotton development program,
so will have several competitive
disadvantages, including:
• They will not be accompanied by
any of the development resources
(breeding experts, infrastructure, etc.)
used to create them at DPL.
• They will not be divested with
access to ‘‘performance data and other
information’’ deemed necessary to the
divestiture of certain germplasm to
Syngenta. Id. at 19.
The CIS does not explain how an
acquirer could integrate all these
disparate germplasm lines into an
effective breeding program that might
produce commercial varieties, or how
long that would take.
Moreover, divestiture of the DPL
germplasm is non-exclusive, in that
Monsanto and DPL will ‘‘retain a license
to continue using these twenty lines to
breed new varieties and to sell
exclusively varieties that contain only
Monsanto’s traits.’’ Id. at 17. That
unusual weakening of the remedy is
defended as necessary ‘‘to preserve
DPL’s current competitiveness, prevent
disruption to its breeding program, and
provide DPL the ability to compete
effectively in the future.’’ Id. There is no
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explication of factual support for those
conclusory statements.
The bottom line is that the acquirer of
‘‘Enhanced Stoneville’’ has the right to
breed certain parent lines but not, in
Dupont’s experience, the resources to
create commercial varieties in any
reasonable amount of time. It must do
so in competition with a combined
Monsanto/DPL that retains all those
resources, know how, and marketplace
advantages. Nor, given that Monsanto/
DPL retains parallel rights, does the CIS
explain how the purchaser would have
an incentive comparable to the
incentive DPL’s exclusive rights gave it
invest in developing these lines before
the merger.
2. Independent DPL vs. ‘‘Enhanced
Stoneville’’
This is not a close call. The
monopolist has acquired the premier
development partner with all the
necessary resources its rivals were
relying on to be competitive. As a
substitute, it proffered a cobbledtogether combination of disparate
germplasm and other assets with all
sorts of strings attached that have no
comparable competitive presence today
or in the future, and then sold them to
a company that brings no meaningful
complementarity. This remedy plainly
does not return the marketplace to the
level of competitive trait development
resources eliminated by the transaction.
Taken alone, each element lacks
attributes that DPL brings to the
competitive landscape. Taken together,
they are a ‘‘mix and match’’ group of
assets that lack the necessary prospect
of competitive viability the Antitrust
Division itself says is critical to effective
merger remedies. Rather, the combined
Monsanto/DPL team is off and running
in this competitive race while the
Bayer/Stoneville team is stuck at the
starting line trying to find the right
shoes to put on.
First, the CIS acknowledges that
‘‘[d]ivesting Stoneville by itself would
not fully restore the lost competition
between Monsanto and DPL.* * *’’ Id.
at 14. As has been discussed, Stoneville
has a perennially low, and of late
declining, share in areas identified as
important for traits by the DOJ. The fact
that DPL is 5 to 10 times larger than
Stoneville reflects the inferiority of the
Stoneville germplasm and breeding
program.
There is no evidence Stoneville’s
germplasm is likely to improve
significantly over time. Stoneville’s
breeding program lags DPL’s
significantly. For example, DPL has
‘‘eleven strong worldwide plant
breeding programs developing new elite
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genetics to integrate existing and new
biotechnology,’’ compared to just two at
Stoneville. ‘‘Cotton and Soybean Seed
Research,’’ https://
www.deltaandpine.com/research.asp;
‘‘Delta & Pine Land Quarterly
Summary,’’ GARP Research and
Securities (April 10, 2007).
Other industry participants have
acknowledged Stoneville’s inferiority as
a development partner by their conduct.
Although Stoneville was an
independent cottonseed company
between 1999 and 2005, the period
during which various partnerships
began work on non-Monsanto traits for
cotton, companies like Dow, DuPont,
Syngenta, and Bayer did not choose to
collaborate with Stoneville, but with
DPL. See Complaint ¶ 26. Even
Monsanto would prefer to work with
DPL rather than continue ‘‘building its
own cotton business’’ with Stoneville.
CIS at 8.
Divestitures of ‘‘other Monsanto
germplasm’’ and select strains of DPL
germplasm do not close the wide gap
between DPL and Stoneville. The CIS
contains many carefully chosen
descriptions of the ‘‘Enhanced
Stoneville’’ that clearly are damning
with faint praise. For example, the CIS
characterizes the ‘‘Enhanced Stoneville
Assets’’ as providing ‘‘tools’’ that can be
‘‘a significant base’’ and even a
‘‘foundation’’ for competing trait
developers. Id. at 13. Further, the CIS
repeatedly describes the divested
germplasm in aspirational terms, as
‘‘promising’’ and ‘‘anticipated’’ to be
developed into competitive seeds at
some point in the future. These
characterizations are not a sufficient
basis to conclude the remedy will meet
the Division’s own standard of creating
a cottonseed company that competing
trait developers can rely upon in making
investment decisions.
Analysis of the USDA data further
demonstrates the divested assets are
inadequate to create a viable
development partner. First, very few
newly introduced varieties become
commercial successes. DPL introduced
64 unique cotton varieties incorporating
traits in the past eight years, but only 14
ever came to represent 1% or more of
annual U.S. cottonseed acres USDA
Agricultural Marketing Service—Cotton
Program, ‘‘Cotton Varieties Planted’’
1998–2006, Table 1. Thus, current
expectations about the germplasm lines
likely to produce competitive products
in the future are not reliable, and clearly
no substitute for DPL’s ‘‘by far the
greatest track record of success’’ in
developing new cottonseed.
Moreover, what is successful for
certain growing conditions will not
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necessarily be successful in others. That
is why DPL has offered consistently
over 20 commercial varieties in a single
growing region. Indeed, again based on
the USDA data, we find that 30 of the
40 varieties DPL offered in the
Southeast or MidSouth regions in 2006
had less than 1% share in both of those
regions. well over half of the varieties
DPL offered in the Southeast or Mid
South regions (48/73) never achieved a
1% share. Id.
Second, current market success is not
a good predictor for the future
commercial appeal of existing varieties
or their offspring. Each year, roughly a
third of American cotton acres are
planted with new varieties that were
commercialized within the previous
three years, and roughly two-thirds of
acres are planted with varieties less than
five years old. 4. Even if the proposed
germplasm divestitures created a lineup
of competitive varieties in 2008, there is
no assurance they will address the
longer term loss of competition.
This point is key for trait developers
facing major investment decisions.
Traits must be sold in successive
generations of popular cotton varieties,
because most trait value is realized
through sales in varieties that were not
yet invented on the date of the trait’s
commercial introduction. For instance,
analysis of the USDA data shows that,
just three years after Monsanto’s
BollgardfRoundup Ready trait stack was
introduced in 1997, over half of the
acres planted with that stack were
cotton varieties introduced after 1997.
For that reason, firms will only invest
in trait development if they are working
with a development partner with the
germplasm and other resources to
support the consistent introduction of
new, commercially appealing varieties
over the longer term. The ‘‘Enhanced
Stoneville’’ assets do not warrant such
a significant financial commitment.
Further, divestiture of the other
Monsanto and DPL germplasm under
the proposed terms is even less likely to
restore lost competition because it is, in
many cases, nonexclusive and/or bound
up with Monsanto intellectual property.
In a broader sense, the proposed
divestitures are flawed because they
lack organizational and developmental
context. In its policy statements about
remedies, the Division has explained
that ‘‘[r]estoring competition requires
replacing the competitive intensity lost
as a result of the merger.’’ Policy Guide
to Merger Remedies at 5. To ensure that
this is the case, the Division emphasizes
its preference for ‘‘divestiture of an
existing business entity that has already
demonstrated its ability to compete in
the relevant market.’’ Id. at 12.
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By contrast, the collections of
germplasm to be divested are unrelated
to one another and are not integrated
into a single breeding program, as DPL
was. These disparate assets thus lack
many of the complements required to
restore competition, including the
breeders who have experience working
with the assets in question, key
historical information about
performance and breeding history, and
regional breeding facilities well-suited
to the growing of distinct varieties.
Stripped of their context in an existing
business entity, the additional
germplasm assets have ‘‘not
demonstrated the ability effectively to
compete’’ as set forth in the Division’s
internal policies. Id. at 13.
Bayer, which acquired the ‘‘Enhanced
Stoneville,’’ offers no solace to trait
developers. Bayer’s 2006 share of cotton
acres planted was just 3.1% in the
Southeast region and 2.5% in the Mid
South region. Between 1999 and 2006,
according to USDA, Bayer introduced
just one cotton variety that gained a
share of 5% or more in either of these
regions, compared to ten such varieties
from DPL. So it has no track record of
success in these key regions to build on.
Adding ‘‘Enhanced Stoneville’’ and
stacking rights is simply too little too
late to make Bayer a viable trait
development partner.
All these factors obviously increase
the risk for any trait developer, and
DuPont is no exception. It has invested
millions of dollars in its joint
development project with DPL. But,
after evaluating its options in the wake
of this transaction, it concluded that
further investment with a cobbledtogether Bayer/Stoneville does not make
economic sense. DuPont therefore has
initiated the process of terminating the
project. The result, of course, is that
Monsanto’s monopoly in herbicide
tolerant cotton traits will be preserved,
so farmers will face fewer choices and
higher prices.
D. Additional Remedies
The Complaint is clear that what
makes the opportunity for cotton trait
development attractive is the
availability of an exceptional cottonseed
company as a development partner. As
discussed above, that company, DPL,
has the best of all necessary attributes as
a trait development partner: The best
market access, best germplasm, best
breeding programs, best track record of
introducing successful new varieties,
best IP rights, and best incentive to
compete. The Complaint makes clear
that DPL is by far the most attractive
and efficient development partner,
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indeed in DuPont’s view the only viable
partner in cotton.
The remedy therefore that would
restore competition is one that
maintains the competitive resources
needed to develop new traits. Any
remedy that eliminates an independent
DPL has significant risks. But the only
remedy DuPont can envision that would
have a reasonable chance of preserving
competition would be divesting all of
DPL’s germplasm and its breeding
operations, as well as associated IP
rights.
E. Conclusion
The Complaint sets forth a clear and
compelling story of the competitive
injury that will result from the proposed
transaction. The remedy proposed in the
Final Judgment falls far short of what
would be necessary to have a reasonable
prospect of maintaining competition in
trait development. The result is clear:
harm to farmers and consumers from a
further entrenched Monsanto monopoly.
For the foregoing reasons, DuPont
respectfully submits that the Proposed
Final Judgment does not meet the
‘‘public interest’’ standard of the
Tunney Act.
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Respectfully submitted,
Thomas L. Sager,
Vice President and Assistant General
Counsel, E.I. du Pont de Nemours &
Company, 1007 Market Street, D–7038–3,
Wilmington, DE 19898.
Dated: August 27, 2007.
Of Counsel:
Wm. Randolph Smith, Jeane A. Thomas,
Ryan C. Tisch, Crowell & Moring LLP,
1001 Pennsylvania Avenue, NW.,
Washington, DC 20004.
August 10, 2007
Donna N. Kooperstein, Chief, Transportation,
Energy & Agriculture Section, Antitrust
Division, United States Department of
Justice, 325 Seventh Street, NW., Suite
500, Washington, DC 20530.
Re: United States v. Monsanto Company, et
al., Case No. 1:07–cv–00992
Ms. Kooperstein:
I am writing on behalf of our organization
to object to the proposed final judgment that
the U.S. Department of Justice (‘‘DOJ’’) has
filed in the above-referenced lawsuit.
Monsanto’s acquisition of Delta and Pine
Land Company (‘‘Delta’’) will solidify
Monsanto’s monopoly in the market for
cotton seed and will have harmful ripple
effects for Illinois’s farmers, consumers and
agricultural economy.
The State of Illinois has the second largest
acreage of corn and soybeans planted in the
United States. We are concerned that
Monsanto’s proposed acquisition of Delta is
another step in its efforts to monopolize the
market for seeds and biotech traits not just
in cotton, but also in corn and soybeans.
Monsanto is rapidly acquiring a variety of
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seed companies to commercialize its
monopoly traits. In fact, its current iron grip
on the corn seed market is an issue of
extreme concern to our member farmers.
With monopoly control over cotton,
Monsanto will be able to prevent competing
varieties from coming to market—alternative
varieties that could have important
application in corn and soybeans. The result
will be devastating to Illinois farmers who
need new and improved varieties to increase
productivity in their crops and battle
environmental conditions that threaten their
livelihoods. Without market competition, our
farmers will suffer from lack of alternative
products and higher prices. We are
disappointed that, by allowing this
acquisition to proceed, the DOJ is ignoring
the interests of our farmers and consumers.
The clear reason for Monsanto’s
acquisition of Delta is elimination of
competition in seeds. There is nothing about
the acquisition or the DOJ’s proposed final
judgment that will increase competition in
cotton, or for that matter, in corn or soybeans.
The divestiture of Stoneville, a much smaller
cotton company, together with limited access
to a limited line of seed germplasm, is not
an adequate remedy. The acquisition hurts
farmers and consumers, while only
benefiting Monsanto.
Sincerely,
Bridget Holcomb,
Agricultural Policy Coordinator.
Tunney Act Comments of the
International Center for Technology
Assessment and Center for Food Safety
on the Proposed Final Judgement
The International Center for
Technology Assessment (CTA) is a nonprofit, bipartisan organization
committed to providing the public with
full assessments and analyses of the
impacts of technologies on society. CTA
is devoted to fully exploring the
economic, legal, ethical, social and
environmental impacts that can result
from applications of technologies or
technological systems. The Center for
Food Safety (CFS) is a national
nonprofit membership organization
founded by CTA to educate the general
public and decisionmakers on the
social, environmental and other impacts
of agricultural technologies and
systems; to secure adequate regulations
to protect the general public and farmers
from ill effects of agricultural
technologies and systems; and to
promote sustainable agriculture.
In February 2007, CTA and CFS
published a comprehensive review of
the proposed merger entitled ‘‘Cotton
Concentration Report: An Assessment of
Monsanto’s Proposed Acquisition of
Delta and Pine Land’’ (which we are
also submitting as part of these
comments).
CTA and CFS submit these comments
and attachments pursuant to Section
2(b) of the Antitrust Procedures and
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Penalties Act (APPA), 15 U.S.C. 16 (the
‘‘Tunney Act’’). For the reasons
discussed below, CTA and CFS believe
that the Dept. of Justice’s proposed final
judgement (PJF) in this case is not in the
public interest, and therefore must be
rejected by this Court.
I. Background on the Cotton Seed
Industry
Some basic background on the cotton
seed industry is required to understand
the competitive issues raised by the
proposed merger.1 There are two major
types of cotton seed: (1) Conventional;
and (2) genetically modified or ‘‘traited’’
cotton seed. Cotton is grown in four
major regions of the U.S.: The MidSouth, Southeast, Southwest and West.
Many different varieties of cotton have
been developed by breeders. Cotton
varieties have been bred for different
combinations of properties, such as
yield, disease resistance, suitability to
certain climates or soil types, as well as
quality characteristics such as fiber
strength and length. ‘‘Traited’’ cotton
seed is developed from conventional
cotton varieties by means of genetic
modification, which is used to
introduce or ‘‘introgess’’ ‘‘cotton traits.’’
At present, cotton traits are limited to
‘‘herbicide-tolerance’’ (HT) and ‘‘insectresistance’’ (IR). The HT trait allows
farmers to spray herbicides on the
cotton plant to kill surrounding weeds.
The IR trait protects cotton from certain
insect pests. Conventional cotton does
not contain these traits. In 2006, the
USDA identified 203 cotton varieties
planted in the U.S.: 36 conventional
varieties and 167 traited varieties (CTA,
Figure 7). 2
The merger involves two major
markets. One market is the
development, commercialization, and
sale of cottonseed, both conventional
and traited. The top three firms in this
market are responsible for 92–93% of
U.S. sales: DPL (51%), Bayer
CropScience (30%) and Monsanto’s
Stoneville (12%) (CTA, Figure 1). The
second is the ‘‘upstream’’ market for
development of cotton traits. Monsanto
has a 96% market share in traits, with
Bayer and Dow accounting for the rest.
Monsanto’s HT traits are Roundup
Ready and Roundup Ready Flex, both of
which confer resistance to glyphosate
herbicide; Monsanto’s IR traits are
1 Throughout these comments, we reference the
attached ‘‘Cotton Concentration Report’’ for fuller
discussion of issues raised. References are of the
form ‘‘CTA, Section #’’).
2 Unless otherwise noted, statistics on cotton
varieties planted in the U.S. are derived from
USDA, Agricultural Marketing Service, ‘‘Cotton
Varieties Planted’’ report for 2006, which contains
detailed information on varieties of cotton planted.
Reference in CTA, Bibliography.
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Bollgard and its successor, Bollgard II.
The only other commercialized cotton
traits are Bayer’s LibertyLink (HT) and
Dow’s Widestrike (IR). 95% of traited
cottonseed contains only Monsanto
trait(s); 4% only Bayer’s trait; and 1% a
combination of a Monsanto and either a
Bayer or Dow trait (CTA, Figure 2).
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II. DoJ Construes Relevant Product
Market Too Narrowly
DoJ defines the relevant product and
geographic markets as ‘‘the
development, commercialization, and
sale of traited cottonseed for the
MidSouth and Southeast’’ (CIS, p. 9).
The DoJ bases its product market
definition (‘‘traited cottonseed’’) on
several empirically false statements.
First ‘‘Farmers grow substantially all of
this important crop [cotton] from
cottonseed that has been enhanced
through the introduction of
biotechnology traits (‘‘traited
cottonseed’’)’’ (Complaint at 2). Second:
‘‘Today, almost all cottonseed varieties
planted in the United States are traited.
* * *’’ (Complaint at 22). In fact, USDA
data show that this is far from the case.
First, of the 203 cotton varieties planted
in 2006, just 167, or 82%, were traited.
The remaining 36 varieties (18%) were
conventional varieties. Hence, more
than 1 of every 6 cotton varieties was
conventional in 2006. Thus, traited
cottonseed can by no stretch of the
imagination be considered to comprise
‘‘almost all of cottonseed varieties
planted in the United States.’’
Acreage planted to traited vs.
conventional cottonseed breaks down in
a similar manner. USDA data report
88% of U.S. cotton acreage planted to
transgenic varieties, versus 12% planted
to conventional varieties. 12% of the 15
million acres of cotton planted in 2006,
or 1.8 million acres, were hence
conventional. To say the least, it is
difficult to understand how DoJ can
claim ‘‘substantially all’’ U.S. cotton is
produced from traited seed when nearly
one in eight acres, comprising almost 2
million acres, is planted to conventional
seed.
This overly narrow definition of the
relevant product market leads DoJ to
neglect several anticompetitive effects of
the merger.
A. Declining Availability of
Conventional Cottonseed, Higher Seed
Prices
As noted above, DoJ defines the
relevant product market as ‘‘traited
cottonseed.’’ This definition implicitly
ignores the very existence of
conventional cottonseed, which forms a
significant share of both cotton varieties
and acreage planted in the U.S.
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However, the PJF proposes a partial
remedy, albeit in an incidental and
unsatisfactory manner, for this sector of
the cottonseed market (i.e., conventional
cotton varieties) that goes completely
unanalyzed in the Complaint and CIS:
‘‘The proposed Final Judgement allows
Defendants to continue, for a limited
period of time, to sell conventional
versions of some of the divested DPL
varieties currently being sold by DPL in
and outside the United States, providing
for a continuity of supply of
conventional cottonseed’’ (PJF, pp. 17–
18, emphasis added). The evident need
for a remedy expressed in the PJF stands
in stark contradiction to DoJ’s complete
neglect of conventional cottonseed in its
definition of the relevant product
market in the Complaint and CIS.
Because the CIS completely lacks an
analysis of conventional cottonseed, and
in fact virtually ignores its existence,
DoJ has absolutely no basis for
proposing, or assessing the adequacy of,
the remedy cited above.
In fact, the merger will very likely
have a number of serious
anticompetitive impacts related to the
conventional cottonseed market. First,
availability of conventional cottonseed
varieties will decline. DPL sold 15
conventional varieties in 2006, 40% of
the 36 conventional varieties planted in
2006 (CTA, 3.2). Monsanto intends to
reduce the number of conventional
varieties offered by DPL, through
‘‘accelerat[ing] biotech trait penetration’’
(CTA, 3.2). Secondly, because
conventional seed varieties are on
average two to four times less expensive
than traited seeds (CTA, 3.3, Figure 5,
Appendix 3, and related discussion in
text), farmers who prefer conventional
seeds but cannot find suitable varieties
will face substantially increased seed
costs. See CTA, 2.4 for further
discussion of the merger’s adverse
impacts on the conventional cottonseed
market.
B. Declining Availability of Less Costly
Traited Seeds, Increasing Seed Prices
A closely related impact of the merger
is reduced offerings of cotton varieties
with less expensive single vs. more
expensive ‘‘stacked’’ (two) traits, and
reduced offerings of less expensive firstgeneration vs. more expensive secondgeneration Monsanto traits. For
instance, Monsanto has pledged to
‘‘invest in penetration of higher-margin
traits in Delta and Pine Land offerings.’’
These proposed changes to DPL’s
product offerings (with respect to both
conventional and traited seeds) are
clearly not merely Monsanto’s
anticipated responses to farmer demand,
but are expressions of a Monsanto
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strategy to increase profits through
exercize of market power. These
anticompetitive effects of the merger
(reduced choices, increased seed prices)
are addressed in detail in CTA 2.5, 3.3;
Figures 5 & 6, Table 1 and Appendix 3).
III. DoJ Construes the Relevant
Geographic Markets Too Narrowly
A striking feature of DoJ’s settlement
documents is the lack of any broader
analysis of the cottonseed industry. One
searches in vain for some argument or
justification to explain DoJ’s failure to
analyze either (1) the national market in
cottonseed; or (2) DoJ’s restriction of the
relevant geographic markets to the
MidSouth and Southeast regions. On the
first point, the CIS states clearly that:
‘‘The Complaint alleges that the likely
effect of this acquisition would be to
substantially lessen competition in the
market for the development, production,
and sale of traited cottonseed * * *’’
(CIS, p. 1), without, initially at least,
restricting the anticompetitive impacts
to specific geographic regions. On the
second point, beyond a bare mention of
the existence of the Southwest and West
geographic markets, neither the
Complaint nor the CIS discusses the
Defendants’ involvement in these
markets. Yet despite DoJ’s failure to
analyze either of these two markets, or
the national market, the CIS and PJF
propose one remedy that explicitly
addresses anticompetitive issues
relevant to the national market in
cottonseed, thus the Southwest and
West markets as well as the MidSouth
and Southeast (CIS, p. 21, discussed
further below).
In fact, analysis of USDA data show
that the Defendants together have a
substantial presence in both markets:
29.16% of cottonseed sales in the
important Southwest market (which
includes Texas, the nation’s leading
cotton producer); and a still greater
40.51% of sales in the West.3
In the Southwest market, the merger
would effectively result in Monsanto
increasing its market share from 8.04%
(Stoneville) to 21.12% (DPL), or an
increase of over 2.5-fold. In the West
market, Monsanto’s post-merger share of
cottonseed sales increases 3.6-fold, from
8.80% (Stoneville) to 31.71% (DPL).4
3 USDA AMS 2006, cited above and attached. See
Table entitled ‘‘Estimated percentage of upland
cotton planted to leading specified brands by
growth area, 2006 crop’’ p. 3. Note that DPL owns
the Paymaster as well as the Deltapine brand. For
documentation, see CTA, 2.1.1.
4 Here, we assume that the market shares cited in
the following discussion will not be altered by the
Defendants’ divestitures beyond that of Stoneville.
The additional divestitures (e.g. of 20 DPL lines to
Stoneville’s acquirer and 43 lines to Syngenta) are
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At present, these two geographic
markets represent the only cottonseed
markets in which the Defendants’
competitors have a significant presence.
The DoJ’s CIS provides absolutely no
analysis of how this substantial increase
in Monsanto’s post-merger market
presence in these two important markets
would affect competitiveness in the
West and Southwest regions.
The concentration in these markets
would increase substantially as a result
of the merger, especially when
considered in combination with Bayer’s
prospective acquisition of the Enhanced
Stoneville Assets. Even without
Stoneville, Bayer has a commanding
60.28% share of the Southwest market.5
With Stoneville, this presence increases
to 68.32%, or over two-thirds of the
market. In the West, acquisition of
Stoneville would increase Bayer’s
market share from 20.22% (note that
Bayer purchased CPCSD in 2006, see
CTA, 2.11 for documentation) to
29.02%.
Post-merger, the combined market
share of the top two firms in the
important Southwest market (which as
noted above includes Texas, the nation’s
largest cotton producer) increases to an
astounding 89.44%, and the
corresponding market share in the West
market to 60.73%. Top 3 market share
would become 93.29% in the
Southwest, and 96.60% in the West.
The post-merger share of the national
cottonseed market of just the top two
firms rises to 92%, creating a virtual
duopoly in cottonseed, with the
Defendants controlling roughly 50% of
the national market and Bayer
controlling 42% (CTA, Figure 1).
Clearly, DoJ was remiss in not
analyzing the merger’s potential
anticompetitive effects in the
Southwest, the West, and nationally.
The need for such an analysis is clearly
indicated by DoJ’s proposed remedy to
the anticompetitive effects of
Monsanto’s restrictive licensing
practices with third parties, which have
allowed Monsanto to terminate licenses
granted to cottonseed firms (licensees)
which sell cottonseed containing nonMonsanto traits: ‘‘These changes will
give these competing cottonseed
companies the ability to partner with
trait developers other than Monsanto
without any financial penalty and to
offer traits desired by farmers. Trait
described only in relation to the MidSouth and
Southeast markets.
5 USDA AMS 2006, see table cited above. Note
that Bayer owns not only the Bayer CropScience
Fibermax brand, but also AFD Seed, which it
purchased in 2005, and CPCSD (California Planting
Cotton Seed Distributors), which it purchased in
2006. For documentation, see CTA, 2.1.1.
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developers will thereby have access to
close to half of the current U.S.
cottonseed market, without having to
deal with the combined Monsanto/DPL’’
(CIS, p. 21, emphasis added). Without
having conducted any analysis of the
national market in cottonseed, and
having excluded from consideration two
important geographical markets, DoJ is
in no position to propose, or assess the
adequacy of, a remedy that involves
consideration of the national market in
cottonseed.
The truth of this assertion is brought
home by DoJ’s reference, in the passage
cited above, to ‘‘competing cottonseed
companies.’’ If DoJ had analyzed the
national market, it would have found
that there are virtually no ‘‘competing
cotton seed companies’’ of any size still
active, due primarily to numerous
acquisitions over the past decades, and
particularly the last few years, resulting
in an extremely high level of
concentration in the cottonseed
industry. USDA data show clearly that
the number of cottonseed firms with
sales appreciable enough to register in
its surveys has declined dramatically
over the past several decades (CTA,
21.1, Appendices I & 2), and particularly
over the last four years: From 19 in
2003, to just 9 in 2006. Accordingly, the
number of smaller cottonseed suppliers
other than the top three firms (premerger) has declined from 16 to just six
(CTA, 3.1). In short, DoJ’s proposed
remedy in favor of ‘‘competing
cottonseed companies’’ may soon be
irrelevant, if the exit of smaller
companies from the market continues,
and is accelerated by the merger, as
appears likely. Clearly, DoJ should have
analyzed the merger’s potential to
accelerate the exit of smaller companies
from the cottonseed market, and the
associated anticompetitive harms this
would likely have (declining choice of
cottonseed varieties, increased costs).
IV. DoJ’s PJF Represents an Unwieldy
and Unenforceable Conduct-Based
Remedy Masquerading as a Structural
Remedy Based on ‘‘Divestitures’’ of
Germplasm
The primary means by which DoJ
addresses the anticompetitive harms
presented by the merger involves
‘‘divestiture’’ of germplasm. DoJ
acknowledges the crucial role of
germplasm in developing and
commercializing cottonseed in the
Complaint:
‘‘A company with a large collection of
high quality, or elite, germplasm has a
competitive advantage because the
company has the ability to identify the
best genetic material and use it in a
wide variety of possible cross
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combinations, resulting in a greater
likelihood of developing a successful
variety.’’ (Complaint at 5.)
In addition, DoJ recognizes that
divesting Stoneville alone would not be
sufficient to restore competition lost by
the merger Monsanto and DPL (CIS, p.
14). Accordingly, the PJF requires
Monsanto and DPL to ‘‘divest’’ various
lines of germplasm beyond that
represented by Stoneville. Below, we
discuss a few of the many exceptions
and conditions attached to these
divestitures of germplasm that render
them ineffective as a remedy.
A. DPL Germplasm
DoJ states that: ‘‘Defendants will
divest twenty DPL conventional
varieties’’ (CIS, p. 16). First, only 8 of
these 20 varieties are either commercial
lines, and/or parents of lines that have
been sold commercially. Six of these
eight lines are listed as commercially
sold varieties in 2006, when they
comprised, collectively, just 1.76% of
U.S. cotton planted in that year.6 DoJ
makes much of the fact that some of
DPL’s best-selling cotton varieties were
derived, over years of breeding efforts,
from four of these eight lines (CIS, p.
16). Yet as DoJ also acknowledges
elsewhere, development of successful
commercial cotton varieties from even
high-quality parental lines can take 8–
10 years, and cost tens of millions of
dollars. Whether an acquirer will be
able to develop commercially successful
varieties from such parental lines at all,
especially given the presence in the
marketplace of successful varieties
already developed from them, is
extremely uncertain. The time required
for breeding work that might result in
commercially successful varieties is also
uncertain, but could be substantial, and
too long to promptly redress
competitive harm, as merger guidelines
require.
Twelve of the 20 lines are
experimental lines with unproven and
hence uncertain commercial potential.
The acquirer (Bayer) may also lack the
requisite expertise with cotton varieties
of this type to effectively utilize them in
breeding programs.
Still more troubling, Monsanto
retains, or has the right to reacquire,
substantial rights with respect to these
20 varieties (see Schedule B, Section 2,
DPL Germplasm for the following
discussion). For instance, Monsanto is
entitled to re-acquire an exclusive
6 See Table B of Schedule B—Enhanced
Stoneville Assets. Reference to USDA AMS 2006,
cited above, shows that collectively, 00W12
(DP393), Delta Pearl, DP5690, DP491, DP565 and
DP5415 comprised 1.76% of U.S. cotton acreage in
2006.
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license to sell varieties that are derived
or bred from the DPL lines, and also
contain only Monsanto traits. Recall that
the chief value of these lines is as
breeding stock. Secondly, Monsanto
retains exclusive rights to sell any of the
‘‘divested’’ lines for sale in foreign
countries where DPL is currently selling
them and retain sufficient quantities of
these lines for breeding purposes.
Again, Monsanto can continue to breed
with lines that DoJ chooses to designate
as ‘‘divested.’’
Similarly, the ‘‘divestiture’’ of
‘‘advanced exotic yield hues’’ also
comes with numerous strings attached.
As with DPL Germplasm, Monsanto
may retain ‘‘research quantities’’ of
these lines ‘‘to enable them to continue
their trait development research.’’ This
exception is particularly curious in that
DoJ’s rationale for the exceptions (here
and elsewhere) is to allow Monsanto ‘‘to
retain assets (and research rights to
germplasm) that directly relates to trait
development, while the advanced exotic
yield lines were developed by Monsanto
as part of a non-transgenic yield
enhancement project; that is, as part of
a project that involving traditional, nonbiotech breeding work for development
of higher-yielding varieties (CIS, p. 14–
15). We note also that even DoJ admits
that these lines will likely be unsuitable,
at least within the term of the PFJ.
Finally, the ‘‘divestiture’’ of 43 of
DPL’s VipCot lines to Syngenta is
similarly conditioned. Syngenta’s
‘‘exclusive rights’’ to commercialize
varieties developed from these lines is
restricted to varieties that contain one of
four traits (see Schedule C). If Syngenta
were to develop a new trait not listed in
Schedule C, and introgress it into one of
these 43 lines, it could no longer
commercialize it. This limitation is a
significant restriction in light of the
extremely high failure rate in
agricultural biotechnology (CTA, 3.11,
Appendix 7). This condition in effect
puts DoJ in the unenviable position of
‘‘picking a winner’’ in a field littered
with failed development projects. The
commercial prospects of any of these 43
lines is also highly uncertain. DPL once
promised commercialization of VipCot
varieties by 2006 (CTA, 3.4.1). The
commercialization date for eight of
these lines is now projected for 2009–
2011, with the majority pushed off until
beyond 2011. These projected
commercialization dates are notoriously
unreliable, and DoJ’s reliance on them
as remedies to restore competition is
naive.
These are just a few of the many
exceptions, exclusions and conditions
related to the ‘‘divestiture’’ which
renders them ineffective as remedies.
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We would note that such restrictions
have two weakening effects. First, they
limit the ability of extremely weak
competitors to successfully develop
competing traited cottonseed varieties
in a field in which Monsanto already
has overwhelming dominance (as
evidenced by its 95–96% market share
in traits). Secondly, they provide the
virtual monopolist Monsanto with rights
to continue to sell certain of the
‘‘divested’’ lines, and/or to utilize
‘‘divested’’ germplasm in further
breeding work, advantages which can
only act to consolidate its monopoly
position and forestall meaningful
competition. For a fuller discussion of
the competitive strength of a postmerger Monsanto-DPL, see CTA, 3.10
and Appendix 5.
B. DoJ’s Conduct-Based Remedy
Imposes Undue Obligations for
Regulatory Oversight, Which DoJ Has
Neither Time Nor Resources To Oversee
The numerous conditions attached to
the sharing of rights to ‘‘divested’’
germplasm between Monsanto-DPL and
Bayer-Stoneville and Syngenta imposes
oversight obligations on DoJ which the
Antitrust Division is ill-equipped to
undertake. For instance, DoJ may be
called upon to rule as to whether
Monsanto has in fact complied with its
obligation to provide Bayer with
materials the latter needs to obtain
regulatory approval of varieties Bayer
develops from Null Lines derived from
the ‘‘divested’’ advanced exotic yield
lines, or as to whether compensation
Monsanto seeks from Bayer for this task
is in fact ‘‘reasonable’’ (Definitions, Null
Line). Or, DoJ may have to rule on
whether any retention by Monsanto of
research quantities of advanced exotic
yield lines does or does not adversely
affect Bayer (Schedule B, clause 4c).
Clause 4d of Schedule B may further
require DoJ to police Bayer with respect
to acquisition of certain patents, as well
as enforce breeding and resale
restrictions, in relation to the advanced
exotic yield lines. These are just a very
few of the oversight and enforcement
responsibilities with which DoJ has
saddled itself in the PJF. An
examination of Schedules reveals many,
many more. Not only is DoJ likely
unequipped, in terms of expertise, to
fairly adjudicate these matters, the
resource burdens placed on DoJ in
attempting to do so are unacceptable.
Finally, the exceedingly complex terms
in the PJF provide numerous
opportunities for evasion of the terms of
the settlement, which could easily
subvert the remedies proposed.
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V. Conclusion
DoJ’s PJF is clearly inadequate to
remedy the substantial anticompetitive
impacts of the proposed merger. We
have shown that DoJ has construed the
relevant product and geographic
markets too narrowly, and thereby failed
to account for the merger’s likely impact
of reducing availability of conventional
and less expensive traited cottonseed,
thereby leading to reduced seed choices
and increased seed costs for cotton
growers. Likewise, by ignoring the
national and two important regional
markets, DoJ has neglected the
precipitous decline in competition in
the cottonseed industry as a whole that
would likely be wrought by the merger,
which also promises reduced choices
and increased costs for cotton growers.
We have also pointed out the
unwieldy, ‘‘regulatory’’ nature of this
supposed structural remedy, which in
fact is an extremely burdensome
conduct-based remedy of just the sort
that DoJ has neither the resources nor
the expertise to police.
Finally, the proposed merger will
create an extremely concentrated
cottonseed industry dominated by two
huge, vertically-integrated players
(Monsanto and Bayer) which together
will control 92% of the cottonseed
market. Monsanto will consolidate and
extend its near-monopoly position in
cotton traits, with adverse impacts on
U.S. agriculture as a whole (CTA, 2.7 to
2.9, 3.10) as well as anticompetitive
impacts resulting in fewer choices and
higher seed and cotton production
prices for America’s cotton farmers.
Therefore, we respectfully request the
Court to reject DoJ’s proposed final
judgement as insufficient and contrary
to the public interest.
Respectfully Submitted,
Bill Freese,
Science Policy Analyst, International Center
for Technology Assessment, Center for Food
Safety, 660 Pennsylvania Ave., SE, Suite 302,
Washington, DC 20003, Phone: 202–547–
9359, e-mail: bfreese@icta.org, Web site:
https://www.icta.org; https://
www.centerforfoodsafety.org.
Cotton Concentration Report
An Assessment of Monsanto’s Proposed
Acquisition of Delta and Pine Land
Bill Freese,
Science Policy Analyst, Center for Food
Safety (CFS), International Center for
Technology Assessment (CTA)
February 2007
Center for Food Safety is a national
non-profit membership organization
working to protect human health and
the environment by curbing the use of
harmful food production technologies
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and promoting organic and other forms
of sustainable agriculture.
The International Center for
Technology Assessment (CTA) is a nonprofit, bi-partisan organization
committed to providing the public with
full assessments and analyses of
technological impacts on society. CTA
is devoted to fully exploring the
economic, ethical, social, environmental
and political impacts that can result
from the applications of technology or
technological systems.
Main Office, 660 Pennsylvania
Avenue, SE., Suite 302, Washington, DC
20003, https://
www.centerforfoodsafety.org, https://
www.icta.org.
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Table of Contents
Executive Summary
1. Introduction
2. Current Status of the Cotton Industry
2.1 Cotton Industry Already Highly
Concentrated
2.1.1 Concentration in cotton seeds
2.1.2 Concentration in cotton traits and
research and development
2.1.3 Concentration in cotton farms
2.2 Cotton Seed Price Increase with the
Rise of Biotechnology
2.3 Biotechnology Trait Premiums and
Added Value
2.3.1 Herbicide tolerance
2.3.2 Insect resistance
2.3.3 Yield
2.3.4 Pesticide use
2.3.5 Summary of added value
2.4 Biotech versus Conventional Seed:
Farmers’ Choice?
2.5 Single-Trait versus Stacked Cotton
2.6 Biotech Cotton Failures
2.7 Glyphosate-Resistant Weeds
2.8 Glyphosate Use Linked to Plant
Disease, Mineral Deficiencies and
Reduced Yields; Roundup Toxic to
Amphibians
2.9 Inadequate Regulatory Oversight
3. Assessment of the Proposed Merger
3.1 Further Concentration in Cotton Seed
3.2 Declining Availability of
Conventional Cotton Seed
3.3. Accelerated Rise in Cotton Seed
Prices
3.4 Reduced Availability of Cotton with
Non-Monsanto Traits
3.4.1 Cotton with Syngenta’s VipCot
insecticidal protein
3.4.2 Cotton with DuPont’s GAT
herbicide tolerance
3.4.3 Other biotech cotton trait R&D
3.5 Production Costs and Productivity of
Cropland
3.6 Impacts on Growers of Other Crops
3.6.1 Concentration in seeds and traits
other than cotton
3.6.2 Cross-crop trait deployment
3.6.3 Fewer trait choices and adverse
impacts on other crops
3.7 Organic Cotton
3.8 Seed Sterility Technology
(Terminator)
3.9 International Perspective
3.9.1 Monsanto in India
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3.9.2 Monsanto’s bribery in Indonesia
3.9.3 Monsanto’s questionable soya
lawsuits in Europe
3.10 Monsanto-DPL a Virtually
Unchallengeable Competitor
3.11 Conduct-Based Solutions in Light of
the High Failure Rate in Agricultural
Biotechnology
4. Conclusion
5. Recommendations
Bibliography
Figures
Figure 1: U.S. CottonSeed Market Share by
Firm: 2006
Figure 2: U.S. Cotton Trait Market Share by
Firm: 2006
Figure 3: Number and Average Size of U.S.
Cotton Farms: 1987 to 2002
Figure 4: Per Acre Cotton Seed Cost versus
Transgenic Share of U.S. Cotton
Figure 5: Technology Fees as Proportion of
Cotton Seed Price
Figure 6: Breakdown of Traits in Biotech
Cotton in the U.S.: 2006
Figure 7: Number of Conventional and
Biotech Cotton Varieties Planted: 2003 to
2006
Figure 8: Percentage of U.S. Cotton Planted
to Bayer’s Two Top Conventional Lines
vs. Biotech Variants of the Same Lines:
2004–2006
Tables
Table 1: Per Acre Cost of Biotech Seed by
Trait and Generation
Table 2: Potential for Further Trait
Penetration in Cotton Seed
Table 3: Monsanto’s Acquisitions Through
American Seeds, Inc.: 2004 to 2006
Appendices
Appendix 1: Cotton Seed Market Share of
Selected Companies in the U.S.: 1970 to
2006
Appendix 2: Market Share of Four Largest
Private Seed Firms: Cotton, Corn and
Soybeans
Appendix 3: Cost of Cotton Seed:
Conventional versus Biotech
Appendix 4: Average Cotton Yields in the
U.S.: 1930 to 2006
Appendix 5: Acreage of Biotech Cotton
Field Trials in the U.S.: 2000 to 2006
Appendix 6: Monsanto’s Acquisitions and
Collaborations
Appendix 7: Approved versus
Commercially Grown Genetically
Engineered Crops
Acknowledgements
The author and the Center for Food
Safety would like to thank the
Cornerstone Campaign for their
generous support, without which this
report would not have been possible.
The author would also like to thank
those who reviewed a draft of the
manuscript and otherwise offered
valuable suggestions, in particular Will
Rostov, senior attorney at CFS; Diana
Moss, Vice-President of the American
Antitrust Institute; and Martha Crouch,
PhD in biology. However, the author is
solely responsible for the content of this
report.
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Executive Summary
On August 15, 2006, Monsanto
announced that it would acquire the
Delta and Pine Land Company (DPL).
DPL is the eleventh largest seed
company in the world, sells over half of
the cotton seed in the U.S., and holds
a pivotal position as the only major
cotton seed firm that is not also a
biotechnology trait provider. Monsanto
dominates the market for biotechnology
traits in cotton and other crops, and is
also the largest seed firm in the world.
The proposed merger deserves close
scrutiny, particularly in light of the
extraordinarily high degree of
concentration already existing in the
cotton industry.
Cotton Industry Already Highly
Concentrated Pre-Merger
Cotton seed: Just three firms sell 92%
of U.S. cotton seed to farmers (Section
2.1.1, Figure 1, Appendix 1), a much
higher concentration than other major
crops (Appendix 2)
Biotechnology traits: Over 87% of
U.S. cotton is biotech. 96% of biotech
cotton contains Monsanto traits, and
95% contains only Monsanto traits
(Section 21.2, Figure 2)
Research and development: Monsanto
has similar dominance in R&D for future
cotton traits, accounting for 94% of the
experimental biotech cotton planted in
the U.S. from the year 2000 to present
(Section 3.4.3, Appendix 5)
Cotton farms: The average size of U.S.
cotton farms more than doubled from
1987 to 2002. One of every five cotton
farms ceased operations in just the five
years from 1997 to 2002 (Section 2.1.3,
Figure 3).
Market Power and Anticompetitive
Effects
High cost of cotton seed: The cost of
cotton seed has risen 3.4-fold from 1995
to 2005, due primarily to rising
technology fees charged for biotech
traits (Section 2.2, Figures 4 & 5, Table
1, Appendix 3). The value added by
biotech traits does not justify these steep
premiums (Section 2.3), as the trend of
increasing cotton yield since 1930 has
not accelerated during the biotech era
(Appendix 4)
Limited choice: Farmers have fewer
choices of quality conventional cotton
seed, and fewer choices of cotton
varieties with one trait vs. two, as cotton
seed firms and trait providers
aggressively pursue ‘‘increased
technology penetration’’ to maximize
profits (Sections 2.4 & 2.5, Figures 7 &
8)
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Agronomic, Environmental
Consequences of Monsanto’s Trait
Monopoly
Crop failures: Monsanto’s biotech
cotton has failed numerous farmers
since its introduction, often resulting in
sharp drops in yield. Near-total reliance
on any agricultural technology,
including one company’s limited set of
biotech traits, is unwise (Section 2.6)
Resistant weeds: The dramatically
increased use of glyphosate-based
herbicides (e.g. Roundup) associated
with Roundup Ready cotton and other
crops has fostered a rapid and
dangerous development of weeds
resistant to the herbicide, a threat to the
cotton industry compared by one expert
to the boll weevil (Section 2.7)
Other impacts: Recent scientific
studies suggest that excessive use of
glyphosate, which has increased six-fold
from 1992–2002, is linked to plant
disease, crop mineral deficiencies,
reduced yields and (in the case of
Roundup) amphibian mortality, and
may pose a long-term threat to the
productivity of American agriculture
(Section 2.8).
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Anticompetitive Effects of the Merger
Oligopoly to duopoly? USDA data
show that the number of significant
cotton seed firms other than the top
three has declined by more than half
from 2003 to 2006. Bayer’s rising market
share since 1999 is concentrated in the
Southwest, and has not diversified other
regional seed markets. A divested
Stoneville may well be uncompetitive
and ripe for takeover, possibly resulting
in a cotton seed duopoly controlling
over 90% of the market (Section 3.1).
Reduced choice: Monsanto’s
commitment to ‘‘increased technology
penetration’’ would likely lead to
accelerated phase-out of DPL’s
conventional cotton varieties, which
comprised 40% of conventional lines
planted in 2006, and fewer high-quality
‘‘generation one’’ and ‘‘single-trait’’
options, reducing choices for farmers
(Sections 3.2 & 3.3).
Increasing cotton seed prices:
Monsanto’s pledge to ‘‘invest in
penetration of higher-margin traits in
DPL offerings’’ would accelerate the
steep rise in cotton seed prices (Section
3.3, Table 2).
Consolidation of trait monopoly: DPL
is the only seed firm among the top four
(Bayer, MonsantoStoneville, DowPhytogen) that is not also a trait
provider. Acquisition of DPL by
Monsanto would likely result in
exclusion of non-Monsanto traits in over
half of U.S. cotton, extending
Monsanto’s current trait monopoly in
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cotton (Section 3.4) and other crops
(Section 3.5) well into the future. It
would also exacerbate the adverse
agronormic and environmental impacts
of trait monopoly in all crops. The high
failure rate in agricultural biotechnology
means that conduct-based solutions,
such as compulsory licensing
agreements to force Monsanto to deploy
competitors’ traits in DPL germplasm,
are risky and likely to fail to achieve
their competitive ends (Section 3.11).
Other Likely Impacts of the Merger
Organic cotton: The booming market
in organic cotton is threatened by
transgenic contamination, herbicide
spray drift damage, and potentially by
decreased conventional seed
availability. The proposed combination
would exacerbate such risks for organic
cotton growers in the U.S. and overseas,
and potentially reduce U.S. consumers’
choice of organic cotton products
(Section 3.7).
Seed sterility: DPL holds major
patents on seed sterility technology (i.e.
Terminator), a biological means to
eliminate the millennia-old farmer’s
practice of saving and replanting seeds.
Monsanto is known for aggressive
prosecution of farmers who (allegedly)
save its patented seeds. The merger
would increase the likelihood that
internationally-condemned Terminator
cotton and other crops will be
introduced, to the detriment of the
world’s farmers (Section 3.8).
International impacts: Monsanto is
known for questionable business
practices to promote its interests
overseas, including illegal actions such
as bribery of Indonesian government
officials, which resulted in SEC
prosecution and a $1.5 million fine in
2002. Acquisition of DPL’s substantial
international cotton seed business
would give Monsanto, already the
world’s largest seed firm (Appendix 6),
additional scope for such activities
(Section 3.9).
Conclusion and Recommendations
The proposed combination would
negatively impact farmers through
reduced seed choices, increased seed
prices, rising production costs and
increased reliance on one company’s
technology well into the future. The
merger would also increase the cotton
industry’s already near-total
dependence on one company’s
herbicide-tolerance traits, exacerbating
glyphosate-resistant weeds and
potentially endangering the productivity
of American agriculture through the
effects of excessive glyphosate use.
Finally, acquisition of DPL would invest
Monsanto with more power to pursue
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questionable business practices
overseas, and increase the likelihood of
introduction of internationallycondemned sterile seed technology.
The Center for Food Safety and
International Center for Technology
Assessment call on the Department of
Justice (DoJ) to unconditionally oppose
the proposed acquisition of Delta and
Pine Land by Monsanto, and to oppose
future acquisitions leading to increased
concentration in the cotton seed
industry. We also urge the U.S. Dept. of
Agriculture to increase funding for
public-sector development of affordable,
conventional seed varieties neglected by
the private sector and to deny
applications by entities seeking to field
test any seed sterility technology.
1. Introduction
The Center for Food Safety (CFS) and
International Center for Technology
Assessment (ICTA) have conducted an
independent assessment of the proposed
acquisition of Delta and Pine Land
Company by the Monsanto Company.
CFS and ICTA are sister non-profit
public interest groups with more than a
decade of experience in the legal,
agronomic, environmental and public
health issues raised by agricultural
biotechnology.
On August 15, 2006, the Monsanto
Company announced its intention to
acquire the Delta and Pine Land
Company (DPL) for $1.5 billion in cash
(Monsanto 2006a). Monsanto previously
attempted to acquire DPL in 1998, but
abandoned its bid in December 1999
(Kilman 2006) due to stiff conditions
imposed by antitrust regulators (Kaskey
2006). DPL countered that Monsanto did
not try hard enough to win approval,
and sued the company for $2 billion in
damages. The current agreement
requires Monsanto to pay DPL up to
$600 million if regulatory approvals are
not obtained (Pollack 2006). After the
transaction was dropped, a Department
of Justice official testified that the
Antitrust Division would have opposed
the merger because it ‘‘would have
significantly reduced competition in
cotton seed biotechnology to the
detriment of farmers’’ (Nannes 2001).
Monsanto has proposed to divest its
Stoneville cotton seed business in order
to gain approval of the merger
(Monsanto 2006a). Monsanto first
acquired Stoneville in 1997, divested it
in 1999 as part of its prior attempt to
acquire DPL (Fernandez-Comejo 2004,
Table 20, ft. 4), then re-acquired it from
Emergent Genetics, Inc. in 2005
(Monsanto 2005b). Stoneville accounts
for about 12 percent of the U.S. cotton
seed market.
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The proposed merger deserves close
scrutiny for many reasons, particularly
in light of the extraordinarily high
degree of concentration already existing
in the cotton industry. Delta and Pine
Land is the eleventh largest seed
company in the world (ETC 2005), the
biggest cotton seed firm in the U.S., and
holds a pivotal position as the only
major cotton seed seller that is not also
a biotechnology trait provider.
Monsanto dominates the market for
biotechnology traits in cotton and other
major crops, and is also the largest seed
firm in the world (ETC 2005). Our
analysis suggests that the merger would
result in:
(1) Increased cotton seed prices;
(2) Reduced choice of conventional
and some types of biotech cotton seed;
(3) Consolidation of Monsanto’s
virtual trait monopoly in cotton and
other crops well into the future; and
(4) Adverse agronomic and
environmental effects, as well as
increased production costs, stemming
from Monsanto’s near-monopoly in
herbicide-tolerance traits.
The merger could also result in:
(5) Increased concentration in the
cotton seed market;
(6) Harm to organic cotton growers,
and reduced choice of organic cotton
products for consumers;
(7) Harm to farmers in the U.S. and
elsewhere by facilitating the
introduction of sterile seed technology
(‘‘Terminator’’); and
(8) Increased scope for Monsanto to
pursue illegal and questionable business
activities overseas, to the detriment of
the world’s farmers.
We first examine the recent history
and current state of the cotton industry
(Section 2). This helps inform our
analysis of the likely impacts of the
proposed combination between
Monsanto and Delta and Pine Land
(Section 3) The conclusion (Section 4) is
followed by recommendations (Section
5).
2. Current Status of the Cotton Industry
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2.1 Cotton Industry Already Highly
Concentrated
The cotton industry is by most
measures the most highly concentrated
of any major crop industry. Below, we
briefly discuss four major aspects of this
concentration: cotton seeds,
biotechnology traits in cotton, research
and development for biotechnology
traits in cotton, and cotton-growing
land.
2.1.1
Concentration in Cotton Seeds
Over the past 16 years, the market in
cotton seeds has become highly
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concentrated. Appendix I shows some
degree of competition from 1970 to
1989, with the top four private suppliers
selling from 46 to 70% of total cotton
seeds sold to farmers. The ‘‘top four’’
market share rose rapidly in the 1990s,
reaching the 90% level in 1996.
Concentration increased still further
from 2000–2006, with just the top three
firms—Delta and Pine Land, Bayer and
Stoneville—controlling on average 91%
of the market. In 2006, the combined
market share of the top three stood at
92% (Figure 1). Based on available data,
concentration in cotton seed exceeds
that in other major crops, such as corn
and soybeans, and by a considerable
margin (Appendix 2).1
Major factors driving this
concentration include (see Appendix I
and Fernandez-Cornejo 2004, Table 20)):
(1) The virtual disappearance of
public sector (university) breeding
efforts, from 12–25% of cotton seed sold
to farmers in the 1970s and 1980s, to
less than 1% today;
(2) Numerous mergers and
acquisitions, such as DPL’s acquisition
of Lankart and Paymaster brands in
1994 (SEC 1996) and Sure-Grow in
1996; and Stoneville’s acquisition of
Coker Pedigreed Seed and McNair in
1990, Brownfield Seed and Delinting
Co. in 2000, and Germain’s Cotton
Seeds in 2001 (SEC 1997, Stoneville
2001);
(3) The rise of biotechnology and
utility patents on biotech traits and
plants, which prompted large chemical
biotechnology firms to vertically
integrate through acquisition of cotton
germplasm, as seen with Monsanto’s
acquisition and re-acquisition of
Stoneville in 1997 and 2005; Bayer’s
acquisition of Aventies CropScience in
2001 (Bayer 2001), AFD Seed in 2005,
and California Planting Cotton Seed
Distributors (CPCSD) in 2006 (Bayer
2006); and Dow’s joint-venture with J.G.
Boswell, Phytogen, in 1998 (DFP 2005).
2.1.2 Concentration in Cotton Traits
and Research and Development
Biotechnology traits are specific
properties conferred on a crop variety
through the process of genetic
engineering. As shown in Figure 2, the
market in biotechnology traits
(hereinafter ‘‘traits’’) deployed in cotton
seed is even more concentrated than the
cotton seed market, with the top three
trait providers accounting for the traits
in l00% of biotech seed planted in 2006.
1 In this report, we focus on ‘‘upland cotton,’’
which accounts for about 97% of U.S. production.
The remaining 3% is American Pima or extra-long
staple, grown primarily in CaIi[ornia, and used
mainly for high-value products such as sewing
thread and expensive apparel (USDA ERS 2006a).
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Yet market share is far from evenly
distributed even among these few
competitors. In 2006, over 96% of
biotech cotton planted in the U.S.
contained Monsanto traits, and 95%
contained only Monsanto traits. Cotton
with only Bayer (3.7%) or only Dow
(0.06%) traits accounted for less than
4% of biotech cotton, with roughly one
percent stacked with traits from
Monsanto and either Bayer or Dow.2
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
Interestingly, the market in cotton
traits was once at least slightly less
concentrated. In 1998 and 1999, Bayer’s
herbicide-tolerant Buctril cotton
(resistant to the herbicide bromoxynil)
had a 13% share of biotech cotton
(calculated from May et al. 2003, Table
1).
Research and development (R&D)
efforts are also highly concentrated.
Here too, Monsanto has overwhelming
dominance, with 94% of experimental
biotech cotton acreage since the year
2000 (see Section 3.4.3 and Appendix
5).
2.1.3 Concentration in cotton farms
Finally, the rise of biotechnology in
cotton has also been accompanied by
accelerating concentration of cottonproducing land in fewer hands. Figure
3 shows a drop in the number of cotton
farms from 1987 to 1992, followed by a
smaller decline through 1997, the
beginning of the biotech era. In just the
following five years, the number of
cotton farms declined steeply by over
21%, representing a loss of one of every
five U.S. cotton farms. Cotton farm size
has also risen dramatically, particularly
2 Unless otherwise noted, all statistics on
conventional and biotech cotton varieties planted
from 2003 to 2006 are derived from government
data in ‘‘Cotton Varieties Planted’’ reports for the
relevant year, based on surveys conducted by the
U.S. Dept. of Agriculture’s Agricultural Marketing
Service. See USDA–AMS (2003–2006) in the
Bibliography.
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Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
since 1997, when the size of the average
cotton farm already exceeded that of any
other major field crop. In addition, the
percentage of cotton farms 500 acres or
larger has increased from 12% in 1987
to 29% in 1997 (Meyer and MacDonald
2001).
While, the declining number and
increasing size of cotton farms is a longterm historical trend in 1949, 1.1
million presumably mixed crop farms
harvested an average of 24 acres of
cotton each) (USDA ERS 1996),
biotechnology has helped facilitate
consolidation over the past decade, as
discussed further below.
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
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2.2 Cotton Seed Price Increase With
the Rise of Biotechnology
The increasing use of transgenic
cotton since 1995 has been
accompanied by a dramatic rise in
cotton seed prices paid by farmers.
1-listorical price data from USDA show
that the per acre cost of cotton seed has
risen 3.4-fold in just the eleven years
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from the start of the biotech era in 1995
to 2005, when transgenic varieties
accounted for 83% of U.S. cotton
(Figure 4). The proportion of overall onfarm operating expenses attributable to
seed expenditures increased nearly
three-fold in the same brief time span
(data not shown).
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
A comparison of present-day prices
for conventional and transgenic cotton
seed shows that biotech traits are indeed
primarily responsible for this rapid
price increase. Appendix 3 plots the
prices of 140 varieties of cotton seed
sold in the Lubbock, Texas area in 2006,
broken down by conventional and
various biotech trait categories. The data
show that the average per acre cost of
transgenic cotton seed ranges from two
to over four times as much as that of
conventional seed. (We will discuss
these findings in more detail below.)
The price differential is attributable
primarily to ‘‘technology fees’’ charged
by trait providers. Figure 5, based on
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prices for the same 140 varieties
portrayed in Appendix 3, shows that
technology fees comprise from 31% to
59% of the overall price paid by farmers
for cotton seed. Technology fees
increase with a) newer generation traits;
and b) number of incorporated traits.
Table I shows that the price of cotton
seed rises roughly 40% when a second
transgenic trait is ‘‘stacked’’ with a first
and for a variety with second generation
versus first generation trait(s).3 A farmer
pays on average nearly twice as much
for a second generation variety with two
traits as for a first generation variety
with one trait.4 At present, biotech
cotton is limited to one or two (stacked)
traits, though three or more are possible
in the future, as we are starting to see
in the corn seed market, with so-called
triple-stack corn (Gullickson 2006).
3 Note that seed prices vary considerably based on
numerous factors: Region, time of purchase,
package deals with chemicals. etc.
4 The term ‘‘generation 2’’ was originally used to
denote promised biotech crops with ‘‘output’’ traits
desirable to consumers, such as enhanced nutrition,
versus ‘‘generation 1’’ crops with ‘‘input’’ traits of
interest to farmers, such as herbicide tolerance (HT)
and insect resistance (IR). However, the biotech
industry has failed to make a commercial success
of any true generation 2 ‘‘output’’ trait biotech crop.
Monsanto chooses to call its Roundup Ready Flex
and Bollgard II traits ‘‘second generation’’ even
though they are merely variations on the original
generation 1 input traits, Roundup Ready and
Bollgard.
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Cotton seed providers are actively
transitioning the cotton varieties they
offer from conventional to biotech, from
one to two biotech traits, and from first
to second generation traits. For instance,
the short-term goals cited in a 2004
Delta and Pine Land presentation to
investors EDPL 2004, slide 6) are:
18643
*‘‘Increased technology penetration
(share, stacked traits vs. single trait);’’
and
*‘‘Accelerated transition to MON
[Monsanto] second generation traits.’’
TABLE 1.—PER ACRE COST OF BIOTECH SEED BY TRAIT AND GENERATION
One trait
(HT)
First Generation .......................................
Second Generation .................................
Price Rise 1st gen. ‰ 2nd ......................
Two traits
(HT/IR)
Roundup Ready, $31.91 ........................
Roundup Ready Flex, $44.02 ................
38% .........................................................
Roundup Ready/Bollgard I, $45.20 ........
Roundup Ready Flex/Bollgard II, $61.90
37% .........................................................
Price rise
‰ 2 traits
(percent)
42
41
* 94
What is the nature and magnitude of
the value added by biotech traits? Does
this added value justify the substantial
price premiums of biotech versus
conventional cotton seed? Is increased
technology penetration being driven
solely by farmer demand? These
questions are addressed in the following
two sections.
2.3 Biotechnology Trait Premiums and
Added Value
Conventional wisdom has it that the
added value of biotech cotton seed fully
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justifies its two-to four-fold increased
price over conventional seed. It is said
that farmers wouldn’t pay these high
premiums if the seeds didn’t deliver
added value commensurate with their
added cost; they would buy
conventional seed, instead. However,
the extreme concentration in both
cotton seeds and traits at least suggests
the possibility that market power might
be restricting farmers’ choice of both
conventional and biotech seeds and
thus artificially raising prices. An
assessment of this possibility, provided
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in Section 2.4, requires a basic
understanding of added value in the
context of biotech traits deployed in
cotton.
In 2006, almost 88% of U.S. cotton
was transgenic (USDA AMS 2006).
Nearly three-fourths of transgenic cotton
acreage was planted to so-called
‘‘stacked’’ varieties modified for both of
two traits: Herbicide tolerance (HT) and
insect resistance (IR). Varieties with HT
alone comprised one-fourth and those
with IR alone comprised less than 1%
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Source: Jones, MA (2006). HT = herbicide tolerance; IR = insect resistance. Per acre seed prices based on 38 inch rows and 4.0 seed/ft. Variety not specified. Prices quoted for Virginia, N. & S. Carolina with 25% discount.
* 94% signfies the price rise from 1 trait/first generation to 2 traits/second generation.
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advantages cited for HT cotton are
convenience and ability to cover more
acres (i.e. reduced labor inputs per acre)
(Duffy 2001), both of which are of
particular value to larger farmers
(Benbrook 2005, p. 9). Thus, HT cotton
has helped facilitate the shift to fewer
and larger cotton farms noted above.
Monsanto’s HT cotton traits, Roundup
Ready and Roundup Ready Flex,
comprised 96% of HT cotton in 2006.
Both Roundup Ready versions are
engineered to survive spraying with
glyphosate-based herbicides, sold by
Monsanto under the name of Roundup.6
The remaining 4% of HT cotton acreage
contained Bayer’s LibertyLink trait,
which confers tolerance to glufosinate,
sold by Bayer under the name of
Liberty. Monsanto’s dominance in
herbicide-tolerant cotton is attributable
to three major factors:
(1) The effectiveness of glyphosate, an
extremely broad-spectrum herbicide
(i.e., it kills a broader range of weed
species than most other weed killers),
and the popularity of the Roundup
Ready system with many farmers;
(2) The low cost of glyphosate, due to
Monsanto’s ‘‘brilliant strategy of
dropping its price years ahead of patent
expiration [in 2000] and tying its use to
the early growth of genetically modified
crops’’ (Barboza 2001), as well as
subsequent competition from low-cost
generic manufacturers of glyphosate;
(3) Aggressive acquisition of highquality germplasm in which to
incorporate its traits, as well as
licensing agreements for incorporation
of its traits in other firms’ germplasm.
The dominance of Roundup Ready
cotton has driven a many-fold increase
in the use of glyphosate and reductions
in the use of other herbicides. The
growing reliance on this single
herbicide has led to rapid development
of glyphosate-resistant weeds, which is
beginning to seriously erode the value of
this technology (see Section 2.7).
Insect resistance involves
introduction of a gene encoding an
insecticidal protein from a soil
bacterium (known as Bt) into the tissues
of the cotton plant, and protects cotton
from some (but by no means all) cotton
pests, thus reducing the use of
insecticides. However, the value added
by the IR trait is limited by several
factors. First, most IR cotton 7 is highly
effective only against the tobacco and
pink bollworm caterpillars, but only
partially effective against ‘‘some of the
most damaging insect species,’’ such as
cotton and American bollworms (May et
al. 2003); it provides no protection
against other pests such as the boll
weevil, stink bugs, plant bugs and
mirids (Caldwell 2002). Because farmers
continue to spray for these latter pests,
IR cotton often provides only a modest
reduction in the number of insecticide
applications (NAS 1999, p. 114).
Secondly, to the extent that insecticide
applications are reduced on IR cotton,
5 ‘‘Over-the-top’’ is one form of ‘‘post-emergence’’
herbicide application, or spraying after the cotton
seed has ‘‘emerged’’ or sprouted. The alternative
herbicide regime more common with conventional,
non-HT varieties is called ‘‘pre-emergence.’’ That is,
a herbicide that retains its activity for weeks is
applied to the soil before the cotton plant actually
sprouts so as to suppress ‘‘weed competition’’ in the
critical early life of the cotton plant. Pre-emergence
herbicides are also used, though to a lesser extent,
with HT cotton.
6 Generation I Roundup Ready cotton permits
over-the-top application only during the early
seedling stage, after which time spray shields are
required to direct the herbicide to the base of the
plant, so-called ‘‘post-directed’’ application. Note
that post-directed applications are also used with
conventional cotton. Generation 2 Roundup Ready
Flex cotton permits over-the-top application of
higher doses of glyphosate throughout the growing
season (Bennett 2005).
7 As used here, ‘‘IR cotton’’ signifies any cotton
with the IR trait; as shown in Figure 6, the IR trait
nearly always comes in cotton varieties ‘‘stacked’’
with HT.
2.3.1
Herbicide Tolerance
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Herbicide tolerance permits the cotton
plant to survive application of a single
herbicide that would otherwise kill the
[non-biotech] plant, thus allowing
‘‘over-the-top’’ application of the
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herbicide to more easily kill nearby
weeds without killing or severely
injuring the cotton plant itself.5 HT
cotton permits greater flexibility in the
timing of herbicide applications, allows
for herbicide use over greater time
spans, and in general simplifies weed
management by reducing the number of
different weed killers applied. The chief
(Figure 6). HT and IR are the only
biotech traits available in cotton.
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this ironically often results (over years)
in larger populations of the pests not
affected by the built-in insecticide,
which can then lead to increased
chemical applications in later years and
erosion or even reversal of the original
benefit. For instance, Bt cotton growers
in China, who originally benefited
through reduced expenditures on
insecticides, found themselves applying
more (and paying more for) insecticides
than non-transgenic cotton growers by
year seven due to such secondary pest
problems (Connor 2006). Similar
problems, though not so severe, have
been reported in North Carolina
(Caldwell 2002) and Georgia (Hollis
20Q06).
Cotton with Monsanto’s Bollgard or
Bollgard II cotton traits comprised 99%
of IR cotton planted in the U.S. in 2006,
with Dow AgroScience’s Widestrike
accounting for the rest.
2.3.3 Yield
One often hears unqualified assertions
that biotechnology increases crop
yields. Yet this is simply not the case.
As recently noted by a USDA
researcher, biotechnology does not
increase the plant’s genetic yield
potential, the only meaningful sense in
which such claims could be true:
‘‘Currently available GE [geneticallyengineered] crops do not increase the
yield potential of a hybrid variety. In
fact, yield may even decrease if the
varieties used to carry the herbicidetolerant or insect-resistant genes are not
the highest yielding cultivars.’’
(Fernandez-Cornejo & Casweli 2006, p.
9)
These higher-yielding cultivars have
been developed over decades with
conventional breeding. USDA data
reveal a nearly four-fold increase in
average cotton yield from 1930 to the
early years of the biotech era in 1998,
due to conventional breeding in
combination with the introduction of
fertilizers and pesticides (FernandezCornejo 2004, pp. 5–6).8 Appendix 4
illustrates this trend of increasing yield,
and shows that it has not accelerated
since 1995, during biotech cotton’s rise
to dominance, with five years of yield
increase offset by six years of yield
decline.
Yields of cotton or any crop are
influenced by many complex,
interacting factors beyond the plant’s
genetic yield potential. These include
soil quality, the amount and timing of
rainfall, temperature, severe weather
8 Though it is difficult to disentangle the various
factors, by one account 67% of the increased yield
of cotton from 1936–1960 was attributable to
conventional breeding (see Fuglie et al. 1996, cited
in Fernandez-Corneo 2004, pp. 5–6).
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events, insects, weeds and disease. Of
great importance, too, is a farmer’s
management skills and preferences in
responding to the particular challenges
s/he faces in a given year. Though
generalizations are hazardous, studies
tend to show that IR cotton has helped
farmers reduce yield Losses from
damage by bollworms (but not other
pests) in some areas and situations
where bollworm infestation is heavy
(e.g. lower Southern states), but has no
yield impact in other areas where
bollworms are not so troublesome (e.g.
upper Southern states) Likewise, most
studies of HT cotton have shown no
yield gains, while others suggest lesser
yield reductions from weed competition
versus conventional varieties (see USDA
ERS 2001, pp. 11–12 for a review of
studies). Of course, additional income
from any increased yield must exceed
the additional cost of traits (see Table 1)
for biotech seed to be profitable for
farmers. This hurdle becomes higher as
biotech seed premiums rise with
stacked and newer generation traits
(Figure 5, Appendix 3).
Farmer preferences are also
important. For instance, growers who
prefer mechanical tillage and/or preemergence herbicides for weed control,
or organic methods to control insects or
weeds, may find little use for biotech
traits, as would growers in areas less
plagued by bollworms and weeds.
Others who like the traits may still not
find them worth the steep premiums,
and prefer conventional seeds for cost
reasons. Clearly, it is of vital importance
for farmers to have access to a wide
variety of seeds, including conventional
varieties, to meet the particular
challenges confronting him/her in any
given situation, using the methods s/he
prefers.
2.3.4 Pesticide Use
The most comprehensive independent
study to date, based on USDA data,
demonstrates that adoption of biotech
cotton in the U.S. has led to a 3.7%
increase in pesticide 9 use on cotton
from 1996 to 2004. A decrease in
insecticide use attributable to IR traits
has been swamped by a bigger increase
in herbicide use facilitated by herbicidetolerance traits (Benbrook 2004,
Appendix Table 11). The cost of the
increased use of pesticides has been
largely offset by the declining price of
glyphosate, the chief herbicide used on
cotton. The declining cost of glyphosatebased herbicides from 140–45/gallon in
the 1990s to 12–16/gallon in 2005–06
(Brown 2006a, slide 46)—is extremely
9 The term ‘‘pesticides’’ encompasses both
herbicides (weed killers) and insecticides.
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18645
important to keep in mind, as it is
largely responsible for steady or
declining expenditures on pesticides
despite increasing amounts applied as
biotech cotton share rises.10
Even in the case of IR traits, however,
any cost savings from reduced
insecticide expenditures must be
balanced against the IR trait premium;
where bollworm infestation is low,
conventional seeds often prove more
profitable (Caldwell 2002).
2.3.5 Summary of Added Value
To sum up, biotech cotton has
provided added value to many farmers,
but this value is highly dependent on
the particular region and situation, as
well as farmer preference. In general, it
can be said that cotton with the HT trait
has simplified weed management
through greater convenience, lower
labor requirements and a decrease in the
number of herbicides used. Cotton with
the IR trait has slightly reduced
insecticide use, and reduced yield
losses where bollworm infestation is
heavy. Offsetting these advantages are
the overall increase in pesticide use, the
rise in glyphosate-resistant weeds
(Section 2.7), the growing problems
with secondary insect pests, and
facilitation of the trend to fewer and
bigger cotton farms. As discussed
further below, the first two problems are
exacerbated by near-exclusive reliance
on one company’s HT traits to the
exclusion of other methods of weed
control.
These limitations to the value added
by biotech traits raise a simple question.
Is farmer demand alone responsible for
the 88% adoption rate of seeds that cost
two to four times as much conventional
varieties? Or are other factors at play?
2.4 Biotech Versus Conventional Seed:
Farmers’ Choice?
While biotech seeds are popular with
many farmers, there is evidence that
some growers purchase them for reasons
other than added value. For instance,
anecdotal reports suggest that some
cotton farmers choose Roundup Ready
(RR) cotton varieties to protect their
cotton from damage due to glyphosate
spray drift from an RR cotton-growing
neighbor’s field (Arax and Brokaw
1997). Given the ubiquity of RR cotton
(82% of total U.S. cotton acreage in
2006), this explanation could apply to a
large number of RR cotton farmers, who
might otherwise choose to grow
conventional varieties. Studies
simulating glyphosate spray drift
10 USDA data show a constant, roughly $60/acre,
expenditure on ‘‘chemicals’’ applied to cotton from
1997–2005, though these figures appear to be
uncorrected for inflation (see USDA ERS 2007b).
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for purchase of more expensive RR
seeds is not added value, but rather a
costly consequence of sloppy weed
control practices by neighbors. Farmers
who buy RR seeds for this reason say
they prefer paying the price premium to
the time and hassle of paperwork
involved in lodging crop insurance
claims to obtain reimbursement for
spray drift damage to a conventional
cotton crop, not to mention the
uncertainty of reimbursement.
Another explanation given by cotton
growers for purchasing biotech cotton is
that seed firms are offering fewer and
fewer high-quality conventional cotton
varieties. This explanation is supported
by independent experts. For instance,
Donate Miller, associate professor with
the Louisiana State University
AgCenter, stated that one of the ‘‘bigger
problems’’ facing cotton growers is that
fewer conventional varieties are being
developed and released (Bennett 2005).
Similarly, Texas cotton consultant
Francis Krenek says that some farmers
in his area are constrained to use
Roundup Ready cotton because in many
cases, certain desirable seed varieties
are only available in versions that carry
the RR trait (PANUPS 2006).
These assessments by farmers and
independent cotton experts are
confirmed by hard data. First, the
number of conventional varieties
planted has fallen steeply since just
2003, from 78 to 36. The percentage of
planted varieties that are conventional
has fallen even more steeply, from 53%
in 2003 to just 18% in 2006, reflecting
both reduced conventional and
increased transgenic cotton seed
offerings (Figure 7). This dramatic
decline in the availability of
conventional seed occurred during a
period when the transgenic share of U.S.
cotton acreage increased only modestly,
from 76% to 88%.
The top three firms (DPL, Bayer and
Monsanto’s Stoneville) offer a
disproportionately small share of the
planted conventional cotton varieties,
54% over the past four years, despite
seed sales responsible for over 90% of
2006 cotton acreage. For instance,
Stoneville’s conventional varieties
declined from 5 in 2003 to just 2 in
2006, while the number of its planted
biotech varieties climbed from 11 to 32
over the same time period. DPL had 21
conventional lines planted in 2003,
shrinking to 15 in 2006. The number of
planted varieties from Bayer fell from 15
in 2003 to 6 in 2006.11
Nearly half the conventional varieties
planted from 2003 to 2006 came from
smaller suppliers, and the number of
smaller cotton seed suppliers (i.e. other
than DPL, Bayer and Monsanto’s
Stoneville) listed in USDA data covering
virtually 100% of planted upland cotton
has declined from 16 in 2003 to just 6
in 2006. This all portends continuing
reductions in the availability of
conventional cotton seed.
Equally important is the lower quality
of the few conventional varieties that
are still being offered. The top firms
either do not offer conventional versions
of their top-selling transgenic cotton
varieties, or only limited supplies of the
same. As noted in Section 2.3, biotech
traits are limited to herbicide tolerance
and insect resistance. All other
characteristics—such as boll size, fiber
quality, disease resistance, and above
all, yield—are properties of the specific
germplasm, not biotechnology.12 This
means that farmers who want the
desirable, non-biotech attributes of the
best varieties (especially high yield)
may have no alternative but to purchase
costly biotech seed, whether or not they
want the HT and/or IR traits at all, or
at least at the substantial premium over
conventional seeds.
One indication of the lower quality of
conventional varieties offered by
industry leaders is the steeply falling
acreage planted to them. For instance,
U.S. cotton acreage planted to all DPL’s
conventional varieties declined from
6.36% in 2003 to just 1.47% in 2006.
Acreage planted to all of Stoneville’s
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11 For
purposes of comparison, the numbers for
Bayer include conventional varieties offered by
Bayer (Fibermax) and by AFD Seed in both 2003
and 2006, even though Bayer only acquired AFD
Seed in 2005.
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12 This assumes no adverse consequences from
the genetic modification process. Actually, there is
some suggestive evidence that fiber quality may be
lower in certain biotech varieties (Edmisten 2000),
but this issue lies beyond the scope of this report
and will not be addressed here.
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confirm that it can damage cotton
(Thomas et al. 2005; Lyon & Keeling;
Muzzi 2004). Arkansas state officials are
considering regulations to minimize
glyphosate drift damage to non-RR crops
(Bennett 2007). This ‘‘defensive’’ reason
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few conventional varieties over the
same time period is negligible, roughly
0.3% of U.S. cotton in 2003 to less than
0.1% in 2006. The decline in acreage
planted to DPL’s and Stoneville’s
conventional varieties in this four-year
period is more than twice as steep as the
overall decline in conventional acreage,
from 23.78% of U.S. cotton in 2003 to
12.36% in 2006.
Many popular varieties of cotton are
offered only in biotech versions. For
instance, Stoneville’s ST 5599 BR has
been a leading variety since at least
2003. ‘‘BR’’ designates it as Monsanto’s
Bollgard/Roundup Ready IR/HT stack;
Stoneville does not appear to offer a
conventional version of this line (i.e.
‘‘ST 5599’’ is absent from USDA data).
DPL’s enormously popular DP 555 BG/
RR (also Bollgard/Roundup Ready) was
the top-selling cotton variety from 2003
(8.68% of planted cotton acreage) to
2006 (17.3%). According to University
of Georgia cotton expert Steve M.
Brown, DP 555 BG/RR is popular chiefly
because it outyields other varieties by
100–300 lbs./acre (personal
communication). No conventional
version of this variety is listed in USDA
data, nor is one listed on DPL’s Web
site. It seems likely that at least some
farmers would buy conventional
versions of these top-selling cultivars, if
only they were made available.
The evidence from other cultivars
suggests they would. For instance, in
2006, DPL’s conventional lines DP 5415
and DP 5690 were planted on slightly
more combined acreage (0.76% of all
cotton) than their Roundup Ready
counterparts DP 5415 RR and DP 5690
RR (0.67%). Despite this demand, DPL’s
Web site no longer lists conventional DP
5415 or DP 5690, suggesting they will
not be sold in 2007, while the Roundup
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Ready versions are still being offered.13
This would be entirely consistent with
DPL’s goal of ‘‘increased technology
penetration.’’ A similar comparison is
unavailable for Monsanto’s Stoneville,
because there do not appear to be
conventional variants of any of
Stoneville’s transgenic lines.
Another example comes from Bayer
CropScience, the number two supplier
of cotton seed with 30% of the U.S.
market (Fibermax, AFD Seed and
CPCSD brands). Bayer does not feature
a single conventional cotton variety in
its ‘‘2006 Fibermax Variety Guide,’’
merely noting in fine print that three
conventional Fibermax lines ‘‘are
available for 2006 in limited supply.
Please contact your local seed dealer for
additional information’’ (Bayer
Fibermax 2006). It is surprising that
Bayer would have limited supplies of
these varieties, since two of them were
the top-selling conventional varieties
offered by any company, planted on
7.14% of U.S. cotton, or over 1 million
acres, in 2006.
Why would Bayer have limited
supplies of these two popular
conventional varieties, designated FM
958 and FM 832? One possible
explanation is that Bayer did not
produce enough seed because it did not
expect them to be so popular. Yet this
seems unlikely, given the fact that FM
958 and FM 832 represented an even
13 For availability, see https://
www.deltaandpine.com (last accessed 12/28/06).
Select ‘‘Cotton Varieties’’ tab at the top, then
‘‘conventional’’ for each of the given regions to
confirm the absence of DP 5415/5690; select
‘‘Roundup Ready’’ to confirm that DP 5415/5690 RR
are still being offered. For percentages of DP 5415
& 5690 varieties, see USDA AMS (2004.2006). Note
that the 0.76% figure for conventional DP 5415/
5690 represents over 113,000 of the 14.95 million
acres of upland Cotton planted in the U.S. in 2006
(USDA NASS 2007).
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greater share of cotton planted in 2004
and 2005, as shown in Figure 8. Figure
8 also demonstrates that farmers prefer
the conventional versions of each line to
their biotech variants (FM 958B and FM
832B with the IR trait; FM 958LL and
FM 832LL with HT). This strongly
suggests that the increasing acreage
planted to the biotech variants is
attributable to Bayer’s intentional
limitation of conventional supplies. In
other words, farmers who want the
desirable properties of FM 958 and FM
832, but cannot obtain the conventional
versions due to limited supplies, have
no recourse but to purchase the more
expensive biotech variants.
Per acre price data show that the
herbicide-tolerant biotech variants are
nearly twice as expensive as the
corresponding conventional versions:
$33.26 versus $18.09 for FM 958, and
$31.48 versus $17.45 for FM 832 (Plains
Cotton Growers 2006).14
Together, Bayer (73%) and DPL (13%)
account for 86% of conventional cotton
acreage. The remaining 14% of
conventional cotton seed planted in
2006 was supplied by regional cotton
suppliers: Phytogen, mainly in
California (7.2%); and All-Tex (2.6%),
Americot (2.5%) and Beitwide Cotton
Genetics (1.4%), mainly in Texas. These
smaller firms, with limited seed
varieties adapted to the growing
environments of their regional markets,
are unlikely to be able to meet farmer
demand for high-quality conventional
varieties in most areas of the country.
The public sector, which once might
have met this lower profit marginmarket, virtually disappeared in 1992
(see Appendix 1).
14 Per acre price data were not available for the
insect-resistant versions of the two lines.
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Conventional upland cotton seed was
planted on 1.85 million acres in 2006,
representing nearly one-eighth of the
14.95 million upland cotton acres
planted.15 Thanks to oligopolistic
market power, many farmers may soon
have little choice but to plant biotech
cotton, whether or not they want
biotech traits at all, or at least at the
prices at which they are offered. Indeed,
it appears this is already happening.
The elimination of more affordable
conventional cotton seed is not only
unfair to farmers, it has troubling
implications for the future of the U.S.
cotton industry.
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2.5
Single-Trait Versus Stacked Cotton
Nearly three-fourths of biotech cotton
planted in 2006 was stacked with two
traits, HT and IR (Section 23, Figure 6).
According to some experts, many
farmers are being constrained to
purchase cotton with two traits when
they want only one. Keith Edmisten,
associate professor and cotton specialist
at North Carolina State University,
explains that some of his state’s growers
would prefer to purchase HT-only
15 12.36% of planted upland cotton acreage was
conventional (USDA AMS 2006). 14.95 million
acres of upland cotton were planted in 2007 (USDA
NASS 2007).
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cotton,16 but end up buying HT/IR
varieties because the better quality (e.g.
higher-yielding) cultivars come only in
stacked, not HT-only, versions.
University of Georgia cotton expert
Steve M. Brown agrees that the available
cotton varieties with the Roundup
Ready (Flex) trait alone tend to be
lower-yielding than stacked Monsanto
varieties (personal communications).
DPL and Monsanto are committed to
‘‘increased technology penetration’’
(DPL 2004) and ‘‘accelerate[d] biotech
trait penetration’’ (Monsanto 2006b) for
‘‘increased returns from technology to
the business’’ (DPL 2004) in other
words, higher profit margins. We have
discussed several tactics employed by
companies to implement this strategy:
Phasing out or limiting supplies of
desirable conventional varieties, and
offering the best cultivars only in
biotech versions, or only in stacked
versus single-trait versions. As a result,
farmers often purchase, and pay more
16 The chief reason is that North Carolina farmers
must usually spray for stink bugs whether or not
their cotton has the JR trait (see Section 2.32), and
so would prefer not to waste money on the IR trait
premium. In addition, some growers wish to avoid
planting ‘‘refuges’’ of non-IR cotton, a requirement
for growers of IR cotton imposed by the
Environmental Protection Agency to slow
development of insects resistant to the built-in
insecticide(s).
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for, technology they do not need or
want.
2.6
Biotech Cotton Failures
While many farmers have been
satisfied with biotech cotton, others
have experienced erratic performance.
Cotton bearing the traits of marketleader Monsanto has been plagued by
numerous failures since the
introduction of insect-resistant Bollgard
cotton in 1996 and glyphosate-tolerant
Roundup Ready cotton in 1997.
For example, farmers in Texas,
Oklahoma, Louisiana and Mississippi
who planted Bollgard cotton in 1996
were surprised to find that cotton
bollworms thrived in up to 50% of their
fields, even though the cotton was
supposed to be immune to these pests
(Lambrecht 1998; Consumers Union
1999). As a result, farmers who had
already paid a premium for ‘‘bollwormresistant’’ cotton had to purchase and
spray insecticides, or risk losing their
crop (Benson et al. 1997). These first
Bollgard cotton varieties also exhibited
poor germination, late maturity, lower
yield, and other defects. The failures
were so severe that the cotton growers
filed a class action suit against
Monsanto; according to the plaintiffs’
attorney, Monsanto paid the farmers a
substantial sum in an out-of-court
settlement (Consumers Union 1999). A
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second generation of Bt cotton (Bollgard
II) with better resistance to bollworms
was introduced in 2003. Yet Bollgard II
cotton varieties are predicted to
facilitate increased infestations of pests
unaffected by the built-in insecticides,
such as stink bugs (Yancy 2004).
Roundup Ready (RR) cotton has also
failed farmers repeatedly. In 1997,
growers in Mississippi, Arkansas,
Tennessee, Louisiana, Texas and
Missouri reported that the cottonbearing boils on their RR cotton simply
dropped off, or were deformed, causing
substantial yield losses (Lambrecht
1998; Chattanooga Times 1997; Kerby
Voth 1998). The director of
Mississippi’s Bureau of Plant Industry,
Robert McCarty, stated that only
Monsanto varieties seemed to fail, over
an area totaling 30,000 acres (Meyerson
1997). While Monsanto blamed cold,
wet weather for the cotton failures,
arbitrators at the Mississippi Seed
Arbitration Council decided otherwise,
issuing a non-binding resolution calling
on Monsanto to reimburse three farmers
$194 million for their damages (NYU
1998), which Monsanto refused to do
(Steyer 1998). Monsanto and Delta and
Pine Land eventually pulled five
varieties of Roundup Ready seed due to
substandard quality (Lambrecht 1998),
and Monsanto paid 55 Mississippi
growers an estimated $5 million in
compensation (NYU 1998).
In 1998, 190 growers in Georgia,
Florida and North Carolina reported
similar problems with Roundup Ready
cotton (Augusta Chronicle 1999,
Edmisten 1998). Andrew Thompson of
Georgia reported losing nearly a quarter
of his crop, costing him 250,000.
Farmers and cotton experts say
Monsanto rushed its RR cotton to
market, without giving university
researchers (May et al. 2003, p. 1596) or
even a USDA scientist opportunity to
test it. USDA geneticist William
Meredith was denied seeds to test at a
government lab, because in order to
obtain the seeds, he would have had to
sign an agreement with Monsanto not to
test them. ‘‘You need a good referee in
the ball game, which is what I am,’’ he
reportedly said. ‘‘But some of the
Monsanto people thought they knew all
they needed to know about cotton’’ (as
quoted in Lambrecht 1998).
In 2005, there were once again
widespread yield losses with Roundup
Ready cotton, this time in Texas
(PANUPS 2006). Many of the cotton
bolls fell off, others were misshapen,
still others didn’t open before harvest,
and so could not be picked by machine.
These are all symptoms of Roundup
damage, and scientists have confirmed
that under certain conditions RR cotton
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is not immune to glyphosate (Cerdeira &
Duke 2006). As with the failures of
Bollgard cotton cited above, farmers
experienced double losses: From
payment of large premiums for a nonperforming trait, and lost income from
large drops in yield. These farmers also
filed suit against Monsanto to recover
their losses; at this writing, the outcome
is still pending.
There are likely many more incidents
of this sort that have gone unreported by
farmers. Defective RR cotton that is
damaged by Roundup early in the
season may recover later, and in some
cases yield may not be affected (Jones &
Snipes 1999). Monsanto also has a
program to reimburse farmers for
defective cotton, but only when
stringent conditions are met. While
these conditions vary by region and
seed supplier, they can include having
planted at least 70% of one’s total
acreage with cotton bearing Monsanto’s
trait(s); near total loss of the crop (yield
< 150 lbs./acre, or less than one-fifth the
2006 national average yield of 798 lbs./
acre), and exclusive use of Monsanto’s
more expensive Roundup brand of
glyphosate (Smith 2004). Many farmers
who do not meet these conditions have
likely suffered losses without
compensation. Substandard
performance and outright failure of
Monsanto biotech cotton has been
frequently reported in India and
Indonesia as well (see Section 3.9).
Other Roundup Ready crops have
exhibited similar problems. For
instance, RR soybeans have been
observed to perform poorly during hot,
dry conditions, and are more subject to
‘‘stem-splitting’’ (Coghlan 1999), which
can result in higher yield losses relative
to conventional soy. In both Brazil and
Paraguay, RR soy was reported to suffer
greater yield losses than conventional
soy during drought conditions over the
past two years (FoE International 2007).
Benbrook (2001) discusses a number of
additional agronomic problems with RR
soybeans.
The sometimes erratic performance of
biotech cotton and other biotech crops
underscores the need to maintain
vigorous breeding programs for
continued production of high-quality
conventional seed, which as described
above is on the decline.
2.7 Glyphosate-Resistant Weeds
Monsanto provides the traits
deployed in 95–96% of U.S. transgenic
cotton (Figure 2), representing 82–83%
of U.S. cotton overall. Such extreme
market power is undesirable in any
industry, as it tends to hamper
innovation, restrict choice and raise
prices. In agriculture, however, this high
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degree of concentration can also have
grave agronomic consequences. In this
and the following section, we discuss
the adverse effects of increasing reliance
on use of a single herbicide, glyphosate,
fostered by Monsanto’s virtual
monopoly in transgenic cotton traits.
Farmer adoption of glyphosatetolerant, ‘‘Roundup Ready’’ cotton has
led directly to a 753% increase in
glyphosate use on cotton in the U.S.
from 1997 to 2003 (Steckel et al 2006)
Just as overuse of an antibiotic breeds
resistant bacteria, so overuse of
glyphosate has spawned rapidly
growing populations of weeds the
chemical is no longer able to kill, except
perhaps at greatly increased rates of
application.
North Carolina weed scientist Alan
York has called it ‘‘potentially the worst
threat (to cotton) since the boll weevil,’’
the devastating pest that virtually ended
cotton-growing in the U.S. until an
intensive spraying program eradicated it
in some states in the late 1970s and
early 1980s (Minor 2006). And York
isn’t alone. University of Georgia weed
scientist Stanley Culpepper has found
over 100,000 acres of Georgia cotton
infested with glyphosate-resistant
pigweed that survives up to twelve
times the normal rate of Roundup (Laws
2006c).
Glyphosate resistance in weeds has
developed with incredible rapidity over
just six years, corresponding with the
period of widespread introduction of
Roundup Ready cotton and soybeans. In
contrast, there was only one confirmed
glyphosate-resistant weed in the U.S. in
the 22 years from 1976, when Monsanto
first introduced the chemical in the U.S.
(Monsanto 2007), through 1998.17
Concern began building in 2001, when
a farm journal reported:
‘‘Resistance to glyphosate (Roundup) is
emerging all around the world, potentially
jeopardizing the 25 billion dollar market for
genetically modified herbicide tolerant
crops’’ (Farmers Weekly 2001).
According to a joint statement by ten
prominent weed scientists (Boerboom et
al. 2004):
‘‘It is well known that glyphosate-resistant
horseweed (also known as marestail)
populations have been selected in Roundup
Ready soybean and cotton cropping systems.
Resistance was first reported in Delaware in
2000, a mere 5 years after the introduction of
Roundup Ready soybean. Since that initial
report, glyphosate-resistant horseweed is
now reported in 12 States and is estimated
17 The sole resistant weed by 1998 was rigid
ryegrass in California. See Web site of The Weed
Science Society of America. https://
www.weedscience.org/Summary/Uspecies
MOA.asp?lstMOAlD=12&FmHRACGroup=Go
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to affect 1.5 million acres in Tennessee
alone.’’
The list of confirmed glyphosateresistant weeds in the U.S. now stands
at seven, with the latest addition (giant
ragweed) reported in January 2007
(Ohio Farm Bureau 2007). A number of
additional weed species are under
investigation for resistance (Roberson
2006), and the acreage affected is
growing rapidly. An online farm journal
recently devoted an extensive special
edition, with contributions from leading
weed scientists across the country, to
glyphosate-resistant weeds (Crop News
Weekly 2006).
Farmers have several options to deal
with such weeds They can:
(1) Apply more glyphosate (resistance
is not an all-or-nothing phenomenon,
and is defined as the ability to survive
the normal rate of herbicide application,
not absolute immunity).
(2) Switch to an herbicide with a
different ‘‘mode of action’’.
(3) Stop planting Roundup Ready
crops and applying glyphosate every
year in order to lessen the ‘‘selection
pressure’’ that accelerates development
of glyphosate-resistance.
(4) Switch [from no-till or
conservation tillage to conventional
tillage.
Option 1—using more glyphosate—is
probably the most common response.
While this can be effective in the shortterm, it leads to a vicious cycle of
escalating resistance, followed by still
more glyphosate use. Monsanto’s
introduction in 2006 of a ‘‘second
generation’’ Roundup Ready cotton
known as Roundup Ready (RR) Flex
may well facilitate this misguided
approach. RR Flex is engineered to
withstand higher application rates of
Roundup than first generation RR
cotton, and to permit application
throughout the growing season, rather
than only in the early growth stages as
with original RR (Bennett 2005).
Producers who adopt RR Flex cotton in
the hopes of better controlling resistant
weeds will not only pay for more
glyphosate, but also spend roughly 40%
more for RR Flex (see Table 1).
Weed scientists recommend use of
different herbicides (option 2) to stem
development of resistant weeds, but
often in combination with heavier
applications of glyphosate (Yancy 2005).
An Arkansas weed scientist estimated
that the state’s growers would have to
spend as much as $9 million to combat
glyphosate-resistant horseweed in 2004
(AP 2003). The alternative is even more
expensive. Left unchecked, horseweed
can reduce cotton yields by 40–70%.
Larry Steckel, weed scientist at the
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University of Tennessee, estimates that
on average, glyphosate-resistant
pigweed will cost cotton growers in the
South an extra $40 or more per acre to
control (Laws 2006a). This represents a
substantial burden, as cotton farmers’
average expenditure on all pesticides
(insecticides and herbicides) was $61
per acre in 2005 (USDA ERS 2007b).
Option 3—reducing glyphosate use
through growing non-RR cotton or nonRR crops in rotation with RR cotton—
is also recommended (Yancy 2005), but
is becoming progressively more difficult
with the declining availability of quality
conventional seed,18 and the continuing
paucity of non-RR biotech varieties. The
only non-RR HT trait planted
commercially is Bayer’s LibertyLink
(LL).19 Only nine varieties of LL cotton
were planted in 2006, representing only
4% of cotton acreage, versus a total of
149 varieties with RR or RR Flex,
comprising 82% of U.S. cotton.
Option 4 is to physically remove the
weeds through mechanical tillage or
hand weeding. Mechanical tillage, once
common, has been on the decline for
years as farmers switch to ‘‘no-till’’ or
conservation (minimal) tillage practices
in order to reduce labor costs and fuel
expenditures, as well as decrease the
soil erosion that often accompanies
plowing. The rise of glyphosate-resistant
weeds is beginning to reverse this
trend.20 For instance, acreage under
conservation tillage in Tennessee
dropped by 18% in 2004, as farmers
turned back to the plow to control
glyphosate-resistant horseweed;
Tennessee counties with the largest
cotton acreage experienced the largest
decline in conservation tillage, from
80% to just 40% (Steckel et al. 2006).
It is estimated that resistant horseweed
has reduced the area under conservation
tillage in Arkansas by 15%, with similar
trends reported in Missouri and
Mississippi (Ibid). In particularly bad
cases of glyphosate-resistant pigweed in
Georgia, the necessity of hand-weeding
18 While farmers of course could grow RR cotton
without using glyphosate, it would represent
wasted expenditure on the premium (technology
fee) paid for the trait. In other words, payment of
the premium is a strong inducement to make use
of the trait through application of glyphosate.
19 USDA data list two varieties of bromoxyniltolerant cotton in 2006, one from Stoneville and one
from Bayer, but their aggregate acreage amounted to
less than 0.05% of U.S. cotton. Stoneville
reportedly retired all of its bromoxynil-tolerant
cotton seed offerings after the 2004 season
(Robinson 2004).
20 Some attribute the rise of conservation tillage
to adoption of RR crops, yet a USDA expert notes
that the steep rise in conservation tillage (at least
in soybeans) came from 1990–1996, before their
introduction, and that the share of soybean acres
grown with conservation tillage stagnated after 1996
(Fernandez-Cornejo & McBride 2002, p. 29).
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can cost growers $92 an acre (Laws
2006a).
The over-reliance on a single
herbicide fostered by Monsanto’s nearmonopoly in cotton traits is confronting
cotton and other growers with an
extremely serious agronomic problem.
Aside from non-chemical weed control
methods used in organic cotton
production, the only real solution is use
of herbicides other than glyphosate. But
this is unlikely as long as glyphosatetolerant, Roundup Ready cotton
comprises over 80% of U.S. cotton. In
fact, over-reliance on Roundup Ready
crops and glyphosate has dampened
research into new herbicides, meaning
none are on the horizon (Mueller et al.
2005, p. 925; Yancy 2005). Meanwhile,
growers will increasingly turn to older,
more toxic herbicides, such as paraquat
and 2,4–D, to control glyphosateresistant weeds (Roberson 2006).
A growing body of research suggests
other serious consequences of farmers’
growing dependence on glyphosate and
Roundup Ready crops.
2.8 Glyphosate Use Linked to Plant
Disease, Mineral Deficiencies and
Reduced Yield; Roundup Toxic to
Amphibians
Overall glyphosate use in the U.S.
increased six-fold from 1992 to 2002,
due largely to the widespread
introduction of Roundup Ready
soybeans and cotton (Cerdeira & Duke
2006, p. 1633); area planted to Roundup
Ready corn is growing as well
(Monsanto 2006c). RR versions of these
crops are increasingly grown in rotation,
meaning that each year, more prime
cropland is sprayed more frequently
with glyphosate, with increasing rates
applied in many areas to control
resistant weeds. While glyphosate is
generally regarded as less toxic than
many weed killers, a growing body of
research suggests that continual use of
this chemical may make RR plants more
susceptible to disease and prone to
mineral deficiencies than conventional
crops, as well as reducing their yields.
In addition, recent studies suggest that
Roundup is much more toxic to
amphibians than previously thought.
When Roundup is sprayed on RR
crops, much of the herbicide ends up on
the surface of the soil, where it is
degraded by microorganisms. However,
some is absorbed by the plant and
distributed throughout its tissues. Small
amounts of glyphosate ‘‘leak’’ from the
roots of RR plants and spread
throughout the surrounding soil
(Motavalli et al. 2004; Krerner et al.
2005; Neumann et al. 2006). This root
zone is home to diverse soil organisms,
such as bacteria and fungi, that play
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critical roles in plant health and disease;
and it is also where the roots absorb
essential nutrients from the soil, often
with the help of microorganisms.
The presence of glyphosate in the root
zone of RR crops can have several
effects. First, it promotes the growth of
certain plant disease organisms that
reside in the soil, such as Fusarium
fungi (Kremer et al. 2005). Even non-RR
crops planted in fields previously
treated with glyphosate are more likely
to be damaged by fungal diseases such
as Fusarium head blight, as has been
demonstrated with wheat in Canada
(Fernandez et al. 2005). This research
suggests that glyphosate has long-term
effects that persist even after its use has
been discontinued. Second, glyphosate
can alter the community of soil
microorganisms, interfering with the
plant’s absorption of important
nutrients. For instance, glyphosate’s
toxicity to nitrogen-fixing bacteria in the
soil can depress the absorption of
nitrogen by RR soybeans under certain
conditions, such as water deficiency,
and thereby reduce yield (King et al.
2001). Some scientists believe that this
and other nutrient-robbing effects may
account for the roughly 6% lower yields
of RR versus conventional soybeans
(Benbrook 2001).
Other research shows that Roundup
Ready crops themselves are less
efficient at taking up essential minerals
such as manganese through their roots
(Gordon 2006), and that glyphosate
inside plant tissues can make such
minerals unavailable to the plant
(Bernards et al. 2005). The resultant
mineral deficiencies have been
implicated in various problems, from
increased disease susceptibility to
inhibition of photosynthesis.
While much of this research involves
RR crops other than cotton, similar
impacts are likely with cotton, given the
heavy use of glyphosate common to all
RR crops. In addition, it should be
recalled that many farmers rotate RR
cotton with RR soy and to a lesser extent
with RR corn.
Finally, recent studies (Relyea 2005a,
2005b) demonstrate that common
versions of Roundup herbicide that
contain a surfactant (i.e. POEA, or
polyethoxylated tallowamine) to aid
penetration of the active ingredient
(glyphosate) into plant tissue are
extremely toxic to the tadpoles and
juvenile stages of certain species of
frogs, killing 96–100% of tadpoles after
three weeks exposure and 68–86% of
the juveniles after just one day.
2.9 Inadequate Regulatory Oversight
While the U.S. Dept. of Agriculture’s
Animal and Plant Health Inspection
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Service (APHIS) is primarily responsible
for assessing the potential
environmental impacts of biotech crops,
it has by many accounts failed to do its
job. A National Academy of Sciences
committee identified numerous
regulatory deficiencies in 2002 (NAS
2002), and since then several federal
courts have ruled against APHIS for
failure to adhere to U.S. environmental
laws with respect to biotech crops (e.g.
CFS et al. vs. Johanns et al. 2006; CTA
et al. vs. Johanns et al. 2007). In
February 2007, the U.S. District Court
for Northern California ruled that
APHIS must perform an environmental
impact statement on Roundup Ready
alfalfa, which APHIS de-regulated in
2005 despite having failed to prepare
one. Among the Court’s concerns was
the potential for RR alfalfa to increase
the prevalence of glyphosate-resistant
weeds, a concern that APHIS ignored:
‘‘The Court notes, however, that it is
unclear from the record whether any federal
agency is considering the cumulative impact
of the introduction of so many glyphosate
resistant crops; one would expect that some
federal agency is considering whether there
is some risk to engineering all of America’s
crops to include the gene that confers
resistance to glyphosate’’ (Geertson Seed
Farms et al. v. Johanns et al. 2007, pp. 16–
17).
The growing dependence of American
farmers on the use of glyphosate poses
long-term risks to the productivity of
U.S. agriculture and the environment,
risks which U.S. regulators are largely
ignoring. There is little hope of breaking
this dangerous dependence as long as
Monsanto maintains a near-monopoly in
transgenic HT traits with its Roundup
Ready crops.
3. Assessment of the Proposed Merger
To assess the impacts of the merger,
one must compare the likely effects on
the cotton seed and traits industry of
DPL as a subsidiary of Monsanto versus
as an independent entity, informed by
an analysis of existing trends, as
described above.
In our view, the merger must be
evaluated in terms of its potential
impacts on: (1) Concentration in cotton
germplasm; (2) Availability of quality
conventional seed; (3) Cotton seed
prices; (4) Concentration in biotech
traits; (5) Production costs and the
productivity of American cropland; (6)
Growers of other major crops; (7)
Grower and consumer choice for organic
cotton seeds and products; and (8)
Introduction of DPL’s seed sterility
technology, known as Terminator. We
also believe that potential international
impacts of the merger deserve
consideration. Finally, we will discuss
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the feasibility of conduct-based
solutions to address anti-competitive
effects of the merger.
3.1 Further Concentration in Cotton
Seed
As discussed in Section 2.1.1 and
portrayed in Appendix 1, concentration
in the cotton seed market has increased
dramatically since 1970, and especially
since the early 1990s. Top four market
share reached 90% by 1996, while top
three market share has averaged 91%
since the year 2000. Despite these facts,
some still try to argue that there are
more competitors in the cotton seed
market today than in 1998, when
Monsanto first attempted to acquire
DPL, and imply that the merger should
be permitted for this reason (e.g.
Leonard 2006). This argument is
without merit for several reasons. First,
it seems to rest exclusively on Bayer’s
rising market share since 1999. Yet
competitiveness is not ensured by
having three rather than two firms
controlling 90% or more of the national
market. More relevant is that the
number of smaller suppliers (i.e. other
than DPL, Bayer and Stoneville) with
sales appreciable enough for listing in
USDA data fell by more than half in just
the last four years, from 16 in 2003 to
6 in 2006.21 Second, Bayer’s seed sales
are concentrated heavily in the
Southwest, particularly Texas, and thus
the company’s rising market share has
done little or nothing to increase
competition in other regions. Indeed,
DPL’s market share in the importation
Southeastern (SE) and South Central
(SC) markets 22 has actually increased
during the years of Bayer’s rise, from
81% (SE) and 61% (SC) of acreage
planted in 2003 to 86% (SE) and 73%
(SC) in 2006.
Another argument presented by
proponents of the proposed acquisition
is that it would not change overall
market concentration, provided
21 Based on USDA AMS reports, 2003–2006,
which lists market share by brand rather than
supplier. The number of suppliers is arrived at by
subtracting brands known to be owned by another
supplier. Of 21 brands listed in 2003, Paymaster
and Sure-Grow are owned by DPL, leaving 19
suppliers, or 16 other than the top three. Of the 13
listed brands in 2006, we subtract Paymaster and
Sure-Grow as well as AFD Seed and California
Planting Cotton Seed Distributors (the latter two
purchased by Bayer in 2005 and 2006, respectively)
to arrive at 9 suppliers, or 6 suppliers other than
the top three. Note also that USDA AMS figures
show generally declining market share for the
‘‘Miscellaneous’’ category comprising all suppliers
too small for listing in its reports: From 1.36% of
upland cotton acreage planted in 2003 to just 0.68%
in 2006.
22 The Southeastern market comprises Alabama,
Florida, Georgia, N. & S. Carolina and Virginia. The
South Central market comprises Arkansas,
Louisiana, Mississippi, Missouri and Tennessee.
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93%. This enhanced market power
would likely hasten the already
precipitous exit of smaller cotton seed
firms from the market.
Increased trait penetration would come
at the expense of conventional seed
offerings. Given the fact that DPL’s 15
non-transgenic lines comprise over 40%
of conventional cotton varieties planted
in 2006, the merger would likely further
restrict farmers’ ability to choose quality
conventional cotton seed.
The discussion above clearly shows a
decline in the number and quality of
conventional cotton seed varieties
planted, despite continued demand
from farmers. Among the top three,
Monsanto’s Stoneville has gone furthest
in purging conventional cotton lines
from its offerings, with only two
varieties planted to negligible acreage in
2006. These two unpopular varieties
represent only 6% of 34 planted
Stoneville varieties, whereas
conventional varieties comprise a more
than 3-fold larger share of planted
varieties from other cotton seed firms.
Judging by its conduct with Stoneville,
it seems reasonable to assume that postmerger, Monsanto would similarly
reduce the number of conventional seed
varieties offered by DPL. This
assumption is strengthened by
Monsanto’s announced strategy, in a
presentation to investors on the DPL
acquisition, to ‘‘accelerate biotech trait
penetration’’ (Monsanto 2006b).
As discussed above, cotton seed
prices have risen dramatically with the
advent of biotechnology. Relative to
industry-wide figures for 2006,
Stoneville offers slightly higher
percentages of the highest price seed
categories—stacked varieties and
varieties with 2nd generation traits (data
not shown)—both of which increase the
average price of its seed (see Figure 5
and Table 1). In its presentation to
investors, Monsanto announced its
intention to ‘‘invest in penetration of
higher-margin traits in Delta and Pine
Land offerings’’ (Monsanto 2006b).
Since DPL currently sells more than
four times as much cotton seed as
Stoneville, Monsanto’s pursuit of this
policy with an acquired DPL would lead
to an acceleration of the already steep
rise in cotton seed prices.
The potential for seed price increases
can be gauged by breaking down the
composition of 2006 cotton acreage by:
(a) Conventional versus biotech; (b) one
versus two traits; and (c) generation 1
versus generation 2 traits (Table 2).
First, replacement of conventional
varieties with biotech cultivars offers
the greatest per unit potential for
increasing profit margins/prices, since
no tech fees at all are collected on these
seeds. As shown in Appendix 3 and
Figure 5, single-trait cotton seed is on
average twice the price, and stacked
cotton roughly four times the price, of
conventional seed. Second, the potential
for increasing prices through trait
stacking is limited, but still substantial,
with 26% of 2006 biotech cotton acreage
from seeds bearing just one trait. As
shown in Table 1, companies charge
roughly 40% more for seed with two
traits versus just one. The greatest
potential for increasing the price of
cotton seed, however, lies in
replacement of popular first-generation
traits with their second-generation
counterparts (this applies only to
Monsanto), which also entails a price
increase of roughly 40% (Table 1).
Bollgard II was introduced in cotton in
2003, Roundup Ready Flex in 2006
(Monsanto 2007). 78% of 2006 biotech
cotton acreage was planted to varieties
containing only generation I trait(s), 8%
to those with only second-generation
trait(s), and 10% to stacked varieties
with mixed generation 1 and 2 traits.
Replacement of first generation with
higher-margin second-generation traits
in seeds planted to upwards of 78% of
biotech cotton acreage represents a large
profit potential, which as indicated
above Monsanto intends to exploit
postmerger in DPL cotton seed offerings.
Another portent of increased seed
prices is provided by University of
Georgia cotton expert, Steve Brown,
who already predicts cotton seed prices
rising from $44 to a range of $80–$120
per acre (Brown 2006a, slide 46). It is
unclear whether or not this $80–$120
figure accounts for the price-increasing
effects of the proposed combination.
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Conventional Cotton Seed
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Monsanto divests Stoneville (Leonard
2006). This assumes, however, the
viability of Stoneville as an independent
entity. Sandy Stewart, Associate
Professor and Extension Cotton
Specialist with the Louisiana State
University AgCenter, has questioned
whether a divested Stoneville would be
competitive in 2008 (Laws 2006b).
Without the advantage of affiliation
with the world’s largest seed and traits
firm, Stoneville might well be ripe for
takeover. The history of the cotton seed
industry is rife with takeovers
(Appendix 1). Stoneville could succumb
to the fate of Lankart, Paymaster, SureGrow, AFD Seed and others. For
instance, in 1993, Paymaster’s 29%
market share in cotton seed was more
than double Stoneville’s current 12%.
DPL acquired the company the
following year. If the merger goes
through, Stoneville might well become
an attractive target for Bayer, which has
acquired at least two cotton seed firms
in the past two years. If Bayer were to
acquire a divested Stoneville, the virtual
oligopoly of three in cotton germplasm
would become a duopoly: MonsaritoDPL would control 51%, and BayerStoneville 42%, of the cotton seed
market, for a top two market share of
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3.4 Reduced Availability of Cotton
With Non-Monsanto Traits
As a subsidiary of Monsanto, only one
(3%) of Stoneville’s 32 biotech cotton
varieties planted in 2006 carried a nonMonsanto trait, versus 17 of 135 (13%)
biotech varieties with non-Monsanto
traits for the rest of the industry. This
one variety—bromoxynil-tolerant cotton
BXN 47—was planted to negligible
(<0.05%) acreage.23 In other words,
biotech varieties with non-Monsanto
traits are more than four times more
common in cotton seed sold by
Stoneville’s competitors (chiefly Bayer
and Phytogen). If Monsanto were
allowed to acquire DPL, one would
expect it to pursue the same policy
(exclusion of competitors’ traits) with its
new subsidiary’s germplasm. In 2006,
all 46 of DPL’s biotech cotton varieties
carried Monsanto traits. Yet over the
past few years, DPL has taken
significant steps to diversify its future
biotech trait offerings, steps which
could easily be undone in the event of
a merger. Below, we examine DPL’s
diversification efforts and the broader
field of experimental biotech traits being
developed in cotton.
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3.4.1 Cotton With Syngenta’s VipCot
Insecticidal Protein
In 2004, DPL acquired global licenses
to incorporate VipCot insecticidal
proteins developed by Syngenta in its
cotton varieties, in return for $47
million to be paid over three years (DPLSyngenta 2004). Though DPL expected
to market limited quantities of VipCotcontaining seed in 2006, this did not
come to pass. In 2006, DPL acquired
Syngenta’s global cotton seed business,
including cotton germplasm in the U.S.
In the company’s 2006 press release,
commercial introduction of VipCotcontaining cotton varieties was pushed
back 2–3 years, to 2008–09, ‘‘subject to
receiving regulatory approvals’’ (DPLSyngenta 2006). Syngenta received
USDA clearance for VipCot in 2005
(USDA APHIS 2005), but since 2004 has
obtained only a series of time-limited
provisional approvals from the
Environmental Protection Agency (EPA)
for the VipCot insecticidal protein
VIP3A (for the first, see EPA 2004).24
The latest provisional approval expires
23 In 2004, Emergent Genetics, Inc., then owner of
Stoneville, announced a phase-out of bromoxyniltolerant cotton varities (Robinson 2004).
24 While most genetically engineered crops
require only USDA approval for commercial
introduction, those like VipCot that produce
pesticides require additional approval of the
pesticide by the EPA. Companies normally seek
time-limited approvals for GM crop pesticidal
proteins from EPA while the pertinent crop is
undergoing field trials.
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on May 1, 2007 (EPA 2006), at which
point Syngenta might seek a renewal of
the temporary exemption from EPA, or
apply for final clearance. Marketing of
VipCot is unlikely to proceed without
final clearance from EPA.
The merger could only reduce DPL’s
incentive to market cotton containing
VipCot, given the fact that VipCot
(assuming final EPA clearance) would
compete with its new owner’s latest IR
trait, Bollgard II, or other new IR traits
Monsanto develops to complement or
succeed Bollgard II.
3.4.2 Cotton With DuPont’s GAT
Herbicide Tolerance
In 2006, DPL obtained licenses from
DuPont to deploy an experimental dual
herbicide-tolerance trait known as
Optimum GAT in cotton and soybeans
(DPL-DuPont 2006). The GAT trait is
being developed in cotton by a DPLDuPont joint venture known as
DeltaMax Cotton LLC. The GAT trait
provides tolerance to two herbicides
rather than one, as with all previous HT
traits. GAT crops, if successfully
developed, will be tolerant to both
glyphosate and ALS inhibitors, a
popular class of herbicides used on
cotton, soybeans and corn. GAT is being
advertised by DuPont as a means for
farmers to continue using the popular
herbicide glyphosate, while at the same
time permitting application of a second
herbicide to deal with the growing
problem of glyphosate-resistant weeds
(DuPont-Pioneer 2006a).
The merger would present Monsanto
with an interesting dilemma—whether
to allow its new subsidiary to market
DPL cotton varieties with a competitor’s
glyphosate-tolerance trait. Monsanto’s
glyphosate-tolerance traits (Roundup
Ready & RR Flex) are the pillar of the
company’s biotech crop empire. Not
only is Roundup Ready by far the
dominant trait in cotton, it represents
the only trait deployed in biotech
soybeans (and 89% of U.S. soybeans
were transgenic in 2006 (USDA ERS
2006b)), and the dominant HT trait in
both corn and canola. Monsanto might
well be reluctant to allow DPL to market
cotton varieties with a competitor’s
glyphosate-tolerance trait. This
reluctance can only be increased by the
plans of DuPont and Syngenta to jointly
incorporate GAT in soybeans, corn and
perhaps other crops, further challenging
Monsanto’s dominance in HT
technology (Greenleaf Genetics 2006;
StLPD 2006).
Growers in the Southeast, where
DPL’s market share exceeds 86% (USDA
AMS 2006), are concerned that the
proposed merger would reinforce DPL’s
‘‘inordinate control’’ of their seed
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market and deny them needed new
varieties. According to University of
Georgia cotton agronomist Steve Brown:
The collective technology pool of the
merged company would conceivably include
not only Monsanto’s Bollgard, Bollgard II,
Roundup Ready, and Roundup Ready Flex
traits but also the Verdia GAT gene, the
DuPont ALS-tolerant gene, and Syngenta’s
VIP system. These latter technologies could
be developed * * * or shelved. The fact that
they are not in another company’s laboratory
or greenhouse prevents the introduction of
products that could effectively compete with
Monsanto’s current portfolio. Shelving such
technology—or even physically eliminating
existing transgenic lines in which these new
genes have successfully been introduced—
establishes serious, lengthy hurdles for other
would-be competitors.
Growers in Georgia are already frustrated
with the inordinate control exercised by one
company. Unless issues of traits are
adequately addressed in the proposed
merger, things could get worse. The real
answer to the overwhelming control of
varieties and technology by a single provider
is legitimate competition (Brown 2006b).
3.4.3 Other Biotech Cotton Trait R&D
Companies wishing to conduct
outdoor field trials of experimental
biotech crops (i.e. environmental
releases) must submit ‘‘notifications’’ to
USDA’s Animal and Plant Health
Inspection Service (APHIS).
Notifications give basic information
about the proposed field trials, such as
the type of crop and genetic
modification, containment measures,
and overall acreage. APHIS normally
responds by issuing
‘‘acknowledgements,’’ allowing the
trials to proceed. APHIS makes some of
the notification information available to
the public in a searchable database. The
following analysis is based on these data
for biotech cotton field trials from the
year 2000 through the end of 2006.
Monsanto has received over half
(53%) of the 449 USDA permits for
transgenic cotton field trials since the
year 2000, three times more than its
closest competitor, Bayer, at 17%. These
two companies, plus Syngenta and Dow,
received 91% of all permits, with the
remainder divided among DPL and six
other institutions. While these data
show Monsanto’s clear dominance in
cotton trait R&D, they greatly
overestimate the degree of competition
in transgenic cotton trait research and
development. Aggregate field trial
acreage is a better measure of R&D
efforts than number of permits.
This is because new biotech crops
require extensive field testing that can
take 5–10 years, and the majority fail
early on. Stage of development
correlates roughly with size of field
trials. Permits for small trials from
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fractions to dozens of acres indicate
early-phase development, and high
likelihood of failure. Permits for larger
field trials in the hundreds to thousands
of acres, especially if conducted in
multiple locations over consecutive
years, indicate a greater likelihood of
eventual USDA clearance. The
significance of field trial acreage as a
measure of R&D progress is indicated by
the fact that companies sometimes claim
permit acreage as confidential business
information (CBI) so as to prevent
competitors from learning the R&D
status of a given experimental crop
(personal communication, James White,
APHIS).25
When one compares acreage figures
(see Appendix 5), Monsanto’s dominant
position as measured by number of
permits becomes overwhelming.
Monsanto was responsible for nearly
94% of experimental biotech cotton
acreage (80,956 acres) over the past
seven years—26 times more than Bayer
(3.6% or 3073 acres) and 47 times more
than Syngenta (2.3% or 1943 acres), its
closest competitors. By the more
accurate measure of acreage, then,
Monsanto has roughly the same
predominant position in R&D for future
cotton traits as it does for currently
marketed cotton traits.
In the event of a merger, Monsanto
would have a natural incentive to
exclude competitors’ traits from DPL
seeds. Its overwhelming dominance in
cotton trait R&D demonstrates that it
would have no need to license traits
from Syngenta, Bayer or other firms.
3.5 Production Costs and Productivity
of Cotton Cropland
Glyphosate-resistant weeds are on the
rise, and they are already increasing
growers’ production costs, in some cases
dramatically. Continued increases in the
use of glyphosate promise an
accelerated development of glyphosateresistant weeds, with concomitant rise
in production costs to control them and
adverse agronomic impacts, such as
increased erosion from reduction in
conservation tillage and a return to the
or additionally, the company will
claim the trait or gene being field tested as
confidential business information.
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25 Alternately
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use of more toxic herbicides (Section
2.7). The negative effects of rising
Roundup use on soil microorganisms
and plant nutrition may pose an
increased long-term risk of plant disease
and yield losses, both in cotton and
other crops, and potential threats to
amphibian populations (Section 2.8).
Finally, the sometimes erratic
performance of Monsanto’s cotton—
problems such as deformed bolls and
dramatic yield losses first noted in the
1990s, but still occurring today (Section
2.6)—makes near-total dependence on
cotton with Monsanto technology
unwise.
All of these adverse impacts are direct
consequences of the growing dominance
of Monsanto’s traits, particularly its
Roundup Ready (Flex) traits, in cotton.
The merger would exacerbate these
problems by enhancing Monsanto’s
ability to incorporate its traits in a large
portion of U.S. cotton seeds well into
the future.
3.6
Impacts on Growers of Other Crops
While the cotton industry is the most
relevant context for assessment of the
proposed combination, the merger
would likely contribute to further
increasing Monsanto’s seed and trait
dominance in other crops as well. This
is because Monsanto has extensive
germplasm holdings and/or trait
penetration in corn, soybeans, canola,
vegetables, fruits and other major crops,
while DPL is a major presence in
soybeans as well as cotton; and
essentially the same traits are often
deployed, or deployable, in multiple
crops. One effect of this increased
dominance in seeds and traits is that
growers of other crops will experience
an exacerbation of the adverse
agronomic and environmental impacts
discussed above with respect to
Monsanto’s technology, particularly
Roundup Ready (Flex), in cotton.
Indeed, in many cases cotton growers
are also growers of other crops, such as
soybeans and corn.
3.6.1 Concentration in Seeds and
Traits Other Than Cotton
In 2005, Monsanto became the largest
seed firm in the world, with seed sales
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of $2.8 billion, to surpass the traditional
leader, DuPont Pioneer (ETC 2005).
Appendix 6 illustrates the company’s
dramatic rise to dominance. Monsanto
undertook two major ‘‘shopping
sprees’’ 26 in the mid-90s and the middle
of this decade. Here, we will treat only
the North American acquisitions (see
Section 3.9 for international deals).
From 1996–1998, Monsanto’s
aggregate multi-billion dollar
acquisitions of DeKalb Genetics,
Asgrow, Agracetus, Holden’s
Foundation Seeds, Calgene and smaller
firms catapulted it to number one in
U.S. soybean and number two in U.S.
corn seed sales (Fernandez-Cornejo
2004, Tables 16 & 19). In 2005,
Monsanto reportedly had 41% and 25%
market shares in global corn and
soybean seed sales, respectively (ETC
2005). The second, and ongoing, wave
of acquisitions in this decade has
focused on regional U.S. seed firms,
which Monsanto is purchasing through
its holding company, American Seeds,
Inc. (ASI). In the two years from ASI’s
formation in November 2004 to
December 2006, Monsanto spent $350
million to acquire 15 firms, giving it an
additional share in U.S. corn and
soybean seed sales of more than 6.5%
and 2.0%, respectively (Table 3). 27
Monsanto’s $1.4 billion acquisition of
the world’s largest fruit and vegetable
seed firm, Seminis (Monsanto 2005a), in
2005 reportedly gave the company from
23% to 38% shares of the global seed
markets for tomatoes, onions, peppers,
cucumbers and beans (ETC 2005). The
$300 million buyout of Emergent
Genetics, also in 2005, included 12% of
U.S. cotton seed sales represented by
the Stoneville and NexGen brands
(Monsanto 2005b). Monsanto also
acquired significant canola germplasm
with buyouts of Limagrain Canada
(Monsanto 2001) and the Advanta and
Interstate canola brands (Monsanto
2004a). In addition, Delta and Pine Land
is fast becoming a major player in
soybeans as well as cotton (DPL 2004).
26 Sec https://www.americanseedsinc.com/news/
2005-03-01.htm.
27 Compiled from information in news releases at
https://www.americanseedsinc.com/news.htm.
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Cross-Crop Trait Deployment
A given trait, or slightly differing
versions thereof, is deployable in
multiple crops. The pre-eminent
example of cross-crop trait deployment
and dominance is Monsanto’s Roundup
Ready. According to Monsanto’s figures,
102.6 million acres of Roundup Ready
soybeans (66.4), corn (24.8), cotton
(10.8) and canola (0.6) were planted in
2005. Monsanto’s corresponding
estimate for 2006 is 113–117 million
acres (Monsanto 2006c). Monsanto has
also received commercial clearance for
Roundup Ready versions of beets and
alfalfa, though neither of these are
grown to a significant extent due to
rejection by consumers and the food
industry. Monsanto dropped efforts to
gain USDA approval for Roundup Ready
wheat in 2004 for similar reasons,
though it could re-apply in the future.
USDA is currently considering deregulation of Roundup Ready turfgrass
for lawns and golf courses. Monsanto is
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field-testing a number of other Roundup
Ready crops, including onions, peas and
Kentucky bluegrass (Cerdeira & Duke
2006).
The majority of commercialized
Roundup Ready crops utilize the same
mechanism, a modified version of a
bacterial enzyme that is immune to
glyphosate, CP4 EPSPS, from soil
bacteria of the genus Agrobacterium
(Cerdeira & Duke 2006).28
The only other significant transgenic
HT trait is Bayer’s LibertyLink
(glufosinate tolerance). LibertyLink (LL)
versions of canola, corn, cotton,
soybeans, beets and rice have received
USDA approval,29 though only LL
28 Roundup Ready canola contains 2 mechanisms
of glyphosate resistance: EPSPS and glyphosate
oxidase (GOX), an enzyme that degrades
glyphosate.
29 See ‘‘phosphinothricin-tolerant’’ listings for
Bayer CropScience and two companies it has since
acquired, AgrEvo and Aventis, at https://
www.aphis.usda.gov/brs/not_reg.html.
Phosphinothricin is another name for glufosinate,
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canola, cotton and corn are being grown
commercially.30 Though we have not
found precise figures, commercial
acreage of LL crops in the U.S. is
estimated at roughly 1 million acres,31
or about one percent of Roundup Ready
crop acreage. LibertyLink crops utilize
the glufosinate-inactivating enzyme
phosphinothricin acetyl transferase
the active ingredient in Bayer’s Liberty-brand
herbicides.
30 LL soybeans received USDA approval in 1996,
but were never marketed due to concerns over
export market rejection (Illinois Extension 1999),
though Bayer reportedly plans to introduce them in
2008 (Gullickson 2006). Three LL rice varieties have
also received USDA approval, but have not been
marketed for similar reasons (Weiss 2006).
31 USDA AMS data for 2006 show that 3.64% of
14.95 million acres of upland cotton, or 550,000
acres, were planted to LL cotton; Monsanto’s
estimate that 3% of transgenic HT corn was
LibertyLink in 2003 suggests roughly 350,000 acres
of LL corn in that year (Monsanto 2004b); since
75% of the 1.08 million acres of canola in 2003
were Roundup Ready (Cerdeira & Duke 2006, p.
1635), LL canola represents some fraction of the
remaining 270,000 acres.
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(PAT) generated from either one of two
closely related genes (bar and pat)
derived from soil bacteria of the genus
Streptomyces (USDA APHIS 2006, p.
29).
One finds similar cross-crop
deployment in the smaller market for IR
traits, although only in corn and cotton.
Monsanto’s Bollgard and Bollgard II IR
traits are found in 99% of IR cotton
acreage. While we have not found
figures for IR trait market shares in corn,
Monsanto is likely dominant here as
well, though Syngenta, Dow, and DowPioneer all have competing traits. IR
traits in corn include a handful of
slightly differing versions of insecticidal
proteins that kill differing insect pests;
the most notable difference is found in
corn, where differing IR traits kill pests
of grains and leaves (e.g. corn-borers)
and root pests (corn rootworm).
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3.6.3 Fewer Trait Choices and Adverse
Impacts on Other Crops
With DPL’s additional germplasm in
cotton and soybeans, a post-merger
Monsanto-DPL would have secure
access to more seed varieties in which
to incorporate its traits. Since
essentially the same trait can be
deployed in multiple crops, an
investment in development of a single
trait brings returns roughly
commensurate with the number of traitbearing seeds, of whatever crop, that are
sold.32 For instance, Monsanto’s recent
acquisition of Seminis gives it broad
new opportunities for introduction of its
current and future traits in a number of
new vegetable crops. Conversely, a trait
provider with lesser germplasm has
fewer opportunities to recoup its
investment in the development of a
given trait, and is thus at a competitive
disadvantage in all crops. This vertical
integration effect is clearly at play in the
proposed combination with respect to
Monsanto’s industry-leading Roundup
Ready (Flex) traits. Thus, the merger
would consolidate Monsanto’s current
overwhelming dominance in traits and
seeds for all major crops, and help
extend its trait dominance to minor
crops such as vegetables in the future.
Vertical integration efficiencies are
generally adduced in support of
mergers. Yet in this case, the additional
vertical integration of traits and
germplasm in a combined MonsantoDPL will only increase market power
and discourage competition. MonsantoDPL’s near monopoly in traits and
predominance in (cotton) seeds means
that vertical integration would not bring
lower seed prices for farmers.
Less competition in traits will mean
fewer choices for growers of other crops.
In addition, the adverse agronomic and
environmental impacts discussed above
for cotton will be exacerbated in other
crops, particularly for cotton growers
who also grow other crops.
Government research would seem to
support this assessment of fewer seed
choices. Researchers with the USDA’s
Economic Research Service have found
that ‘‘consolidation in the private seed
industry over the past decade may have
dampened the intensity of private
research undertaken on crop
biotechnology relative to what would
have occurred without consolidation, at
least for corn, cotton and soybeans.’’
They add: ‘‘Also, fewer companies
developing crops and marketing seeds
may translate into fewer varieties
offered’’ (Fernandez-Cornejo &
Schimmelpfennig 2004).
3.7
Organic Cotton
Organic cotton production by
definition excludes use of genetically
engineered seeds, chemical fertilizers
and pesticides under USDA organic
standards (OCA 2004). Though it still
represents a very small market,
organically grown cotton has enjoyed
tremendous growth recently at the
retail, manufacturing and farm levels.
Global retail sales of organic cotton
products increased from $245 million in
2001 to $583 million in 2005, an annual
average growth rate of 35%. Global
organic cotton fiber sales increased
nearly six-fold, from 5,720 metric
tonnes in 2000 to 32,326 metric tonnes
in 2005 (Organic Exchange 2006).
Major retailers are largely responsible
for this booming market. For instance,
Patagonia converted its entire line of
sportswear to 100% organic cotton in
the 1990s, and 2.5% of Nike’s total
cotton use in 2003 was organic,33
making it the largest user of organic
cotton in that year (Organic Exchange
undated). In 2004, Wal-Mart and Sam’s
Club began marketing an organic cotton
line of yoga outfits, and since then have
introduced organic cotton baby clothes,
bed sheets, towels, and ladies apparel.
The popularity of these products
spurred Wal-Mart to become the largest
single purchaser of organic cotton in
2006. Other retailers with organic cotton
lines include Eileen Fisher and
Timberland (Gunther 2006). This strong
33 The
32 This applies to early-stage research and
development of the trait. Incorporation of the trait
requires later-stage development expenditures
specific to the individual crop.
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common practice of blending organic and
conventional cotton accounts for the greater
increase in global organic cotton fiber sales vs. retail
sales, since products must contain over 95%
organic cotton to be labeled ‘‘organic cotton.’’
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growth is expected to accelerate in the
coming years (Organic Exchange 2006).
Conventional and biotech cotton
production is extremely chemicalintensive, accounting for approximately
25% of global insecticide use, and 10%
of overall pesticide use (Organic
Exchange undated). Thus, organic
cotton production means significantly
less chemical pollution of the
environment, avoidance of chemicalrelated threats to the health of
growers,34 and no contribution to the
rapidly growing problem of herbicideresistant weeds. Equally important is
the increased revenue from organic
cotton, which offers smaller growers an
opportunity to survive in a ruthless
cotton industry marked by fewer and
ever-bigger farms (see Figure 3). By one
estimate, organic cotton producers can
increase their income by 50%: They
receive a 20% premium over the price
paid for conventional/biotech cotton,
and spend less on inputs (which
includes seeds and fertilizers as well as
pesticides) (Fashion United).
Organic cotton is grown in the U.S.
(primarily Texas, but also Arizona,
Missouri and New Mexico),35 but
increasingly in a number of African
nations as well as India, China, Turkey,
Peru and Paraguay.36 An in-depth, twoyear study in India showed that organic
cotton producers spent 40% less on
inputs, and had slightly higher yields,
than conventional cotton producers
(Ramakrishnan 2006). Low input costs
are particularly important for resourcepoor farmers in developing countries,
who frequently incur debt at high
interest rates to purchase seeds and
chemicals. The high price of biotech
cotton seed has been a major complaint
of developing country farmers induced
to buy it in expectation of better
performance (see Section 39.1).
Biotech cotton poses a number of
potential threats to organic producers.
First, biotech cotton could contaminate
organic cotton and render in unsaleable.
Contamination can occur when pollen
from transgenic plants blows or is
carried by insect pollinators to fertilize
neighboring conventional/organic fields,
through admixture of transgenic seeds
in conventional/organic seeds, by the
sprouting of transgenic ‘‘volunteer’’
plants from unharvested seeds in a
subsequently grown field of
conventional/organic crops, and by
other means (UCS 2004). There are
numerous examples of inadvertent
34 See https://www.organicexchange.org/Farm/
cotton_facts_intro.htm.
35 See https://www.aboutorganiccotton.org/
stewards.html.
36 See https://www.organicexchange.org/Map/
oce.html.
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transgenic contamination mining
markets for conventional/organic
producers in other crops. For example,
as reported in Nature Biotechnology,
‘‘[t]he introduction of transgenic,
herbicide-tolerant canola in western
Canada destroyed the growing, albeit
limited, market for organic canola,’’
which commands a 100% premium over
conventional canola (Smyth et al. 2002).
The extremely widespread
contamination of grain supplies and
food products with transgenic StarLink
corn in 2000/2001 resulted in extremely
costly recalls of over 300 corn products,
sharp drops in exports as contaminated
corn shipments were rejected, and lower
prices for corn farmers (Freese 2001).
Both canola and corn are considered
‘‘outcrossing’’ crops, while cotton is
generally ‘‘self-pollinated’’ 37 But even
self-pollinating transgenic crops like
rice can pose a threat, as seen in the
recent episode in which an unapproved
variety of transgenic rice (LLRICE6OI)
widely contaminated commercial rice
supplies, wreaking havoc with rice
markets and causing losses to rice
farmers projected at up to $150 million
(Weiss 2006). CFS (2006) gives
additional examples of transgenic
contamination.
Contamination episodes are seldom
adequately explained, but are generally
blamed on slipshod management
practices on the part of the biotech
company or farmers growing the crop,
or on deficient regulatory oversight by
governmental authorities. For instance,
the USDA’s Inspector General recently
issued a scathing audit lambasting the
USDA’s Animal and Plant Health
Inspection Service for numerous
fundamental flaws in its oversight of
genetically engineered crop field trials
(USDA IG 2005). A less charitable
interpretation was suggested by Don
Westfall, of the biotech consultancy firm
Promar International, who reportedly
stated in connection with the StarLink
corn episode noted above: ‘‘The hope of
the industry is that over time the market
is so flooded [with GMOs] that there’s
nothing you can do about it. You just
sort of surrender’’ (Laidlaw 2001).
The production practices associated
with biotech cotton may also reduce
yields of nearby organic cotton
producers through spray drift damage.
Herbicides are sprayed liberally to kill
37 ‘‘Self-pollinated’’ means that a particular
plant’s (male) pollen fertilizes primarily its own
(female) ova, while the pollen of ‘‘outcrossing’’
plants normally fertilizes other plants of the same
species. But the terms are relative. For instance,
insect pollinators like honeybees can carry cotton
pollen for hundreds of feet to fertilize other cotton
plants, see: https://www.aphis.usda.gov/brs/
cotton.html.
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weeds in virtually all non-organic
cotton production. Sprayed herbicides
can drift several miles, especially when
applied via airplane, as is common with
cotton, and damage other farmers’ crops
(Bennett 2007, see also Section 2.4). The
potential for spray drift damage has
increased with the introduction of
Roundup Ready cotton, since it permits
application of glyphosate over a wider
time window than conventional cotton.
Roundup Ready Flex cotton widens the
application window still further, since it
withstands glyphosate throughout the
growing season, and moreover survives
higher application rates than original RR
cotton (see Section 2.7).
A third potential risk to organic
cotton producers is the rapidly
declining availability of high-quality
conventional seeds, since organic
standards prohibit use of transgenic
seeds.
Acquisition of DPL would give
Monsanto the world’s largest cotton
seed holdings, with substantial presence
in both U.S. and many foreign markets
(see Section 3.9). Monsanto has
explicitly stated that important goals of
its acquisition of DPL are ‘‘to create a
new global platform in cotton’’ and ‘‘to
accelerate biotech trait penetration’’
(Monsanto 2006b, emphasis added).
Therefore, the merger would likely lead
to increased acreage of Monsanto
biotech cotton planted overseas, posing
the significant threats outlined above to
organic cotton producers in African and
other developing country nations, where
governmental oversight of biotech crops
is often even weaker than in the U.S.
Since organic cotton products sold in
the United States increasingly come
from organic fiber grown overseas, the
merger could have the effect of
restricting the choice of organic cotton
products for American consumers.
3.8 Seed Sterility Technology
(Terminator)
DPL and USDA jointly hold at least
three major patents on a transgenic
method for genetic sterilization of seeds
(ETC 2003). Known as the Technology
Protection System, or Terminator, it
involves genetically manipulating seeds
such that, upon application of a
chemical trigger, mature plants arising
from the treated seeds themselves
produce seeds that are sterile (UCS
1998). The purpose of Terminator
technology is to prevent farmers from
saving seeds from their harvest for the
purpose of replanting. The USDA and
DPL regard Terminator as a way to
provide U.S. seed and trait firms with a
biological means to prevent
‘‘unauthorized’’ reproduction of seeds
bearing their patented biotech or other
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traits (USDA ARS 2001). This is
regarded as particularly important in
developing countries, home to most of
the world’s 1.4 billion people who
depend on farm-saved seed and seeds
exchanged with their neighbors as their
primary seed source (Shand 1999).38
Terminator proponents often argue
that poor farmers would continue to be
free to save and replant their own
varieties. Yet if a farmer’s neighbor
plants a Terminator crop, crosspollination could render a portion of the
first farmer’s seed sterile (CGIAR 1998).
And if shipments of Terminator seedcontaining grain are sent to developing
countries, the common practice of
planting seed from grain ostensibly
meant for consumption (e.g. food aid)
could also lead to farmers unknowingly
planting their fields with sterile seeds,
resulting in significant drops in yield
(FAO 2002, p. 5; ETC 2003, pp. 3–4).
The growing number of often
unexplained episodes in which biotech
crops inadvertently contaminate
conventional crops demonstrates that
these are real possibilities (CFS 2006).
Proponents also argue that resourcepoor farmers would continue to have
access to non-Terminator seeds
developed by the public sector. Yet this
is by no means assured. After all, it is
a public agency (the USDA) that helped
develop sterile seed technology in the
first place, and stands to earn an
estimated 5% royalties on net sales
(RAFI 1998). And public sector plant
breeding has declined dramatically in
the past two decades, both in the U.S.
and around the world, increasingly
supplanted by private sector seed
(Femandez-Cornejo 2004; Shand 1999).
We have already discussed how
university-bred cotton varieties virtually
disappeared in the U.S. in the early
1990s (Section 2.1.1, Appendix 1), and
how farmers’ choice of both
conventional and biotech cotton seeds is
being restricted due to oligopolistic
market power (Sections 2.4 and 2.5).
These developments help explain the
international outcry against Monsanto’s
proposed acquisition of DPL in 1998.
Critics feared that Monsanto would
deploy seed sterility technology in its
growing stocks of the world’s
germplasm (see Sections 3.6 & 3.9 and
Appendix 6). Criticism of Terminator
came from many sources, including
Jacques Diouf, Director General of the
38 Seed saving is also practiced in developed
countries, however. As recently as 1997 in the US.,
it is estimated that 63% of wheat, 22% of cotton,
and 19% of soybeans came from saved seeds
(Fernandez-Cornejo 2004, Table 5). However, the
dramatic rise of patented biotech cotton and
soybeans varieties that cannot be legally saved has
almost certainly reduced these figures.
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United Nations’ Food and Agriculture
Organization; the Consultative Group on
International Agricultural Research
(CGIAR), the world’s largest
international agricultural research
network (RAFI 2000); and Gordon
Conway, former President of the probiotech Rockefeller Foundation, a major
funder of the Green Revolution
(Rockefeller 1999). Opposition to
Terminator is strong in developed
countries and near universal in the
developing world (RAFI 2000).39 World
Food Prize winner M.S. Swaminathan of
India warned that deployment of
Terminator technology would erode the
right of farmers to save and breed seed
varieties appropriate to their areas, as
well as foster genetic uniformity,
increasing the vulnerability of crops to
pests and disease (Swaminathan 1998).
Such criticism impelled Monsanto,
before the merger fell through, to make
‘‘a public commitment not to
commercialize sterile seed
technologies’’ (Shapiro 1999). In its
2005 Pledge Report, however, Monsanto
initially restricted its pledge to read
‘‘nor to commercialize sterile seed
technologies in food crops.’’ When
challenged over this apparent change of
policy, Monsanto apologized and
eventually restored the original
language (ETC 2006). Nevertheless, the
company left the door open to future
deployment of Terminator in food or
non-food crops with the proviso: ‘‘* * *
but Monsanto people constantly
reevaluate this stance as technology
develops’’ (Monsanto 2005c, p. 29).
Should the proposed combination
take place, there are several reasons to
be concerned about an imminent
‘‘reevaluation’’ leading to possible
deployment of Terminator technology in
cotton.
(1) DPL has always been a zealous
proponent of Terminator. In 2000, DPL’s
Harry Collins declared: ‘‘We’ve
continued right on with work on the
Technology Protection System. We
never really slowed down. We’re on
target, moving ahead to commercialize
it. We never really backed off’’ (as
quoted in RAFI 2000). DPL and USDA
have reportedly tested Terminator
cotton and tobacco in greenhouses (ETC
2003).
(2) Despite its pledge, at least one
Monsanto officer has reportedly been
promoting genetic use restriction
technologies (a category that includes
Terminator) at numerous international
meetings (Dr. Roger Krueger, see ETC
2006).
39 See also https://www.banterminator.org/
news_updates/news_updates.
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(3) Monsanto’s restriction of its ‘‘noTerminator’’ pledge to ‘‘food crops’’
(altered only after a public challenge),
coming just one year before its renewed
attempt to acquire DPL, holder of
Terminator patents and the dominant
player in non-food cotton, is at the very
least suspicious.
(4) Since objections to Terminator
have focused heavily on its threat to the
food security of developing countries,
initial deployment in a fiber crop like
cotton may be regarded as less likely to
provoke the same level of opposition.
(5) In 2001, USDA confirmed that
commercial introduction of Terminator
would likely be in cotton: ‘‘Delta and
Pine Land Co. researchers are further
developing the technology to ready it for
commercial use. However, even the
most optimistic predictions estimate
that commercial cotton with built-in
TPS technology may not be available
until 2004’’ (USDA ARS 2001).
(6) Monsanto’s aggressive
investigations and/or prosecution of
thousands of U.S. farmers for (allegedly)
saving the company’s patented
Roundup Ready soybeans demonstrate
the lengths to which the company will
go to discourage the practice of seedsaving (CFS 2005).40 Terminator would
provide it with a more effective,
biological means to the same end. As
former DPL president Murray Robinson
put it: ‘‘We expect [the new technology]
to have global implications, especially
in markets or countries where patent
laws are weak or non-existent’’ (as
quoted in Shand 1999).
(7) Monsanto could profit
substantially from deployment of
Terminator. In 1998, DPL projected that
Terminator could generate revenues in
excess of $1 billion (Shand 1999).
Should Monsanto choose to
‘‘reevaluate’’ its current ‘‘pledge’’ not to
deploy Terminator, its acquisition of
DPL would give it a much expanded
germplasm base in which to roll out
sterile seed technology in a fiber crop
less likely to arouse public opposition,
thereby threatening the millennia-old
tradition of farmer-led seed-saving and
breeding.
3.9 International Perspective
The potential international impacts of
the merger also deserve consideration,
for at least two reasons. First, a
combined Monsanto-DPL would have
large market shares of cotton and other
40 Monsanto budgets $10 million annually for a
department of 75 employees to investigate and
prosecute farmers. Through 2004, Monsanto had
won over $15 million in damages from U.S. farmers
in cases that went to court, and likely much more
in confidential out-of-court settlements (CFS 2005,
pp. 23, 33–34).
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crops in a number of countries, raising
anti-competitive concerns. Second,
Monsanto is known for questionable
and in some cases illegal business
practices in foreign countries, practices
that may raise red flags with
government regulators outside of the
U.S.
DPL is the eleventh largest seed
company in the world, with 2004 seed
sales of $315 million (ETC 2005). An
unknown portion of these sales occur
overseas. According to a 2004
presentation to investors, DPL controls
86% of the Mexican cotton seed market,
and has an 85% share in South Africa,
70% (estimated) in Colombia, 30%
(estimated) in Brazil, 30% in Greece,
27% in Spain, 25% (estimated) in
Australia, 14% in Argentina, and 5% in
Turkey and China (DPL 2004). In May
2006, DPL announced acquisition of
Syngenta’s global cotton seed business,
comprised of operations and assets in
India, Brazil, Europe, and certain cotton
germplasm in the United States. The
Indian acquisitions included a research
facility and ‘‘cotton seed germplasm and
distribution assets in each of the three
primary growing regions of India’’ (DPLSyngenta 2006).
In addition to its international cotton
operations in India (see next section),
Monsanto has also gained a substantial
international presence in other crops
(Appendix 6). For instance, its purchase
of at least four Brazilian seed firms in
the 1990s gave it a 63% market share in
Brazilian corn seed in 1998–99 (Pardey
et al. 2004, p. 19) and a substantial stake
in Brazil’s soybean market as well.
Other notable international deals in the
1990s include acquisition of Cargill’s
international seed division ($1.4
billion), and two major South African
seed firms (mainly corn).
The large international marker
presence of a combined Monsanto-DPL
in cotton seed and other major crop
markets would be of great concern,
particularly in light of Monsanto’s
history of questionable and illegal
business practices overseas.
3.9.1 Monsanto in India
Monsanto has undertaken a major
effort to introduce GM cotton
internationally, notably in India and
Indonesia (for the following discussion,
see FoEI 2007, pp. 42–55). For instance,
Monsanto acquired a 26% share of
India’s largest seed firm, Maharashtra
Hybrid Seed Company (Mahyco), in the
1990s, and established a 50:50 joint
venture with Mahyco known as Mahyco
Monsanto Biotech to market Bt cotton
there (Cyber India 2004). India plants
more cotton (over 20 million acres) than
any country in the world, making it a
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lucrative market. Controversy over the
commercial introduction of MahycoMonsanto Bt cotton in India from 2002
to 2005 has centered on allegedly
deceptive advertising campaigns
portraying the Bt cotton as endowed
with magical qualities, the more than
three-fold higher price of biotech cotton
seed,41 and numerous crop failures.
Many Indian farmers went into debt to
purchase the high-priced seed, based on
promises of greatly increased yields and
reduced insecticide expenditures.
However, reports from Indian state
government officials arid farm
organizations document that the Bt
cotton often yielded less than
conventional cotton, and did not resist
pests as promised by Mahyco-Monsanto.
In consequence, Indian government
officials in various states, most recently
in Tamil Nadu (Sharma 2007), have
demanded compensation for farmers
who have suffered Bt cotton failures.
As reported in Nature Biotechnology,
a study by the Nagpur-based Central
Institute of Cotton Research revealed a
constellation of problems with MahycoMonsanto’s Bt cotton varieties, which
were developed for U.S. farmers but
often proved unsuitable to Indian
conditions (for the following discussion,
see Jayaraman 2005). First, the built-in
insecticide was not produced at
sufficient levels in cotton bolls to
adequately control the cotton bollworm,
India’s chief cotton pest, especially late
in the growing season, which is longer
than in the U.S. This meant both
greater-than-expected insect damage for
some farmers, and in the longer term,
increased probability of development of
pests resistant to the Bt insecticide.
Second, an estimated one-quarter of the
hybrid Bt cotton seeds didn’t produce
any insecticide at all, a problem not
seen in the U.S., where true-breeding
varieties are planted. Suman Sahai,
president of the Indian civil society
group, Gene Campaign, reportedly
charged Monsanto with promoting the
use of hybrids in India to force farmers
to buy fresh seeds every year even
though it is aware that true-breeding
varieties (whose seeds can be saved for
subsequent crops) perform better. The
deficient insect-resistance of Bt cotton
in India has meant that Indian cotton
growers purchase and spray more
chemical insecticides than Bt cotton
growers in other parts of the world. Due
41 Acting on a complaint from the government of
Andhra Pradesh, India’s Monopolies and Restrictive
Trade Practices Commission issued notices to
Monsanto and its Indian affiliates for taking undue
advantage of its monopoly in Bt cotton seed by
charging a royalty of 1,250 rupees on a 450 gm
packet of seed, raising its price to 1,800 rupees
(Mitta 2006).
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to such agronomic problems, the Indian
government refused to renew the
licenses for three Bt cotton varieties in
many states. The recent spate of farmer
suicides in Indian cotton-growing
regions has many causes, including
drought-related crop failures and low
cotton prices, but indebtedness arising
from purchase of high-priced biotech
cotton seeds that sometimes failed to
perform was by many accounts a
significant factor (FoEI 2007, p. 50).
3.9.2 Monsanto’s Bribery in Indonesia
Monsanto’s abortive bid to introduce
biotech cotton to the Indonesian market
involved bribery of and illicit payments
to Indonesian government officials.
According to a U.S. Securities and
Exchange Commission (SEC) complaint
(SEC 2005a), in 2002 a senior Monsanto
manager based in the U.S. authorized
payment of a $50,000 bribe to a senior
Indonesian Ministry of Environment
official to repeal a decree requiring
environmental impact assessments of
biotech crops prior to their introduction,
a decree applying to Monsanto’s Bt
cotton (the decree was never repealed).
In addition, Monsanto’s Indonesian
affiliates made at least $700,000 in illicit
payments to 140 Indonesian government
officials and their family members from
1997 to 2002. Monsanto was fined $1
million by the U.S. Department of
Justice for violation of the U.S. Foreign
Corrupt Practices Act and an additional
$500,000 by the SEC (SEC 2005b). As in
India, many Indonesian farmers were
extremely disappointed with the
performance of Monsanto’s cotton,
which was sold at a substantial
premium to conventional seed but in
many cases failed to deliver the
promised added value (FoEI 2007, pp.
52–53).
3.9.3 Monsanto’s Questionable Soya
Lawsuits in Europe
A third example of questionable
business practices involves Monsanto’s
lawsuits against eight European
importers of Argentine soy meal, which
is largely derived from Roundup Ready
soybeans. Monsanto is demanding that
the importers pay royalties on these
imports based on the company’s
European patents on Roundup Ready
(RR) soybeans (MarketWatch 2006).
Monsanto’s attempts to collect
royalties from Argentine soybean
farmers have failed, chiefly because the
company does not have a patent on RR
soy in Argentina (FoEI 2007, p. 24), and
the country’s 1973 seed law allows
farmers to legally save and replant RR
soy from their harvests (Valente 2004).
Monsanto chose to introduce RR soy in
Argentina despite the lack of patent
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protection (Benbrook 2005, p. 14).
Measures ostensibly introduced to
penalize the illegal practice of selling
saved RR seed also affect farmers who
legally save their own seed for
replanting. For instance, an ‘‘extended
royalty’’ scheme introduced in 1999
requires farmers to sign a contract
obligating them, upon purchase of RR
soybean seeds, to pay a surcharge of $2
for each 50 kg of saved seed, and is
associated with lengthy interrogations of
farmers and intrusive inspections of
farmers’ field by seed dealers (NellenStucky & Meienberg 2006 Valente 2006).
Argentine farmers are generally opposed
to such schemes, which recall
Monsanto’s practices in the U.S.
Monsanto’s U.S. patents on RR soybeans
have allowed the company to
aggressively investigate and/or
prosecute thousands of American
farmers for (allegedly) replanting saved
RR soy, resulting in decisions awarding
the company over $15 million through
2004 (CFS 2005).
Monsanto’s lawsuits against European
importers of Argentine soy meal are
widely regarded as having little chance
of success, because they illegitimately
assert a right to collect royalties on a
processed derivative (soy meal) of the
patented RR soy based on the mere
presence of the RR gene, whereas the
European patents at issue confer
protection only to seeds in which the
RR gene performs its function of
conferring resistance to glyphosate,
which is only true of planted seeds, not
seeds or seed derivatives meant for
(animal) consumption (Nellen-Stucky &
Meienberg 2006). Argentina has
reportedly obtained a legal opinion to
this effect from the European
Commission’s Internal Market and
Services Directorate-General
(MarketWatch 2006). Some regard
Monsanto’s lawsuits as a stratagem to
impose costly delays on Argentine soy
meal exports to Europe, and thereby
pressure the Argentine government to
change its seed laws to suit the
company (Nellen-Stucky & Meienberg
2006).
3.10 Monsanto-DPL a Virtually
Unchallengeable Competitor
DPL’s cotton seeds are generally
considered the highest-quality
germplasm in the industry, as suggested
by its 51% share of the cotton seed
market and the fact that it has the two
top-selling cotton varieties sold by any
company (USDA AMS 2006). Monsanto
is the undisputed leader in cotton traits,
with an over 95% market share, and has
a similarly dominant position in R&D,
with 94% of experimental transgenic
cotton acreage since the year 2000
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(Appendix 5). On this basis alone, a
merger of these two giants can only
exacerbate concentration in an already
highly concentrated industry.
But the merger’s impacts look still
more dire when one considers the
strong linkage between quality
germplasm and trait dominance. Access
to limited high-quality germplasm—
regarded as the ‘‘delivery mechanism’’
for traits—is absolutely crucial to
effectively marketing biotech cotton.
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Seed proved to be the delivery mechanism
of choice for agrobiotechnology, and, because
high quality proprietary germplasm was in
short supply, the strategic value of certain
seed companies rose quickly
(Kalaitzandonakes 1998).
At present, in the U.S., Monsanto has
sure access only to its Stoneville
subsidiary’s germplasm, representing
12% of U.S. cotton. While its traits are
currently offered widely in other firms’
seeds via licensing agreements, these
agreements are limited in duration and
subject to expiration or cancellation.
Acquisition of DPL would give
Monsanto control of the highest-quality
seeds, planted on more than four times
as much acreage as Stoneville’s, in
which to incorporate its traits. The
acquisition could also lead to
cancellation of DPL’s plans to diversify
its trait offerings, as described in
Section 3.4.
If Monsanto’s competitors are
prevented from deploying their traits in
DPL’s germplasm, they will be forced to
seek access to a much smaller pool of
mostly lower-quality germplasm in
which to incorporate their traits via
licensing agreements or acquisition.
They would thus face two, likely
insurmountable, obstacles: First,
marketing new and unfamiliar traits to
farmers committed from long experience
and habit to Monsanto’s industryleading traits and doing so in
germplasm whose quality in terms of
yield and other desirable (non-biotech)
attributes is unlikely to match
Monsanto-DPL’s. The extremely high
concentration in seeds post-merger
would make acquisition of quality
germplasm by Monsanto’s competitors
effectively impossible. High-quality
cotton germplasm is a naturally limited
form of capital that accrues slowly over
many years of patient breeding efforts.
Unlike brick and mortar factories or
other capital equipment, it cannot be
fabricated, given only sufficient funds.
This limitation makes entry
considerably more difficult for a wouldbe innovative competitor than would be
the case in a nuts-and-bolts or
information technology industry.
Perhaps the single, most important
factor to consider in assessing the
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merger is Monsanto’s extraordinary
success in deploying its traits in the
seeds of its competitors, even
competitors that are also trait providers
themselves, via licensing agreements. In
other words, Monsanto has come to
overwhelmingly dominate traits in
cotton (and other crops) even without
the substantial additional vertical
integration represented by acquisition of
DPL. Since at present there is little room
left for Monsanto traits in cotton, the
proposed acquisition could only act to
extend Monsanto’s already
unacceptably high level of trait
dominance into the indefinite future.
Despite the undeniable attractiveness
of the Roundup Ready system, however,
there are also clear signs that transgenic
trait ‘‘adoption’’ is a push as well as a
pull affair, a product of oligopolistic
market power as well as farmer demand.
As demonstrated above, even popular
conventional seed varieties are being
eliminated or restricted in supply, while
conventional versions of leading
transgenic lines popular mainly for their
yield (or other non-biotech attributes)
are simply not available (Section 2.4).
Thus, an accelerated decline in the
availability of high-quality conventional
seed is another likely outcome of the
merger.
3.11 Conduct-Based Solutions in Light
of the High Failure Rate in Agricultural
Biotechnology
One might imagine that the
anticompetitive effects of the merger
could be adequately addressed by
requiring Monsanto-DPL to incorporate
competitors’ traits-for instance,
Syngenta’s VipCot IR and DuPont’s
Optimum GAT HT traits (Section 3.4).
However, this sort of solution runs a
high risk of failure due to the high
failure rate associated with this
relatively new technology, a factor
easily overlooked by those
inexperienced in the world of biotech
crops.
In brief, the overwhelming majority of
biotech traits developed in the
laboratory are never effectively
commercialized. Failure occurs at
several stages in the research,
development, regulatory review and
commercialization process. A trait
developed in the laboratory may well
not reach the stage of outdoor field trials
due to unexpected technical difficulties.
The great majority of biotech plant
varieties that do undergo outdoor field
testing never receive government
clearance for commercial cultivation,
most often because the company drops
development because of trait instability,
poor agronomic performance in certain
environments, and/or unforeseen health
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Sfmt 4703
or environmental risks. And even the
majority of those few biotech crops that
do receive government clearance fail in
the marketplace.
This high failure rate is often
obscured by overly optimistic public
relations material from biotech
companies, which are understandably
optimistic about future prospects for
their traits and loathe to air their
failures.
An approximate measure of the
failure rate is provided by USDA data,
which show that 976 genes,42 and thus
nearly as many biotech traits,43 have
been tested in roughly 50,000 outdoor
field trials (Caplan 2005) involving more
than 100 different plant species 44 since
the late 1980s. Yet only 71 biotech
‘‘events,’’ or particular crop-trait
combinations, have received
commercial clearance.45 Of these 71,
only four crops with HT and/or IR traits
have succeeded commercially,
representing virtually 100% of the
world’s biotech acreage (see Appendix 7
and ISAAA 2006).46
While Syngenta’s VipCot cotton has
received USDA clearance, the EPA has
not given final approval to VipCot’s
VIP3A insecticidal protein, perhaps due
to concerns that it will kill non-target
organisms as well as insect pests by
virtue of its broad-spectrum activity. As
noted in Section 3.4.1, DPL has already
pushed back the introduction date of
VipCot from 2006 to 2008–09, and there
is no guarantee it will be released then,
even assuming that a compulsory
licensing agreement is imposed on
Monsanto as a condition of the merger.
DuPont’s Optimum GAT trait is even
less certain to succeed. DuPont
optimistically projects commercial
introduction of GAT in soybeans in
2009 (StLPD 2006), to be followed by
introduction in corn and cotton some
years later, by one account 2012 (Polaris
2005). DuPont’s Web site indicates that
GAT cotton is at the early phase 1 (proof
42 See https://www.tsb.vt.edu/cfdocs/isblists2.cfm/
opt=16, last accessed Feb. 12, 2007.
43 In the great majority of cases, a biotech trait is
conferred by a single gene. A limited number of the
976 genes noted above are marker genes employed
to facilitate the crop development process and do
not themselves express a trait. USDA also lists
alternative designations for some genes separately.
On the other hand, an unknown but substantial
number of genes claimed as ‘‘confidential business
information’’ (CBI) of the biotech crop developer do
not appear in this list (see Caplan 2005 on the
growing number of CBI claims for genes), so the
true number of biotech traits tested in field trials
surely exceeds 1,000.
44 https://www.tsb.vt.edu/cfdocs/isblists2.cfm/
opt=3, last accessed Feb. 12, 2007.
45 https://www.aphis.usda.gov/brs/not_reg.html,
last accessed Feb. 12, 2007.
46 Approved biotech crops other than HT and/or
IR soybeans, corn, cotton and canola account for
well under 1% of global biotech crop acreage.
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choice of organic cotton products for
U.S. consumers.
However, agriculture is not software.
Production of food and fiber to meet
basic needs is a far more serious affair
than computer operating systems.
Agriculture requires competition in
seeds and traits for all the reasons that
apply to other industries, but also to
ensure the diversity that is essential to
sustain the health and productivity of
American agriculture. As discussed in
Sections 2.6 to 2.8, the near-monopoly
in biotech traits promises a future of
unprecedented reliance on a single
herbicide, glyphosate. Excessive use of
glyphosate leads to increasingly
stubborn weeds, a threat to the cotton
industry compared by one expert to the
boll weevil; disease-prone, mineral
deficient crops; and heightened risks of
widespread yield reductions and
failures. Increased use of Roundup may
also endanger amphibian populations.
From an international perspective, the
merger will give Monsanto, a company
known for questionable and illegal
activities overseas, increased access to
foreign markets, particularly in cotton.
Monsanto’s acquisition of DPL’s seed
sterility technology increases the
potential for eventual introduction of
Terminator cotton and other crops, with
adverse equity impacts on resource-poor
farmers.
4. Conclusion
5. Recommendations
Based on our analysis, the Center for
Food Safety and International Center for
Technology Assessment believe that the
proposed merger would have a number
of anticompetitive effects, including
increased cotton seed prices; restricted
choice of cotton seed varieties with no
traits (i.e. conventional seed) or one
trait; and increased obstacles to entry of
and/or greater market penetration by
Monsanto’s cotton trait competitors.
Other possible effects include an
accelerated exit of smaller cotton seed
firms from the market; acquisition of a
uncompetitive, divested Stoneville,
leading to a duopoly in seeds; harm to
organic cotton growers, particularly
overseas, and potentially reduced
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of concept) of 4 phases of development
(DuPont-Pioneer 2006b). USDA field
trial data show that to date, DeltaMax
Cotton LLC has received only two
permits to conduct small field trials of
GAT cotton, on 5 and 10 acres, both in
2006.47 The small scale of these field
trials confirms that GAT cotton is at an
early stage of development.
Interestingly, DuPont received
commercial clearance for a transgenic
cotton resistant to ALS-inhibitor
herbicides in 1996, but either did not try
or was unable to market it.48 (We find
no record that this HT trait was ever
incorporated into a commercial cotton
cultivar.) Tolerance to ALS-inhibitors is
the trait paired with glyphosatetolerance in Optimum GAT. One
limitation of ALS-inhibitor tolerance is
the prevalence of weeds already
resistant to this class of herbicides.49
This, combined with rapidly increasing
glyphosate-resistance in weeds, may
limit the usefulness and marketability of
Optimum GAT.
History clearly demonstrates that any
given experimental biotech crop is very
unlikely to become commercialized.
Conduct-based solutions to correct the
anticompetitive effects of a merger
naturally rely on ‘‘picking a winner.’’
Given the high failure rate in
agricultural biotechnology, this is a
risky strategy that is very likely to fail.
I. We call on the Department of justice
to unconditionally oppose the
acquisition of Delta and Pine Land
Company by Monsanto to protect
farmers from higher seed prices,
reduced seed choices and other adverse
impacts as outlined in this report.
II. We call on the Department of
Justice to oppose future acquisitions of
cotton seed firms by the oligopolists—
Delta and Pine Land, Bayer and
Monsanto—to avert the negative effects
of increased concentration in the cotton
seed industry.
III. We urge the US Department of
Agriculture to resume its historical role
of promoting the interests of American
farmers, through:
A. Increased funding of public sector
breeding efforts to supply American
farmers with affordable, high-quality
seed varieties in cotton and other crops,
in particular conventional seed varieties
neglected by the private seed industry;
B. Denial of any and all permits to
entities applying to field test any crop
incorporating Delta and Pine Land’s
Technology Protection System, or any
other other genetic use restriction
technologies that render the seeds of
harvested plants sterile (popularly
47 At https://www.tsb.vt.edu/cfdocs/
fieldtests1.cfm, search on ‘‘Institution,’’ then
‘‘DeltaMax Cotton LLC.’’
48 Go to USDA’s list of GM crops cleared for
commercial use (i.e. petitions for non-regulated
status granted) at https://www.aphis.usda.gov/brs/
not_reg.html. Petition 95–256–01, for sulfonylurea
tolerant cotton, line 19–51a, was cleared on Feb. 21,
1996 Sulfonylurea is an ALS-inhibitor type
herbicide.
49 The Weed Science Society of America lists 95
weeds resistant to ALS inhibitors worldwide.
https://www.weedscience.org/Summary/Uspecies
MOA.asp?1stMOAlD=3&FmHRACGroup=Go.
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known as ‘‘Terminator’’ technology);
and
C. Otherwise following the
recommendations of eleven members of
the USDA’s Advisory Committee on
Agricultural Biotechnology (ACAB)
with respect to Terminator technology,
as set out in a joint letter to ACAB’s
chair of August 25, 2000 (USDA ACAB
2000).
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documented in North Carolina’’, Southeast
Farm Press, October 25, 2004: https://
southeastfarmpress.com/news/102504insect-shifts
Appendix 1: Cotton Seed Market Share
of Selected Companies in U.S.: 1970 to
2006
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
Appendix 2
Market Share of Four Largest Private
Seed Firms: Cotton, Corn and Soybeans
A graph appearing here in the
comment is illegible upon reprinting.
The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
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Acreage of Biotech Cotton Field Trials
in the U.S.: 2000 to 2006
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The graph is available at the Department
of Justice Antitrust Division, 325
Seventh Street, NW., Room 215,
Washington, DC 20530, (202) 514–2481,
and at the Office of the Clerk of the
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District of Columbia, 333 Constitution
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Appendix 7—Approved Versus
Commercially Grown Genetically
Engineered Crops
A graph appearing here in the comment is
illegible upon reprinting. The graph is
available at the Department of Justice
Antitrust Division, 325 Seventh Street, NW.,
Room 215, Washington, DC 20530, (202)
514–2481, and at the Office of the Clerk of
the United States District Court for the
District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
August 8, 2007.
Donna N. Kooperstein, Chief, Transportation,
Energy & Agriculture Section, Antitrust
Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 500,
Washington, DC 20530.
Re: United States v. Monsanto Company et
al. Case No. 1:07–cv–00992.
Dear Ms. Kooperstein:
Ohio Farmers Union submits this letter to
object to the DOJ’s Proposed Final Judgment
(‘‘PFJ’’), which allows Monsanto to acquire
Delta and Pine Land Company (‘‘Delta and
Pine Land’’). Monsanto’s acquisition of Delta
and Pine Land will have serious implications
for independent family farmers throughout
the state of Ohio.
Cotton seed is important to Ohio’s
livestock producers as a high-quality,
alternative feed source. Monsanto’s
acquisition of Delta and Pine Land, the
largest cotton seed company in the country,
will give Monsanto a profound measure of
control over the supply of cotton seed,
especially over the transgenic cotton seed
market. Competing seed trait developers will
have great difficulty gaining acccess to the
market. With fewer alternatives, the cost of
seed to farmers is very likely to increase,
adding additional economic stress to Ohio’s
livestock producers.
Also, Monsanto’s growing dominance in
the cotton markets could magnify their
impact on the soybean and corn markets.
Soybean and corn farmers in Ohio rely on an
affordable, competitive seed market when
they plant in the spring allowing them to
grow food and fuels. The soybean and corn
transgenic seed markets are already
concentrated. This acquisition could easily
drive costs up for Ohio’s grain farmers and
lead to increased prices for consumers.
Innovation will also suffer, as competing
transgenic trait developers are pushed out of
the markets.
The DOJ’s PFJ does not remedy the harms
that will occur from Monsanto’s acquisition.
The divestiture of Stoneville plus 20 lines of
germplasm will not take the place of an
independent Delta and Pine Land with its
breeding expertise and resources. The PFJ
does not restore competition and is not in the
public interest.
Sincerely,
Joe Logan.
Ohio Farmer’s Union.
August 7, 2007.
Donna N. Kooperstein, Chief, Transportation,
Energy & Agriculture Section, Antitrust
Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 500,
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Washington, DC 20530, Via fax (202–307–
2784) and U.S. Mail.
RE: United States v. Monsanto Company, et
al., Case No. 1:07–cv–00992 (D.D.C.,
filed May 31, 2007) (Urbina, J.)
Dear Ms. Kooperstein:
The Organization for Competitive Markets
(‘‘OCM’’) is an independent, nonpartisan,
and nonprofit group comprised of farmers,
ranchers, academics, attorneys, and
policymakers dedicated to preserving and
protecting competitive markets in
agriculture. The OCM submits these
comments pursuant to the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16,
to register its objections to the Department of
Justice’s (‘‘DOJ’’) proposed final judgment
(‘‘PFJ’’) regarding the acquisition by
Monsanto Company (‘‘Monsanto’’) of Delta
and Pine Land Company (‘‘Delta and Pine’’),
the largest cotton seed company in the
United States. With agricultural,
consolidation and concentation occurring at
an unprecedented rate, OCM is disappointed
that the DOJ has once again failed to preserve
competition and protect American farmers
and consumers.
Monsanto’s acquisition of Delta and Pine
promises to substantially damage transgenic
seed trait competition in cotton. Farmers
throughout this country are being harmed by
Monsanto’s aggressive tactics aimed at
denying them competitive alternatives. As
the DOJ acknowledged in its complaint,
Monsanto is the largest producer and
supplier of cotton transgenic seed traits in
the United States. Monsanto controls over
96% of the market for herbicide-tolerant
cotton traits and approximately 99% of the
market for insect-resistant cotton traits.
Monsanto has used its monopoly power to
impose significant price increases on cotton
farmers, including a 229% increase in
Monsanto’s Roundup Ready herbicidetolerant trait over the past four years. The
technology fees Monsanto charges farmers for
its traits accounts for more than 50%, and
sometimes even as much as 70%, of the cost
of a bag of seed. These statistics illustrate the
extent to which greater competition is
needed in the cotton transgenic seed trait
market where farmers are struggling under
the weight of Monsanto’s dominance.
Together with its separate joint
development partners, Delta and Pine offers
the best hope of breaking Monsanto’s
monopoly in cotton transgenic seed traits. As
the DOJ indicated in its complaint, Delta and
Pine is an attractive joint development
partner because of its extensive germplasm
library, personnel and facilities, and superior
track record of breeding success. Also, Delta
and Pine’s high market shares make it an
indispensable vehicle for competing trait
developers to distribute their competing
cotton biotech traits to farmers.
By acquiring Delta. and Pine, Monsanto
will be positioned to undermine these joint
development efforts, close the distribution
channel for competing traits, and thereby
solidify its monopoly position. The DOJ’s
own complaint and PFJ clearly acknowledge
the very significant anticompetitive effect of
Monsanto’s acquisition of Delta and Pine on
the future development of competing cotton
traits. Yet the DOJ’s proposed remedy to cure
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these anticompetitive effects—divestiture of
Stoneville plus providing Stoneville
nonexclusive access to 20 lines of germplasm
and certain Monsanto cotton germplasm
lines—is woefully inadequate and does not
restore competition.
First, Stoneville simply lacks the required
infrastructure and expertise to challenge
Delta and Pine. Second, the ‘‘divestiture’’ to
Stoneville of 20 lines of Delta and Pine
germplasm does little to enhance Stoneville’s
capabilities. Putting aside that it is not even
a true divestiture, these 20 lines are either in
development and not commercially viable or
account for only about 1% of the cotton acres
planted in the Southeast and MidSouth. Plus,
ongoing germplasm line improvements mean
that old lines quickly become obsolete. Even
if Stoneville is eventually capable of bringing
competing biotech traits to market, the DOJ
acknowledges that it will take 815 years for
them to be commercially viable. By then, it
will simply be too late and Monsanto’s
hegemony in transgenic seed traits will have
been cemented permanently. Third, because
Monsanto will have more than a 50% postacquisition share of the highly concentrated
cotton-seed market, competing trait
developers may well lack the incentive to
continue their efforts due to a lack of nonDelta and Pine outlets through which to
license their traits.
Monsanto’s acquisition of Delta and Pine
also promises to have harmful spillover
applications to other agricultural crops vital
to our national economy. With Delta and
Pine under Monsanto’s control, competing
trait developers will be foreclosed from
market opportunities that would provide
them with necessary revenue to justify the
significant research and development costs
associated with the development of
competing traits in cotton and other crops.
Encouraging and promoting alternative,
competing transgenic seed traits is especially
critical in key crops like corn and soy, where
Monsanto already controls more than 95% of
the market for herbicide-tolerant corn traits,
more than 80% of the market for insectresistant corn traits, and over 98% of the
market for herbicide-tolerant soybean traits.
Unless competition is preserved, Monsanto
will soon be able to eliminate competition in
the trait markets, to the detriment of farmers
and consumers everywhere.
Promoting and preserving competition and
choice in transgenic seed traits is critical to
ensuring the success of the vitally important
agriculture sector of the national economy. If
the PFJ is approved, the opposite will
occur—Monsanto’s acquisition of Delta &
Pine will lead to diminished competition,
fewer choices, and higher prices for farmers
and consumers.
Respectfully,
Keith Mudd,
President.
August 16, 2007.
Donna N. Kooperstein, Chief, Transportation,
Energy & Agriculture Section Antitrust
Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 500,
Washington, DC 20530.
Re: United States v. Monsanto Company, et
al., Case No. 1:07–cv–00992 (D.D.C.,
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filed May 31, 2007) (Urbina, J.)
Dear Ms. Kooperstein:
We submit this letter pursuant to the
Antitrust Procedures and Penalties Act, 15
U.S.C. 16, to voice our objections to the DOJ’s
Proposed Final Judgment (‘‘PFJ’’) which
permits Monsanto to acquire Delta and Pine
Land Company (‘‘Delta and Pine Land’’). The
interests of Iowa’s farmers, rural
communities, and consumers will be harmed
by Monsanto’s acquisition of Delta and Pine
Land.
Agriculture is a vital part of Iowa’s history,
environment, and economy. In 2006 and
2007, Iowa was ranked #1 in the United
States in acres of corn and soybeans planted.
See ‘‘Acreage,’’ National Agricultural
Statistics Service, USDA (June 30, 2006, and
June 29, 2007). While Monsanto’s acquisition
of Delta and Pine Land directly impacts the
cotton markets, Monsanto’s stronghold in the
cotton markets will have serious effects on
the corn and soybean markets as well.
Farmers and consumers benefit from
competition in the marketplace. Monsanto’s
acquisition of Delta and Pine will end
competition in cotton biotech seed traits, by
cutting off competing trait developers from
access to Delta and Pine’s superlative
breeding and distribution programs. These
competing trait developers will have no
incentive to invest in R&D for cotton seed
traits, and they will not have the needed
resources to invest in trait development for
other crops, such as the key crops of corn and
soybeans. With no alternatives, the cost of
seed to farmers will continue to climb
through the roof, and the end costs to
consumers will likewise rise dramatically.
Further, innovation will be stifled and seed
quality will suffer.
The DOJ’s PFJ does not remedy the harms
that will occur from Monsanto’s monopoly
position. The divestiture of Stoneville plus a
sell-off of a few lines of germplasm, will not
take the place of an independent Delta and
Pine. The PFJ does not restore competition
and is not in the public interest.
Sincerely,
Carrie La Seur,
Founder & President, Plains Justice.
Denise O’Brien,
President, Women, Food & Agriculture
Network.
Chris Peterson,
President, Iowa Farmers Union.
August 24, 2007.
Donna N. Kooperstein, Chief, Transportation,
Energy & Agriculture Section, Antitrust
Division, United States Department of
Justice, 325 Seventh Street, NW., Suite 500,
Washington, DC 20530.
Re: United States v. Monsanto Company et
al., No 1:07–cv–00992 (D.D.C. filed May
31, 2007) (Urbina, J.)
Dear Ms. Kooperstein:
Pursuant to 15 U.S.C. 16(b), the Attorneys
General of Virginia, Arkansas, Delaware,
Kentucky, Maryland, New Mexico, North
Carolina, Ohio, Oklahoma, Rhode Island,
Tennessee, Utah, and West Virginia hereby
submit the attached comments related to the
Proposed Final Judgment pending in the
above-referenced matter. Please contact me at
(804) 786–6557 if you have any questions.
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Sincerely,
Sarah Oxenharn Allen,
Assistant Attorney General, Antitrust and
Consumer Litigation Section, Office of the
Virginia Attorney General.
Attachment
Comments of the Attorneys General of
Virginia, Arkansas, Delaware, Kentucky,
Maryland, New Mexico, North Carolina,
Ohio, Oklahoma, Rhode Island, Tennessee,
Utah, and West Virginia on the Proposed
Final Judgment in United States v. Monsanto
Company, et al.
Pursuant to ¶ 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16,
the Attorneys General of Virginia, Arkansas,
Delaware, Kentucky, Maryland, New Mexico,
North Carolina, Ohio, Oklahoma, Rhode
Island, Tennessee, Utah, and West Virginia
(hereinafter, ‘‘the Attorneys General’’),
submit the following comments on the
Proposed Final Judgment (‘‘PFJ’’) produced
to the court by the United States Department
of Justice (‘‘the United States’’ or ‘‘DOJ’’) in
the above-referenced matter.
I. Introduction
As the chief law enforcement officers of
their respective states, the Attorneys General
are charged with enforcing state and federal
antitrust laws. The Attorneys General often
are called upon to evaluate and gauge the
competitive benefit or harm of proposed
business acquisitions to the citizens and
economies of their respective states. The
Attorneys General strive to preserve fair
competition, protect their citizens from
unlawful restraints, and promote the
development, production and distribution of
alternative product choices in the
marketplace. As a result, the Attorneys
General have a strong interest in antitrust
enforcement actions by the United States that
will impact their states.
Agriculture is an important industry
affecting local and state economies, as well
as the Gross National Product. Its gross
outputs account for more than $250 billion
of the gross domestic product and more than
$68 billion in exports. See ‘‘Gross Domestic
Product by Industry Accounts,’’ U.S.
Department of Commerce, Bureau of
Economic Analysis, available at https://www.
bea.gov/industry/gpotables/gpo_action.cfm?
anon=52440&table&_id=19025&format&_
type=0; ‘‘Foreign Agricultural Trade of the
United States,’’ U.S. Department of
Agriculture (‘‘USDA’’), available at https://
www.ers.usda.gov/Data/FATUS/
monthlysummary.htm. Cotton, together with
corn and soybeans, accounts for nearly 60%
of the value of all U.S. crops. See ‘‘Crop
Values—2003 Summary,’’ USDA, National
Agricultural Statistics Service. These three
crops have a combined annual value of more
than $58 billion. See ‘‘Crops & Plants—
National Statistics,’’ USDA, National
Agricultural Statistics Service. In 2006, the
cotton market alone generated more than $5
billion in annual revenues for U.S. farmers.
See DOJ Complaint (‘‘Complaint’’), at ¶ 1.
Biotechnology (alternatively, ‘‘biotech’’)
has revolutionized U.S. agriculture by
enabling farmers to protect crops from certain
insects, the effects of herbicides, and other
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soil and plant conditions that evolve over
time. By altering the genetic makeup of seeds
to produce crops with desirable traits, such
as insect resistance and herbicide tolerance,
biotechnology has made it possible for
farmers to increase production yields and
decrease costs, particularly the costs of
pesticides sprayed on crops after planting.
Today, approximately 87% of cotton, 91% of
soybeans, and 73% of corn grown in the
United States is from genetically modified
seeds. See ‘‘U.S. Farmers Plant Largest Corn
Crop in 63 Years,’’ USDA, available at https://
www.nass.usda.gov/Newsroom/2007/
06_29_2007.asp.
Despite the increasingly important role of
biotech seeds in U.S. agriculture, barriers to
entry in the market are extremely high.
Successful entry requires long lead times,
large capital expenditures, highly trained and
experienced personnel, retail distribution
outlets, and access to a broad collection of
elite germplasm (the genetic material
required for the development of traits that
gives the plants their characteristics. See
Complaint, at ¶ 5.). Desirable traits have to be
developed in laboratories, successfully
crossed with varieties of elite germplasm to
produce seeds that have the proven desirable
qualities, and field-tested in conditions
farmers actually confront. See generally Jane
Dever and E. Margaret Hamill, ‘‘Breeding:
Approaches to Fiber Quality Improvement,’’
2005 EFS Systems Conference Presentations,
available at https://www.cottoninc.com/2005/
ConferencePresentations; and Monsanto.com,
‘‘The DNA of Our Business,’’ available at
https://www.monsanto.com/Monsanto/
content/media/pubs/2005/MON_2005_DNA_
of_our_business.pdf. The process often
requires thousands of attempts before a trait
can be developed and used to breed
commercial seed varieties. See Complaint, at
¶ 28. Once a trait is successfully developed,
it must receive regulatory approval by
multiple agencies, in both the United States
and abroad, which can cost millions of
dollars. Id. Market acceptance of new biotech
traits also takes time. Farmers tend to be
conservative in adopting new biotech seed
varieties, and therefore these seed varieties
often take several seasons to attain maximum
penetration and market share in various
regions. As the United States acknowledges
in its Complaint, the development of a single
trait ‘‘typically takes eight to twelve years
and costs over $40 million.’’ Id. at ¶ 28. See
also id. at ¶ 43. Because of these
extraordinarily high barriers to entry, there
are a limited number of companies in the
world capable of successfully developing
biotech traits.
Monsanto Company (‘‘Monsanto’’) is the
dominant biotech trait company in the
United States. Delta and Pine Land Company
(‘‘DPL’’) is the largest cotton seed company
in the United States. The Attorneys General
are concerned that Monsanto’s acquisition of
DPL will eliminate competition in the market
for cotton biotech traits and seeds, stifle
innovation and product choice, and result in
supra-competitive prices to U.S. farmers and
consumers. Monsanto will be able to
eliminate competition in cotton biotech trait
development and commercialization by
foreclosing other companies from developing
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cotton biotech traits with DPL or from
incorporating competing traits into DPL
seeds. The Attorneys General also are
concerned that the acquisition will have
ripple effects that will stall or eliminate the
development of competing biotech traits for
other crops, such as corn and soybeans,
allowing Monsanto to maintain a degree of
control over U.S. agriculture that has never
before been possessed by a single company.
The acquisition also may allow Monsanto to
engage in exclusionary business practices in
cotton. Such exclusionary business practices
could include long-term, highly restrictive
licensing agreements, ‘‘loyalty’’ programs,
bundling requirements, and other restrictions
that effectively could prevent competing
cotton traits from coming to market.
While DOJ recognizes the serious
anticompetitive effects of the acquisition, its
PFJ fails to sufficiently remedy those effects
and, therefore is not in the public interest.
II. The Acquisition Cements Monsanto’s
Current Monopoly Position in Biotech Traits
and Will Give the Company Market Power
in Cotton Seeds
No other company has experienced
Monsanto’s level of success in the
development, production and distribution of
biotech traits. It is undisputed that Monsanto
enjoys large monopoly shares with respect to
every commercially important trait in cotton,
corn and soybean seeds. In 2006, over 96%
of all cotton planted with biotech traits
contained Monsanto traits, while 95%
contained only Monsanto traits—the 1%
difference is attributable to Monsanto traits
that were combined with either Bayer
CropScience or Dow’s Phytogen traits. See
Complaint, at ¶ 3. See also Bill Frecse,
‘‘Cotton Concentration Report: An
Assessment of Monsanto’s Proposed
Acquisition of Delta and Pine Land,’’
International Center for Technology
Assessment, February 2007, at 8–9.
DPL also has had unparalleled success,
with a 50% national share of the U.S. cotton
seed market. See Evren Ergin, ‘‘DPLMonsanto: Antitrust/Merger Analysis,’’
Lehman Brothers, September 12, 2006, at 3.
In the cotton-growing states of the South,
where biotech traits are especially valued,
DPL’s dominance is even greater. It holds an
86% market share in the Southeast region,
which includes the states of Florida, Georgia,
Alabama, South Carolina, North Carolina,
and Virginia, and a 73% market share in the
MidSouth region, which includes the states
of Louisiana, Arkansas, Mississippi,
Tennessee, and Missouri. See ‘‘Cotton
Varieties Planted, 2006 Crop,’’ USDA,
Agricultural Marketing Service Cotton
Program, September 22, 2006, available at
https://www.ams.usda.gov/cottonrpts/
MNPDF/mp_cn833.PDF. These market shares
are slightly higher for DPL seeds that include
biotech traits—an 87% share of traited
cottonseeds in the Southeast and a 79% share
in the MidSouth. See Complaint, at ¶ 4.
DPL’s success reflects the high quality of
its germplasm library and its proven ability
to develop and commercialize new cotton
biotech seed varieties. See id. at ¶ 26. As a
result, DPL is the primary and most
important vehicle for biotech trait developers
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to get competing cotton biotech traits to
market. No other seed company can match
DPL as a development partner because of
DPL’s extensive and unique library of elite
germplasm—which is suitable across a full
range of geographic regions—brand name
loyalty, and industry-leading technical
personnel with unmatched breeding
expertise and capabilities. See Competitive
Impact Statement, at ¶ II(B)(2). In fact, DPL
claims to have three times the breeding
capabilities of any other seed company in the
world. See Tom Jagodinski, ‘‘Delta and Pine
Land’’ (presentation, 2006 Merrill Lynch
Agricultural Chemicals Conference, June 14,
2006 (Slide #3)). In 2006 alone, DPL spent
almost $25 million, or 6% of revenues, on
research and development. See Delta & Pine
Land Co., Annual Report (Form 10–
K)(November 14, 2006), at 42.
The Attorneys General are concerned that,
if approved, the PFJ will enhance Monsanto’s
monopoly power in cotton biotech trait
markets. Requiring Monsanto to divest itself
of its current cotton seed company,
Stoneville 1, as a condition to approve the
acquisition, the United States only
strengthens Monsanto’s monopoly position
by permitting Stoneville’s 12% market share
to be traded for DPL’s market shares of 50–
86%. Further, Monsanto secures complete
control of DPL’s breeding programs and seed
sales. As a result, Monsanto could, and likely
will, undermine DPL’s collaborations with
Monsanto’s competitors to the detriment of
U.S. cotton farmers and consumers.
III. The Acquisition Has Serious
Anticompetitive Effects
The acquisition threatens to substantially
reduce competition in the development,
production and distribution of cotton biotech
traits and seeds. DPL, in partnership with
other companies, is a significant trait
development competitor of Monsanto, which
now will have the ability and incentive to
eliminate, or at least significantly delay,
DPL’s trait development partnerships with
competitors. See Competitive Impact
Statement, at ¶ 11(A). As the United States
acknowledges in its Complaint, DPL ‘‘is an
attractive partner that is well suited to
quickly introduce new trait technologies due
to the strength and breadth of its germplasm
base and breeding programs as well as its
technical service capabilities, know-how,
brand recognition and market position.’’
Complaint, at ¶ 26. No other seed company
has the combination of assets and experience
to foster trait development collaborations and
bring to market competing cotton biotech
traits and seeds.
Monsanto’s acquisition of DPL likely will
end DPL’s development partnerships,
eliminating the only near-term challenges to
1 With only four significant seed companies prior
to the PFJ (DPL, Bayer CropScience, Stoneville and
Dow’s Phytogen Seed Company) and a handful of
smaller seed companies, the cotton seed market is
highly concentrated. Stoneville, which was recently
acquired by Bayer CropScience in connection with
the PFJ, has a 12% share of the cotton seed market,
making it the third largest cotton seed company.
See Evren Ergin, ‘‘DPL-Monsanto: Antitrust/Merger
Analysis,’’ Lehman Brothers, September 12, 2006, at
3.
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Monsanto’s monopoly position in cotton
biotech. DeltaMax, DPL’s joint venture with
E.I du Pont de Nemours and Company
(‘‘DuPont’’) and Pioneer Hi-Bred
International, Inc. (‘‘Pioneer’’) to develop a
trait known as OptimumTM GATM, would
provide cotton farmers a competitive
herbicide-tolerant trait alternative for the first
time. However, the Attorneys General
understand that DuPont and Pioneer have
exercised their right to terminate DeltaMax as
a result of DOJ’s decision to allow their
competitor, Monsanto, to consummate its
merger agreement with DPL during the
pendency of the Tunney Act proceeding.
DeltaMax’s demise is a serious loss of
potential competition that threatened
Monsanto’s dominance in herbicide-tolerant
traits. Herbicide tolerance is considered the
most important biotech trait by farmers in
most states. See ‘‘2007 Acreage Report,’’
USDA, National Agricultural Statistics
Service, at 25, available at https://
usda.mannlib.cornell.edu/usda/current/
Acre/Acre-06-29-2007.pdf (report generally
shows that market penetration for herbicidetolerant seeds is higher in most states than
that of insect-resistant seeds). Because of
DeltaMax’s termination, Monsanto’s cotton
herbicide-tolerant trait dominance is assured
for the foreseeable future. The Attorneys
General are not aware of the current status of
DPL’s collaboration with Syngenta AG to
develop an insect-resistant cotton biotech
trait called VipCotTM, which would pose a
competitive threat to Monsanto’s almost
complete monopoly of insect-resistant traits
in cotton.
The acquisition also harms competition by
eliminating DPL as the vehicle for biotech
trait developers to commercialize and
distribute competing cotton biotech traits.
Once under Monsanto’s control, DPL will
lack the incentive to sell competing traits at
the expense of Monsanto’s monopoly biotech
traits. With its 50–86% shares of the highly
concentrated cotton seed market, DPL is the
primary engine of biotech trait developers to
bring competing new traits to market through
finished seeds. Without an independent DPL,
competing cotton biotech trait developers
may not have sufficient non-DPL outlets to
license their traits.
In addition, as DOJ acknowledged in its
Complaint at ¶ 27, certain aspects of
Monsanto’s current license provisions to seed
companies harm competitors by prohibiting
combining, or ‘‘stacking,’’ of non-Monsanto
biotech traits with Monsanto traits. The
Attorneys General understand that
Monsanto’s licenses with regional corn and
soybean seed companies, which, like DPL,
are known as independent seed companies,
contain similar restrictions. These restraints
severely limit the ability of Monsanto
licensees to deal with Monsanto competitors
and appear to lack any legitimate business
purpose. The PFJ addresses this competitive
concern by requiring Monsanto to modify its
biotech trait licenses with cotton seed
companies to remove the stacking
prohibitions. See Competitive Impact
Statement, at ¶ 111(C). The Attorneys
General applaud this remedy. Unfortunately,
as discussed below, this remedy, along with
the divestiture of Stoneville to Bayer
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CropScience (‘‘Bayer’’) and the nonexclusive
licensing of a small number of germplasm
lines, will not restore the competition that
will be lost as a result of Monsanto’s
acquisition of DPL.
If biotech trait developers are unable to
commercialize and distribute to farmers the
competing traits they develop, they will not
be able to justify their significant research
and development expenditures and will be
deterred from entering the cotton biotech
market. The lack of opportunities in cotton
biotech may spill over to other important
cash crops where Monsanto also enjoys a
dominant position in biotech traits. The
cottonseed traits that DPL is developing in
partnership with Monsanto’s competitors
have numerous cross-crop applications.
Denying biotech trait developers market
opportunities in cotton will deprive them of
the revenues required to sustain expensive
research and development programs in other
important crops, such as corn and soybeans.
Knowledge that otherwise would have been
transferable to other crops will be lost,
putting other trait developers at a
competitive disadvantage. Monsanto’s
domination in cotton also may increase its
leverage over retailers, particularly national
retailers who sell DPL cotton seed in the
South, possibly making it even more difficult
to compete effectively with the bundles
Monsanto packages that include crop
protection chemicals and seeds across
multiple crops.
These anticompetitive effects are more
significant today than in 1999, when DOJ
blocked Monsanto’s first attempt to acquire
DPL. Biotech traits are more important and
valued today than in 1999. DPL’s market
shares, particularly in the cotton-growing
regions of the South, are even higher today.
Compare ‘‘Cotton Varieties Planted, 1999
Crop’’ and ‘‘Cotton Varieties Planted, 2006
Crop,’’ USDA, Agricultural Marketing
Service—Cotton Program. Unlike 1999,
however, Monsanto’s monopoly traits were
about to face real and meaningful
competition in the near future as a result of
joint development partnerships that did not
exist then. The harm to competition today is
real and immediate, and regrettably, the PFJ
does not remedy it.
IV. The PFJ Does Not Remedy the
Anticompetitive Effects
In its Complaint, the United States
acknowledges the significant anticompetitive
effects that the acquisition will have on the
development, production and distribution of
cotton biotech traits and seeds. Complaint, at
¶¶ 37–42. The United States concludes that
the acquisition violates the antitrust laws
because it ‘‘will eliminate competition
between DPL and Monsanto for the
development, breeding, and sale of traited
cottonseed.’’ Id. at ¶ 41. Nonetheless, the
United States has agreed to settle its action
against Monsanto and DPL by requiring
Monsanto to (1) divest Stoneville to an
approved buyer, which DOJ has subsequently
approved to be Bayer, and (2) provide
nonexclusive access to Stoneville of (a)
twenty lines of elite DPL germplasm and (b)
certain Monsanto cotton germplasm lines.
See Competitive Impact Statement, at
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¶ 111(A). The settlement fails to remedy the
likely anticompetitive effects of the
acquisition.
A. The Divestiture of Stoneville Fails To
Preserve Meaningful Competition in Cotton
A divested Stoneville falls far short of
replicating the assets and expertise that DPL
offers. The United States has recognized that
‘‘[a] company with a large collection of high
quality, or elite, germplasm has a competitive
advantage because the company has the
ability to identify the best genetic material
and use it in a wide variety of possible
crossing combinations, resulting in a greater
likelihood of developing a successful
variety.’’ Complaint, at ¶ 16. As DOJ
acknowledges, DPL has ‘‘over ninety years of
germplasm development.’’ Id. at ¶ 17. DPL
also has ‘‘the largest cotton germplasm
collection, with by far the greatest track
record of success in the important MidSouth
and Southeast regions, and an extensive
breeding program,’’ and ‘‘more breeding
capabilities than any competitor.’’ Id.
The new Bayer-Stoneville entity will have
access to only 20 lines from DPL’s extensive
germplasm library, the largest collection of
cotton germplasm in the United States.
Complaint, at ¶ 17. Stoneville was first
acquired by Monsanto in 1996, see
Competitive Impact Statement, at ¶ II (B)(3),
but then sold in 1999 and reacquired in 2005
as part of Monsanto’s efforts to develop a
cotton seed unit. See Complaint, at ¶ 32. The
divestiture of Stoneville appears to conflict
with DOJ’s own Antitrust Division Policy
Guide To Merger Remedies (‘‘Policy Guide’’)
(Oct. 2004). Those guidelines make clear that
‘‘[t]he Division favors the divestiture of an
existing business entity that already has
demonstrated its ability to compete in the
relevant market.’’ See id. at 12. As
Monsanto’s cotton seed unit, Stoneville has
only a limited track record in demonstrating
its ‘‘ability to compete in the relevant
market.’’ In fact, the divested ‘‘parts’’ that the
PFJ pieces together have never been operated
as a unit and would require substantial
reconfiguration. Even if Stoneville could
operate as a single unit with the licensed
parts, it necessarily will have to start from
scratch to duplicate DPL’s success in the
breeding of commercial varieties—a process
DOJ acknowledges takes at least eight to ten
years. See Complaint, at ¶ 15. The time and
expense required to establish the BayerStoneville combination as a viable and
effective partner for competing biotech trait
developers necessarily precludes any real
competition with Monsanto for a period of
time that is well outside of the two-year
window typically used by the federal
competition authorities to define effective
new entry under ¶ 12 of the 1992 Horizontal
Merger Guidelines, jointly issued by DOJ and
the Federal Trade Commission. In the
meantime, Monsanto will use its head start
in the development and distribution of cotton
biotech traits to its competitive advantage.
Furthermore, it is clear that DPL’s
technology, infrastructure, breeding
capabilities and expertise are significantly
superior to Stoneville’s. The PFJ does not
remedy the disparity by providing the
divested Stoneville with any of DPL’s
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breeding expertise, personnel, facilities or
development assets that the United States
acknowledged made DPL an attractive
development partner. See Complaint, at ¶ 26.
In this respect, the PFJ is inconsistent with
DOJ’s Policy Guide, which provides that
‘‘[a]n existing business entity should possess
not only all the physical assets, but also the
personnel, customer lists, information
systems, intangible assets, and management
infrastructure necessary for the efficient
production and distribution of the relevant
product.’’ See Policy Guide, at 12. Without
the breeding assets and personnel that have
made DPL the partner of choice for biotech
trait developers, a divested Stoneville cannot
replace DPL’s ability to bring to market
biotech traits that can compete with
Monsanto’s monopoly varieties.
In addition, Stoneville has been divested to
Bayer, a trait development competitor of
Monsanto. Because of this, Stoneville can
never duplicate DPL’s unique position as an
independent cotton seed company that can
use its successful and high-quality
germplasm to partner with several different
biotech companies to develop viable
competitive alternatives to Monsanto’s
monopolies in traits. Even if it were
technically possible for a rival trait company
to successfully develop a biotech trait that
could compete against a Monsanto trait, it
must have a seed vehicle with which to
partner to commercialize the trait and bring
it to market so that farmers could actually
benefit from having the choice of which trait
to buy. Stoneville will not have the
motivation, as DPL did, to partner with
outside trait developers since it is owned by
a trait development company, so there will
no longer be a feasible alternative to DPL’s
independence as a cottonseed company and
a trait development partner.
Even apart from the loss of an independent
cottonseed company, DOJ also implicitly
recognizes that a divested Stoneville is not
the equivalent of DPL by requiring Monsanto
to provide Stoneville access to 20 lines of
DPL germplasm. However, the availability of
20 lines of DPL germplasm does not ‘‘restore
competitive conditions the merger would
remove.’’ Policy Guide, at 4. The PFJ makes
clear that Stoneville’s access to those
germplasm lines is non-exclusive. See
Competitive Impact Statement, at ¶ III(A)(2).
Thus, even post-acquisition, Monsanto
retains the right to sell the most popular
seeds from those lines and even preclude
their use with non-Monsanto cotton biotech
traits. This also is inconsistent with DOJ’s
Policy Guide, which recognizes that
permitting a merged firm ‘‘to retain access to
the critical intangible assets may present a
significant competitive risk.’’ Policy Guide, at
16. Because the PFJ fails to enhance
Stoneville’s breeding capabilities, access to
such lines will not challenge Monsanto’s
monopoly position, even with respect to any
of those 20 lines.
B. Access to Identified Cotton Germplasm
Ignores the Evolving Nature of Biotech Traits
and Seeds
The PFJ’s requirement that Monsanto
provide access to certain lines of cotton
germplasm lines does not remedy the
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anticompetitive effects of the acquisition for
yet another reason. The PFJ ignores the
reality that elite germplasm is constantly
being improved upon to enhance the
effectiveness of the underlying traits to
address evolving plant, soil, and other
conditions that change over time. As a result,
the best germplasm today becomes obsolete
in a relatively short period of time. See
generally declining market shares of existing
germplasm lines as newer lines are
introduced in ‘‘Cotton Varieties Planted,
1999 Crop’’ through ‘‘Cotton Varieties
Planted, 2006 Crop,’’ USDA, Agricultural
Marketing Service—Cotton Program. Thus, to
stay competitive, cotton biotech trait
developers must have access to new and
improved lines of germplasm.
The availability of certain existing lines of
cotton germplasm cannot replace the need for
Monsanto’s competitors to have ongoing
access to improved germplasm. One of DPL’s
strengths has been its ability to continually
develop new lines of elite germplasm. Once
DPL falls captive to Monsanto’s control,
access by Monsanto’s competitors to DPL’s
next generation of germplasm will terminate.
With an overwhelming monopoly in biotech
traits, Monsanto will have no incentive or
obligation to make DPL’s next generation of
germplasm available to competitors. See
Complaint, at ¶¶ 16–17.
In addition, the 20 lines of cotton
germplasm that the PFJ licenses to Stoneville
constitute only a very small subset of DPL’s
extensive germplasm library. Some of those
lines are merely under development, and
there is no guarantee that they will be
commercially successful in the future.
Further, the PFJ does not provide the
divested Stoneville with any of DPL’s
facilities or personnel with expertise
handling those lines. Instead, it allows
Monsanto to retain access to those lines, as
well as the facilities and expertise DPL has
employed to develop them. Consequently,
the availability of a limited number of cotton
germplasm lines does not guarantee or
enhance Stoneville’s ability to effectively
compete against Monsanto.
V. The Acquisition Potentially Allows
Monsanto To Engage in Exclusionary
Business Practices
The acquisition potentially allows
Monsanto to engage in exclusionary
behavior, which could include a series of
acquisitions of independent seed companies
and germplasm providers to enhance its
monopoly position in both seeds and traits;
long-term, highly restrictive licensing
agreements that encourage the sale of
Monsanto’s biotech traits exclusively;
licensing restrictions that prevent
independent seed companies from combining
Monsanto biotech traits with non-Monsanto
traits; and bundling rebates on seeds, traits
and chemicals to exclude competitors from
retail distribution channels. These
restrictions potentially could stymie
innovation, limit product choices and result
in higher prices. With DPL under its control,
Monsanto will have the ability to foreclose
competing cotton biotech traits from entering
the cotton seed markets. Monsanto’s
monopolization of the cotton biotech trait
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market also may create an incentive to
impose supra-competitive technology fees for
seeds containing Monsanto’s traits, which
would eliminate any efficiencies farmers
otherwise would realize from the merger or
in a competitive cotton biotech trait market.
The Attorneys General are concerned that
the acquisition of DPL may permit Monsanto
to maintain and consolidate its monopoly
position in biotech traits. The lack of viable
competition in cotton traits, coupled with
Monsanto’s market power in the other seed
trait markets, compels a closer examination
of the potential anticompetitive effects of
Monsanto’s business practices in all markets.
VI. Conclusion
The PFJ fails to remedy the anticompetitive
effects of the acquisition in the markets for
cotton biotech traits. If approved in its
present form, the acquisition will further
cement Monsanto’s monopoly in those
markets with severe and unwarranted
consequences for farmers and consumers.
With Monsanto’s huge head start, biotech
trait developers will have no incentive to
expend the necessary research and
development costs that are required for the
successful entry of competing traits and
seeds. Current joint development efforts with
DPL will terminate or stagnate—eliminating
the only near-term opportunities for
meaningful competition in cotton—
innovation will be stifled, and cotton farmers
and consumers will suffer from the lack of
market choices and the imposition of supracompetitive product prices.
The adverse consequences of the
acquisition also will extend beyond cotton.
The loss of revenue that the acquisition will
cause in cotton will impact the ability of trait
developers to bring to market biotech traits
in other crops, such as corn and soybeans.
Research and development efforts
investigating traits in cotton that could be
developed and incorporated into other crops
now will be lost.
The PFJ fails to effectively restore
competition in the market for cotton biotech
traits, and should be rejected.
Respectfully Submitted,
Robert F. McDonnell,
Attorney General of Virginia, Office of the
Attorney General, 900 E. Main Street,
Richmond, VA 23219.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Dustin McDaniel,
Attorney General of Arkansas, Office of the
Attorney General, 323 Center Street, Suite
1100, Little Rock, AR 72201.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Joseph R. Biden, III,
Attorney General of Delaware, Office of the
Attorney General,820 N. French
Street,Wilmington, DE 19801.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
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18673
On Behalf of the Commonwealth of
Kentucky
Respectfully submitted,
Gregory D. Stumbo,
Attorney General, Office of the Attorney
General, 700 Capitol Avenue, Suite 118,
Frankfort, Kentucky 40601, (502) 696–5300.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Douglas F. Gansler,
Attorney General of Maryland, Office of the
Attorney General, 200 St. Paul Place,
Baltimore, Maryland 21202.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Gary K. King,
Attorney General of New Mexico, Office of
the Attorney General, 408 Galisteo Street,
Santa Fe, New Mexico 87501.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Sincerely,
Roy Cooper,
Attorney General of North Carolina, Office of
the Attorney General, 114 W. Edenton Street,
9001 Mail Service Center, Raleigh, NC
27699–9001.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Marc Dann,
Attorney General of Ohio, Office of the
Attorney General, 30 East Broad Street,
Columbus, OH 43215.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
W.A. Drew Edmondson,
Oklahoma Attorney General, 313 NE. 21st
Street, Oklahoma City, OK 73105.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Patrick C. Lynch,
Attorney General of Rhode Island,
Department of the Attorney General, 150
South Main Street, Providence, RI 02903.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Robert E. Cooper, Jr.,
Attorney General of Tennessee, Office of the
Attorney General and Reporter, 425 Fifth
Avenue North, Nashville, TN 37202.
Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Mark L. Shurtleff,
Attorney General of Utah, Office of the
Attorney General of Utah, State Capitol
Complex, Suite E320, Salt Lake City, Utah
84114–2320.
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Comments of the Attorneys General on
Proposed Final Judgment in United States v.
Monsanto Company, et al.
Respectfully submitted,
Darrell v. McGraw, Jr.,
Attorney General of West Virginia, Office of
the Attorney General, State Capitol,
Charleston, WV 25305.
August 20, 2007.
Ms. Donna N. Kooperstein, Chief,
Transportation, Energy & Agriculture
Section, Antitrust Division, United States
Department of Justice, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530.
Re: United States v. Monsanto Company, et
al., Case No. 1:07-cv.00992.
Dear Ms. Kooperstein:
Preserving competition in agriculture
biotechnology markets is essential for greater
choice and lower costs to Texas farmers and
consumers. The lack of competition in these
markets hurts farmers and consumers, who
wind up paying higher prices. Today, Texas
farmers and consumers are already struggling
in the face of rapid agricultural consolidation
and concentration. The latest example of this
dangerous trend is Monsanto’s acquisition of
Delta & Pine Land, which promises to strike
a crushing blow to the Texas cotton industry.
It is for this reason that we submit this letter
and urge the court to reject the Department
of Justice’s ‘‘Proposed Final Judgment’’
regarding this acquisition.
Cotton is a critical thread in the fabric of
the Texas and national economy. Texas is the
#1 producer of cotton in the United States.
Each year Texas farmers plant over 6 million
acres of cotton seed—the 2006 crop had a
value of over $1.4 billion. Cotton growers in
Texas and throughout the country are
increasingly reliant on biotechnology, which
allows farmers to grow cotton resistant to
certain insects and tolerant of certain
herbicides. In 2007, 87% of cotton acreage in
the U.S. was planted with biotech seed
varieties. See United States Department of
Agriculture, U.S. Farmers Plant Largest Corn
Crop in 63 Years (https://www.nass.usda.gov/
Newsroom/2007/06_29_2007.asp).
Monsanto currently enjoys monopolies in
cotton traits. Monsanto controls
approximately 96% of herbicide tolerant
cotton traits and approximately 99% of insect
resistant cotton traits. Monsanto has already
used its dominant position to dramatically
increase the prices farmers are paying for
these traits. This ultimately leads to
consumers paying higher prices for products
containing cotton.
If Monsanto is permitted to acquire Delta
& Pine Land, the largest cotton seed company
in the world, there will be even more
anticompetitive consequences for Texas
cotton farmers and consumers throughout the
country. First, Monsanto will shut out all
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competition in cotton traits because all of the
competing cotton traits are being developed
with Delta & Pine Land, which Monsanto
will now control. Second, once it acquires
Delta & Pine Land, Monsanto will control
over 50% of the national cotton seed market
and even higher percentages in key cotton
growing areas such as the South Central and
Southeast regions of the U.S. Given its
dominance in cotton traits and cotton seeds,
Monsanto will be able to effectively kill
competition in cotton and leave farmers and
consumers with no choice except the
monopolist Monsanto’s products.
The remedy devised by the Department of
Justice to remedy the clear anticompetitive
effects of acquisition will do little to protect
farmers and consumers. Requiring Monsanto
to divest a weak cotton seed company and
approximately 20 lines of germplasm is
entirely inadequate to replace the loss of an
independent, thriving competitor to
Monsanto in the development of
biotechnology traits and a critical
distribution channel for those traits.
With its acquisition of Delta & Pine Land,
Monsanto is poised to enhance its position as
an agricultural titan. This deal will
significantly diminish competition and stifle
innovation in the cotton biotech seed trait
markets and cotton seed market, leading to
higher prices for farmers and consumers.
Because the Department of Justice’s proposed
final judgment will not restore much needed
competition in cotton, it should be rejected.
Sincerely,
Heethe Burleson, On Behalf of the Associated
Cotton Growers, Crosbyton, Texas.
Arvil Campbell, For the Texas Farmers
Union.
Jeff Turner, On Behalf of the Willacy Co-op
Gin, Raymondville, Texas.
Chris Breedlove, For Olton Co-Op Gin, Olton,
Texas.
Glen Campbell, On Behalf of Lorenzo CoOperative Gins, Inc., Lorenzo, Texas.
Johnny Shepard, On Behalf of Citizens Co-Op
Gin, Shallowater, Texas.
Randy Arnold, Founder, High Plains Cotton
Growers Association, Crosbyton, Texas.
Jonathan Hernandez, For the Texas Oaks
Neighborhood Association, Austin, Texas.
Lynda Rodriguez, For the South San Antonio
Chamber of Commerce, San Antonio,
Texas.
Benny Robertson, Seed and Feed Supplier,
Star Feed and Seed Supply, Spur, Texas.
Larry Thornbough, On Behalf of Trans-Pecos
Cotton Association, Coyanosa, Texas.
Sid Brough, On Behalf of EdCot Co-Op Gin,
Odem, Texas.
Glen Ivens, On Behalf of Cotton Center
Farmers Co-Op Gin, Cotton Center, Texas.
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Tom Byars, On Behalf of the Lockney Co-Op
Gin, Lockney, Texas.
Bobby Moss, For the Fiber-Tex Co-Op Gin,
Brownfield, Texas.
Charles Macha, United Cotton Growers,
Levelland, Texas.
Glenn Klesel, On Behalf of Posey Gin, Slaton,
Texas.
Scott LaRue, For the Blackland Prairie Gin,
Deport, Texas.
August 27, 2007
Ms. Donna N. Kooperstein, Chief,
Transportation, Energy & Agriculture
Section, Antitrust Division, United States
Department of Justice, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530.
Re: United States v. Monsanto Company, et
al, Case No. 1:07–cv–00992.
Dear Ms. Kooperstein:
Monsanto’s acquisition of Delta & Pine
Laud promises to stifle innovation, limit
choice for Wisconsin farmers and consumers,
and ultimately drive prices higher.
The agricultural sector is already highly
concentrated, including biotechnology traits
where one company—Monsanto—controls
monopoly trait shares in cotton, corn, and
soybeans. By acquiring Delta & Pine Land,
Monsanto is effectively removing its
principal cotton trait competitor and
positioning itself to limit farmer choice to
Monsanto branded traits.
In addition, by acquiring Delta & Pine Land
and its 50% market share of the cotton seed
market, Monsanto will control not only
cotton traits but cotton seeds. Permitting one
company to be the dominant company in
cotton traits and cotton seeds is just bad
policy and increases the vulnerability of
farmers and consumers by subjecting them to
the whims of one company.
The Department of Justice’s proposed
consent decree regarding this acquisition
offers little hope in terms of greater
competition and increased choice for
Wisconsin farmers and consumers. The
consent decree, which requires Monsanto to
divest Stoneville (with its limited market
share) and a few lines of germplasm, does not
even come close to replacing an independent
Delta & Pine Land, and is inadequate to
restore competition. Wisconsin Farmers
Union therefore urges the Department of
Justice to withdraw its consent decree or, if
it does not do so, for the court to reject it.
Sincerely,
Susan Beitlich,
President.
[FR Doc. E8–5578 Filed 4–3–08; 8:45 am]
BILLING CODE 4410–11–M
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[Federal Register Volume 73, Number 66 (Friday, April 4, 2008)]
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[FR Doc No: E8-5578]
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Part II
Department of Justice
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Antitrust Division
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United States v. Monsanto Company and Delta and Pine Land Company;
Public Comments and Response on Proposed Final Judgment; Notice
Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 /
Notices
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Monsanto Company and Delta and Pine Land
Company; Public Comments and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes the comments received on
the proposed Final Judgment in United States v. Monsanto Company and
Delta and Pine Land Company, No. 1:07-cv-00992, filed in the United
States District Court for the District of Columbia on May 31, 2007, and
the United States's response to those comments.
Copies of the comments and the United States's response to the
comments are available for inspection at the Department of Justice
Antitrust Division, 325 Seventh Street, NW., Room 215, Washington, DC
20530, (202) 514-2481, and at the Office of the Clerk of the United
States District Court for the District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001. Copies of any of these materials may
be obtained upon request and payment of a copying fee.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
[Civil Action No.: 1:07-cv-00992]
United States of America, Plaintiff, v. Monsanto Company and Delta and
Pine Land Company, Defendants. Hon. Ricardo M. Urbina
Plaintiff United States's Response to Public Comments
Table of Contents
Plaintiff United States's Response to Public Comments
I. Background
A. The United States's Investigation of the Transaction
B. The Traited Cottonseed Markets
C. The Competitive Effects of the Transaction
D. The Proposed Remedy
II. Developments Since the Filing of the Complaint
A. Approval of Acquirers of the Enhanced Stoneville Assets
B. VipCot Assets Offered to Syngenta
C. Third Party License Modifications
D. Filing of Public Comments
III. The Standards Governing the Court's Public Interest
Determination
A. The Appropriate Legal Standard
B. The Appropriate Inquiry Is Whether the Remedy Preserves
Competition, Not Whether It Replicates DPL
IV. Response to Comments Criticizing the Sufficiency of the Remedy
A. Divestiture of the Stoneville Business Unit and Monsanto
Germplasm Provide the Acquirer a Firm Foundation on Which to Compete
in the MidSouth and Southeast Markets
1. Stoneville Infrastructure
2. Monsanto/Stoneville Germplasm
a. The Breeding Process
b. Stoneville Germplasm
c. Additional Monsanto Germplasm
i. Advanced Exotic Yield Lines
ii. MAB Populations
B. Additional DPL Germplasm Provides Important and Meaningful
Value
1. The DPL germplasm is of high quality
2. The acquirer will be able to use this germplasm effectively
3. Monsanto/DPL's use of the germplasm does not diminish its
value to the acquirer and provides farmers continued benefits
C. The Remedy Preserves Incentives and Opportunities for
Effective Traited Cottonseed and Trait Development Competition
1. Syngenta will be able to effectively use the VipCot Assets
2. The remedy will preserve opportunities for trait developers
to market non-Monsanto traits in competitive cottonseed
3. The remedy should not--and does not--guarantee the
introduction of DuPont's OptimumGat trait
4. The remedy will preserve the number of ``platforms'' for
trait development that existed pre-merger
V. Response to Comments That the Remedy Is Not Workable
A. The Divestitures and License Changes Are One-Time Events, Not
Ongoing Behavioral Remedies
B. Monitoring Compliance With the Remedy Will Not Unduly Burden
the United States or the Court
VI. Response to Comments That Raise Issues Beyond the Scope of the
Court's Review
A. Crops Other Than Cotton
B. Conventional Cottonseed
C. The Southwest and West Traited Cottonseed Markets
D. Prices for Cottonseed Sold for Livestock Feed
E. Alleged Monsanto Exclusionary Business Practices
VII. Conclusion
Plaintiff United States Response To Public Comments
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the
United States hereby responds to the public comments received regarding
the proposed Final Judgment in this case. After careful consideration
of the comments, the United States continues to believe that the
proposed Final Judgment will provide an effective and appropriate
remedy for the antitrust violation alleged in the Complaint. The United
States will move the Court for entry of the proposed Final Judgment
after the public comments and this Response have been published in the
Federal Register, pursuant to 15 U.S.C. 16(d).
On May 31, 2007, the United States filed the Complaint in this
matter alleging that the proposed acquisition of Delta and Pine Land
Company (``DPL'') by Monsanto Company (``Monsanto'') would violate
Section 7 of the Clayton Act, 15 U.S.C. 18. Simultaneously with the
filing of the Complaint, the United States filed the proposed Final
Judgment and a Stipulation signed by plaintiff and defendants
consenting to the entry of the proposed Final Judgment after compliance
with the requirements of the Tunney Act. Pursuant to those
requirements, the United States filed a Competitive Impact Statement
(``CIS'') in this Court on May 31, 2007; published the proposed Final
Judgment and CIS in the Federal Register on June 15, 2007, see United
States v. Monsanto Co. and Delta and Pine Land Co., 72 Fed. Reg. 33336-
01, 2007 WL 1708314; and published summaries of the terms of the
proposed Final Judgment and CIS, together with directions for the
submission of written comments relating to the proposed Final Judgment,
in The Washington Post for seven days beginning on June 28, 2007 and
ending on July 4, 2007. The 60-day period for public comments ended on
August 27, 2007, and eleven comments were received as described below
and are attached hereto.
I. Background
A. The United States Investigation of the Transaction
On August 14, 2006, Monsanto entered into an agreement to acquire
DPL for approximately $1.5 billion. Over the following nine and a half
months, the United States conducted an extensive, detailed
investigation into the competitive effects of the proposed transaction.
As part of this investigation, the United States issued Second Requests
to the merging parties, as well as Civil Investigative Demands to all
of the major cottonseed companies and cottonseed trait developers. The
United States received and considered more than a million pages of
responsive material and deposed relevant Monsanto and DPL executives.
More than 125 interviews were conducted with customers, competitors,
and others with knowledge of the industry and competitive conditions,
including national and regional agricultural supply companies, grower
organization representatives, USDA cotton experts, and agricultural
economists and academics. The United States met repeatedly with
concerned parties,
[[Page 18613]]
including DuPont, one of the commenters, analyzing their allegations
and submissions.\1\
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\1\ The United States also spoke multiple times with
representatives from the offices of the Attorneys General of 27
states interested in the progress of the United States
investigation, including representatives of 16 of the 17 states
where cotton is grown in the United States (Georgia's office elected
not to participate). In this proceeding, thirteen states,
representing less than 20% of U.S. cotton production, have signed
onto a comment (discussed infra) questioning the proposed Final
Judgment. Of the states signing the comment, Delaware, Kentucky,
Rhode Island, Utah and West Virginia elected not to participate in
any of the communications between the United States and states's
representatives during the United States investigation. The comment
does not explain either the scope of the investigation, if any,
those non-participating states undertook to reach their conclusions
or the reasons why none of the commenting states has initiated
independent legal action to enjoin the transaction.
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In its investigation, the United States considered the potential
competitive effects of this transaction on numerous products and
geographic areas. For several of these, the United States concluded
that the proposed merger was unlikely to reduce competition.\2\ As the
Complaint alleges, the transaction did, however, threaten competition
with respect to traited cottonseed sales in two geographic regions--the
MidSouth and the Southeast.\3\
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\2\ Indeed, the United States concluded that, viewed as a whole,
the transaction was likely to create some efficiencies that could
benefit consumers. A Monsanto-DPL combination brings together firms
with complementary strengths and assets. Monsanto has proficiency in
transgenic trait development, and DPL had expertise in cottonseed
breeding. Merging allows the two programs to operate in tandem.
Through the integration of trait development and cottonseed
breeding, traited cottonseed could reach consumers faster and at
lower cost.
\3\ See Complaint at 12-13.
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B. The Traited Cottonseed Markets
Most cottonseed sold today contains ``transgenic traits''--genetic
material from other organisms that is inserted into the cottonseed
germplasm to give the cotton plant desirable characteristics. Two types
of transgenic traits currently are available: (1) Herbicide tolerance
traits, such as Monsanto's ``Roundup Ready'' and recently introduced
``Roundup Ready Flex'' (``Flex''), which make the cotton plant able to
withstand spraying with particular herbicides, and (2) insect
resistance traits, such as Monsanto's ``Bollgard'' and new ``Bollgard
II,'' which make the cotton plant toxic to certain pests.
Cotton farmers overwhelmingly prefer traited seeds because their
use significantly reduces labor and input costs. In 2006, farmers
planted about 87% of the cotton acres in the U.S. with traited seeds.
USDA Cotton Varieties Planted 2006 Crop Report. Most traited cottonseed
is ``stacked'' to include both herbicide-tolerant and insect-resistant
traits. In the Southeast and MidSouth, 90.8% and 89.3% (respectively)
of the seed sold in 2006 included both types of traits, and farmers now
rarely purchase seed that contains only an insect-resistant trait.\4\
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\4\ Today, traited cottonseeds that contain only insect
resistance account for less than 2% of total traited acres.
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At the time the Complaint was filed, DPL and Monsanto, via its
Stoneville business unit, were significant producers of traited
cottonseed in the United States. Indeed, DPL and Stoneville together
accounted for over 90% of traited cottonseed sales in the MidSouth and
Southeast regions of the United States where cotton farmers place the
most value on insect-resistant and herbicide-tolerant traits. That
vigorous competition would have been lost as a result of the
transaction.
As the Complaint alleges, Monsanto is currently the dominant
provider of insect-resistant and herbicide-tolerant traits for
cotton.\5\ Monsanto's insect-resistant and herbicide-tolerant traits
accounted for over 96% of the transgenic traits in cottonseed
nationwide in 2006; over 98% of the traited cottonseed sold in 2006 in
the MidSouth and Southeast contained Monsanto's traits. Indeed,
Monsanto's traits are the only traits found in any of the traited
cottonseed DPL sold prior to the merger.
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\5\ See Complaint at 2-3.
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DPL was, however, positioning itself to move away from Monsanto's
traits by exploring options with several trait producers that were
developing insect-resistant and herbicide-tolerant cotton traits. The
most advanced of these efforts was work with Syngenta to introduce
VipCot--an insect-resistant trait that would compete with Monsanto's
Bollgard traits. DPL's work with Syngenta had reached a stage where DPL
had successfully introduced VipCot into 42 of its elite breeding
lines.\6\ DPL had already stacked five of the VipCot traited lines with
Flex prior to the merger and anticipated commercializing those lines in
approximately 2009. Following DPL's breeding protocols, DPL anticipated
that stacked versions of the other 37 VipCot lines would have been
ready for commercialization sometime between 2012 through 2016.
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\6\ As discussed below, the relief provided by the proposed
Final Judgment calls for divestiture of 43 DPL lines containing
VipCot. The 43rd line included in the VipCot Assets is a line that
DPL acquired from Syngenta in 2006 that already contained VipCot.
---------------------------------------------------------------------------
DPL's efforts with respect to a non-Monsanto herbicide-tolerant
trait were at a more preliminary stage. In the summer of 2006, DPL
entered into a licensing agreement with DuPont to introduce seed with
OptimumGat, an herbicide-tolerant trait that would compete with
Monsanto's Flex trait. At the time the Complaint was filed, DPL had not
successfully introduced OptimumGat into any of its elite breeding
lines. Rather, development work to advance the OptimumGat project
remained primarily with DuPont. As a backup to the OptimumGat venture,
DPL had also entered into agreements to test two other herbicide-
tolerant traits that would compete with Monsanto's Flex, including a
trait being developed by Bayer called Glytol.
Using VipCot in combination with one of the three herbicide
tolerance options that DPL was exploring, DPL envisioned bringing a
limited quantity of cottonseed with a non-Monsanto stack of insect-
resistant and herbicide-tolerant traits to market as early as 2012. But
in light of standard breeding and testing time requirements, it likely
would have taken DPL several years longer to entirely phase out
Monsanto's traits. Equally important, DPL's ability or willingness to
switch totally away from Monsanto's traits was dependent on several
assumptions--namely that farmers were satisfied with VipCot's
performance versus Monsanto's Bollgard traits, and that DPL found a
successful non-Monsanto herbicide-tolerant trait in the next few years.
As the Complaint further alleges, Monsanto knew that DPL was
working with other trait companies and feared that a possible outcome
of those partnerships would be that DPL ceased offering Monsanto's
traits in its cottonseeds.\7\ Monsanto thus had begun to take steps to
strengthen its own proprietary seed platform to support its cottonseed
trait business. In fact, the United States's investigation revealed
that Monsanto was making a concerted effort to grow its share of
traited cottonseed sales.
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\7\ See Complaint at 9-10.
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Foremost among these efforts was Monsanto's acquisition in 2005 of
Stoneville, which had approximately 15% of the market for traited
cottonseed nationwide and a 33% and 9% share of the MidSouth and
Southeast markets, respectively. After acquiring Stoneville, Monsanto
made significant investments in the company, including: Investing in
upgrades of new buildings and
[[Page 18614]]
greenhouses, lab equipment, ginning and delinting equipment, and
warehouse and equipment storage; hiring additional employees for the
breeding facilities, particularly at its Maricopa, Arizona, breeding
facility which targeted creating varieties for the Southeast; improving
Stoneville's manufacturing facilities, such as adding bagging, dust
collection, and handling equipment; and improving Stoneville's
molecular marker capabilities and library.
Monsanto also had been engaging in other efforts to develop
proprietary cotton germplasm. Those included (a) researching exotic
strains of cottonseed (which the proposed Final Judgment refers to as
the ``Advanced Exotic Yield Lines''), (b) mapping molecular markers for
select breeding crosses that would enable Monsanto to expedite
identification and further breeding of the most promising progeny from
those crosses (which the proposed Final Judgment refers to as the ``MAB
Populations''), and (c) establishing the Cotton States program, through
which Monsanto obtains licenses to promising germplasm from university
breeding programs and private breeders, and, after introducing traits,
licenses the resulting traited cottonseed varieties to small cottonseed
companies and distributors seeking to sell traited cottonseed under
their own brands.
Monsanto's internal business plans projected that as a result of
these efforts, Stoneville's market share in the Southeast and MidSouth
would grow substantially over the next few years. Indeed, Monsanto
projected that Stoneville, with Monsanto traits, and DPL, with non-
Monsanto traits, would have roughly equal market shares by
approximately 2015, with Dow and Bayer traited seeds holding much
smaller shares. Accordingly, if unremedied, the combination of Monsanto
and DPL would have combined the two largest traited cottonseed options
for farmers in the MidSouth and Southeast.\8\
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\8\ The United States's investigation found that Bayer's efforts
prior to the merger to develop germplasm for the Southeast and
MidSouth, if successful, would not likely bear fruit any sooner than
2016. Given the early stage of Bayer's breeding efforts in those
geographic areas, the United States did not rely on this as a source
of potential entry. In contrast, Dow has developed some varieties
suitable for the MidSouth and potentially the Southeast, which will
enter the market some time in the 2008 to 2011 time frame. However,
given limitations in its current trait licensing agreements with
Monsanto, it was unclear that entry of Dow varieties would have a
significant competitive effect in those markets.
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C. The Competitive Effects of the Transaction
Based on this evidence, the United States determined that the
merger of the two companies would likely lessen competition in the
near, medium and long term. In the near term, absent the transaction,
Monsanto's efforts to increase Stoneville share in the MidSouth and
Southeast would give farmers more choices and could lead to lower
prices.\9\ Also in the near term (beginning in approximately 2009), the
entry of DPL seed containing Syngenta's VipCot trait stacked with
Monsanto's Flex trait could have offered farmers a new insect-resistant
trait option and put some pressure on the price for insect-resistant
traits.\10\ The United States's investigation revealed that the most
significant competitive effect of the transaction likely would have
occurred in the medium term (beginning in approximately 2012) when DPL
would first be able to offer cottonseed stacked solely with non-
Monsanto traits and farmers in the MidSouth and Southeast would benefit
from the emergence of competition between two germplasm/trait
platforms, namely, Stoneville seed with Monsanto traits and DPL seed
with VipCot and a non-Monsanto herbicide-tolerant trait.
---------------------------------------------------------------------------
\9\ With its dominance in traits, Monsanto might have recaptured
any seed price reductions through higher trait fees.
\10\ Because DPL would have had to combine VipCot with a
Monsanto herbicide-tolerant trait, Monsanto might have recaptured
any reduction in fees for an insect-resistant trait through
increases in fees for Monsanto's herbicide-tolerant trait.
---------------------------------------------------------------------------
The United States also found that Monsanto's acquisition of DPL, if
unremedied, would threaten longer term harm by deterring or delaying
the entry of new types of cotton traits in the MidSouth and
Southeast.\11\ Cotton trait developers would not have a seed partner
independent of Monsanto with seeds suitable for the MidSouth and
Southeast. Given the significance of the MidSouth and Southeast cotton
growing regions, the inability to reach farmers in these regions would
reduce potential returns from investments in developing cotton traits.
And even if other potential sources of revenue for trait developers
were sufficient to support continued investment in cotton trait
development,\12\ the benefits of these investments would not reach
farmers in the MidSouth and Southeast.
---------------------------------------------------------------------------
\11\ In addition to potentially new insect resistant and
herbicide tolerant traits, there is current transgenic trait
research regarding, among other things, drought tolerance, nematode
resistance and yield.
\12\ These other revenue opportunities arise from the fact that
(a) many potential cotton traits have applications across other
crops, including corn and soy, that offer significantly more revenue
potential than cotton, (b) the demand for traited cottonseed outside
the United States is significant and growing, and (c) there is
substantial cotton acreage within the United States in regions other
than the MidSouth and Southeast, namely the Southwest and West.
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D. The Proposed Remedy
The proposed Final Judgment remedies the anticompetitive effects of
the acquisition alleged in the Complaint-the elimination of competition
between DPL and Monsanto for the development, breeding and sale of
traited cottonseed and the elimination of DPL as a partner independent
of Monsanto for developers of traits that would compete against
Monsanto-in three principal ways:
First, the proposed Final Judgment requires Monsanto to divest the
Enhanced Stoneville Assets to an acquirer who is capable of using the
assets to compete effectively. The Enhanced Stoneville Assets include
Stoneville's U.S. cottonseed business, key cottonseed lines developed
by DPL for the MidSouth and Southeast, and additional Monsanto cotton
breeding assets.
The Enhanced Stoneville Assets provide the acquirer what it needs
to continue Monsanto's efforts to increase Stoneville's share and be an
effective ongoing seed competitor in the near term and beyond.
Moreover, the acquirer will be able to use these assets, on its own or
in partnership with other trait developers, to breed and commercialize
high quality cottonseed for the MidSouth and Southeast with non-
Monsanto traits, preserving medium and longer-term competition that
would otherwise have been lost as a result of the merger.
Second, the proposed Final Judgment requires Monsanto to divest the
VipCot assets to Syngenta and to allow Syngenta to breed with the
VipCot traited lines. This will preserve the potential for near term
benefits from VipCot entry, as well as medium and longer term benefits
from stacking VipCot with non-Monsanto herbicide traits (including
other nascent traits) and developing improved germplasm.
Third, the proposed Final Judgment requires Monsanto to modify two
sets of licenses to eliminate restrictions on the use of non-Monsanto
traits: (1) Its cottonseed trait licenses with seed companies to permit
licensees to breed and sell, without penalty, cottonseed containing
non-Monsanto traits and cottonseed containing both licensed Monsanto
traits and non-Monsanto traits, and (2) its Cotton States licenses to
remove any provision that allows Monsanto to terminate the license if
the
[[Page 18615]]
licensee sells cottonseed containing other traits.
In the United States's judgment, the asset divestitures and license
modifications required by the proposed Final Judgment remedy the
competitive harms identified in the Complaint.
II. Developments Since the Filing of the Complaint
The United States filed the Complaint and Proposed Final Judgment
on May 31, 2007. The Court entered the Hold Separate and Preservation
of Assets Stipulation and Order on June 1, 2007, and Monsanto completed
its acquisition of DPL on that same date. Since the filing of the
Complaint, the following events have occurred in furtherance of the
requirements set forth in the proposed Final Judgment and the Tunney
Act:
A. Approval of Acquirers of the Enhanced Stoneville Assets
Section IV.E. of the proposed Final Judgment requires defendants to
divest the Enhanced Stoneville Assets to an acquirer acceptable to the
United States. The acquirer must have a credible commitment to the
traited cottonseed market and have the intent and capability of
competing effectively. Shortly after acquiring DPL, Monsanto proffered
Bayer CropScience (``Bayer'') and Americot Inc. (``Americot'') to the
United States as potential acquirers of the Enhanced Stoneville Assets,
with Bayer set to acquire all of the divestiture package except for
certain assets relating to the Southwest market which would be sold to
Americot. The United States evaluated the proposed acquirers, including
analyzing the terms of the proposed purchase agreements, the terms of
other recent contracts between Monsanto and Bayer, the market presence
of both proposed acquirers, and other information bearing upon the
acquirers' capabilities to use the divested assets effectively in
competition with Monsanto/DPL.\13\
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\13\ The United States was already familiar with both Bayer and
Americot's existing U.S. cottonseed operations, having interviewed
representatives of these companies on numerous occasions and
reviewed business documents provided by both companies during the
Monsanto/DPL investigation.
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Bayer proposed to purchase the bulk of the Enhanced Stoneville
Assets for $310 million. Its commitment to the cottonseed market is
demonstrated by, among other things, its successful entry into the
Southwest cottonseed market under the Fibermax and AFD brands.\14\
Bayer's growth in this market has been impressive; it entered the
Southwest market in 1999 and, by 2006, had a significant share of seed
sales in that region and had displaced DPL as the market leader. In
addition to cottonseed sales, Bayer has had an active cottonseed trait
development program, which has resulted in the marketplace introduction
of its Liberty Link herbicide-tolerant trait.\15\ In addition to these
cottonseed efforts, Bayer also operates one of the world's largest crop
protection and agricultural chemical companies, providing it ready
access to agricultural distribution channels in the MidSouth and
Southeast as well as pesticide, herbicide, and seed treatment products
to complement its cottonseed offerings.
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\14\ Bayer's willingness to commit such a large amount of
capital to acquiring the assets also tends to indicate Bayer's
interest in using the Enhanced Stoneville Assets to create a viable
competitor to Monsanto/DPL.
\15\ Liberty Link makes cotton tolerant to glufosinate
herbicides and is only available in Bayer's FiberMax cottonseeds,
which are primarily used in the Southwest where they perform well.
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Despite these strengths, Bayer has not been successful in
cottonseed sales in the MidSouth and Southeast, largely as a result of
inferior germplasm for those regions. Acquiring the Enhanced Stoneville
Assets will enable Bayer to become a more effective competitor in the
MidSouth and Southeast \16\ by giving Bayer high-quality germplasm
specifically targeted toward the regions' growing conditions, breeding
stations focused on developing varieties for those regions, and
experienced personnel.\17\
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\16\ Upon acquiring Stoneville, Bayer publicly noted, ``[t]he
new germplasm and the geographic reach of the Stoneville business
East of Texas ideally complement Bayer's cotton seed and trait
business.'' See May 31, 2007 press release, ``Bayer CropScience
agrees to acquire U.S. cotton seed company Stoneville for US-$310
million,'' available at <https://www.bayercropscience.com/bayer/
cropscience/cscms.nsf/id/20070529_EN?open&ccm=400>.
\17\ In its submitted comments, DuPont specifically questions
Bayer's ability to compete in the MidSouth and Southeast, citing the
fact that Bayer had not successfully penetrated those markets in the
past. DuPont Comments at 18. See also AAI Comments at 16. However,
DuPont's claim merely highlights Bayer's prior difficulty in
accessing or developing competitive germplasm for these regions,
rather than speaking to Bayer's ability to succeed once it has such
germplasm. That Bayer can fully succeed when it has access to
competitive germplasm is well documented by its successful entry in
the Southwest market.
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To avoid creating any competitive issue in the Southwest where
Bayer is strong, Bayer did not acquire that portion of the Enhanced
Stoneville Assets best suited for producing traited cottonseed for the
Southwest region of the United States--i.e., the assets related to
Stoneville's NexGen brand of cottonseed.\18\ Those assets, which
include cottonseed lines and a dedicated breeding program targeting the
Southwest, generated over $16 million in sales for Stoneville in 2006,
and Monsanto projected they would generate $36 million in sales by
2010. Americot, a regional cottonseed company founded in 1987 that
sells seed predominantly in west Texas, acquired the NexGen assets for
just over $6 million. With a recently upgraded breeding facility
dedicated to developing lines for the Southwest, Americot is well
positioned to use the NexGen assets effectively.
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\18\ Stoneville started its NexGen germplasm program to develop
cottonseed adapted to growing conditions in the Southwest growing
region. Bayer's Fibermax and AFD brands also have a significant
presence in this region.
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Based on analysis of these factors, the United States determined
that divestiture of the Enhanced Stoneville Assets to Bayer and
Americot satisfied the objectives of the proposed Final Judgment and
approved the proposed acquirers. Monsanto divested the Enhanced
Stoneville Assets on June 19, 2007.\19\
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\19\ The sale of divestiture assets during the pendency of the
Tunney Act review of a proposed final judgment is consistent with
the United States's standard practice, as is permitting closing of
the transaction challenged in the Complaint. The materials filed
with the Complaint included a Hold Separate and Preservation of
Assets Stipulation, requiring the parties to maintain certain assets
separate after the close of the merger (in this instance, DPL's
assets) until the United States was assured that the acquirer or
acquirers proposed by Monsanto for the Enhanced Stoneville Assets
would meet the standards set forth in the proposed Final Judgment
(i.e., the acquirer was capable of operating a viable cottonseed
business using the divested assets). This procedural setting allowed
Monsanto and DPL to close their merger shortly after the Complaint
and Proposed Final Judgment were filed and to expeditiously complete
the sale of the Enhanced Stoneville Assets to Bayer and Americot,
thereby ensuring that neither the Enhanced Stoneville Assets nor DPL
were held in competitive limbo during the pendency of the Court's
review.
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B. VipCot Assets Offered to Syngenta
Section V of the proposed Final Judgment requires Monsanto to offer
certain DPL cottonseed lines containing Syngenta's traits (the ``VipCot
Assets'') to Syngenta. Under the proposed Final Judgment, Monsanto
cannot satisfy the required divestiture of the VipCot Assets without
the United States first approving the terms of the licenses pursuant to
which Monsanto offers Syngenta the assets. Since May 31, 2007, the
United States had numerous discussions with Monsanto and Syngenta
regarding the terms of these licenses. On August 27, 2007, Monsanto and
Syngenta entered into an interim Material Transfer and Use Agreement to
facilitate transfer of VipCot traited cottonseed to Syngenta for
further development prior to Monsanto providing final licenses that
meet the
[[Page 18616]]
terms of the proposed Final Judgment. Pursuant to that agreement,
Monsanto delivered to Syngenta certain seeds that the proposed Final
Judgment requires Monsanto to offer to Syngenta. After obtaining
approval from the United States, Monsanto, on November 27, 2007,
offered to Syngenta the licenses required by the proposed Final
Judgment.
C. Third Party License Modifications
Section VI of the proposed Final Judgment requires Monsanto to
revise certain third-party cottonseed licenses and gives the United
States sole discretion to approve the proposed revisions. The United
States engaged in continuing negotiations with Monsanto to ensure that
the revisions satisfied the terms of the proposed Final Judgment. On
November 15, 2007, Monsanto, pursuant to Section VI.B. of the proposed
Final Judgment, provided to the United States for its approval copies
of the modified licenses Monsanto intended to offer to third party seed
companies; the United States approved the modified licenses on November
20, 2007. Monsanto then provided to the licensees the offers containing
the modified license language. The offers remain open until March 31,
2008.
D. Filing of Public Comments
During the 60-day public comment period called for by the Tunney
Act, the United States received comments from the following eleven
organizations and groups: the American Antitrust Institute (``AAI'');
Attorneys General of Virginia, Arkansas, Delaware, Kentucky, Maryland,
New Mexico, North Carolina, Ohio, Oklahoma, Rhode Island, Tennessee,
Utah, and West Virginia (the ``States''); California Consumers United
(``CCU''); E.I. du Pont de Nemours & Co. (``DuPont''; the Illinois
Stewardship Alliance (``ISA''); the International Center for Technology
Assessment/Food Safety (``ICTA''); a comment signed by the president of
Plains Justice, the president of the Women, Food, and Agriculture
Network, and the president of the Iowa Farmers Union (``Plains
Justice''); a comment signed by a group of Texas cotton gins and other
cotton based associations (``Texas Cotton Associations''); the Ohio
Farmers Union (``OFU''); the Organization for Competitive Markets
(``OCM''); and the Wisconsin Farmers Union (``WFU'').
The criticisms offered by the Commenters generally fall into four
areas: (1) The appropriate standard of review; (2) the sufficiency of
the divestiture to preserve competition in the relevant markets; (3)
the workability of the remedy; and (4) purported competitive harms not
alleged in the Complaint. Upon careful review, the United States
believes that nothing in the comments warrants any changes to the
proposed Final Judgment or is sufficient to suggest that entry of the
proposed Final Judgment is not in the public interest. We address these
issues below and explain why the criticisms raised in the comments are
not valid.
III. The Standards Governing the Court's Public Interest Determination
A. The Appropriate Legal Standard
As discussed in detail in the Competitive Impact Statement (at 23-
27), the Court, in making the public interest determination called for
by the Tunney Act, is required to consider certain factors listed in
the Act relating to the competitive impact of the judgment and whether
it adequately remedies the harm alleged in the complaint.\20\ This
public interest inquiry is necessarily a limited one as the United
States is entitled to deference in crafting its antitrust settlements,
especially with respect to the scope of its complaint and the adequacy
of its remedy. See generally United States v. Microsoft Corp., 56 F.3d
1448, 1458-62 (D.C. Cir. 1995); United States v. SBC Commc'ns, 489
F.Supp.2d 1, 12-17 (D.D.C. 2007).
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\20\ See 15 U.S.C. 16(e)(1)(A) & (B). The Microsoft court
explained that a court making a public interest determination under
the Act should consider, among other things, the relationship
between the remedy secured and the specific allegations set forth in
the government's complaint, whether the decree is sufficiently
clear, whether enforcement mechanisms are sufficient, and whether
the decree may positively harm third parties. Microsoft, 56 F.3d at
1458-62.
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With respect to the scope of the complaint, the Tunney Act review
does not provide for an examination of possible competitive harms the
United States did not allege. See, e.g., Microsoft, 56 F.3d at 1459
(stating that the district judge may not ``reach beyond the complaint
to evaluate claims that the government did not make'').\21\ The
reviewing court may look beyond the scope of the complaint only when
the complaint has been ``drafted so narrowly as to make a mockery of
judicial power.'' SBC Commc'ns, 489 F.Supp.2d at 14. That is not the
case here as the Complaint properly alleges the harm the transaction is
likely to cause in the relevant product and geographic markets. Indeed,
multiple commentors recognized the sufficiency of the Complaint: The
States, for example, note that ``the United States acknowledges the
significant anticompetitive effects that the acquisition will have on
the development, production and distribution of cotton biotech traits
and seeds.'' \22\ DuPont similarly states that ``the Complaint filed by
the Justice Department's Antitrust Division details the serious harm to
farmers and consumers that will result,'' and further acknowledges that
the ``Complaint sets forth a clear and compelling story of the
competitive injury that will result from the proposed transaction.''
\23\
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\21\ Were a court to reject a proposed decree on the grounds
that it failed to address harm not alleged in the complaint, it
would offer the United States what the Court of Appeals for the D.C.
Circuit referred to as a ``difficult, perhaps Hobson's choice,'' in
that the United States would have to either redraft the complaint
and pursue a case it believed had no merit, or drop its case and
allow conduct it believed to be anticompetitive to go unremedied.
Microsoft, 56 F.3d at 1456.
\22\ States Comments at 6.
\23\ DuPont Comments at 2 & 19.
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With respect to the sufficiency of the proposed remedy, a district
court must accord due respect to the United States's views of the
nature of the case, its perception of the market structure, and its
predictions as to the effect of proposed remedies. E.g., SBC Commc'ns,
489 F.Supp.2d at 17 (United States entitled to ``deference'' as to
``predictions about the efficacy of its remedies''); see also CIS at
24-26. Under this standard, the United States ``need only provide a
factual basis for concluding that the settlements are reasonably
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F.Supp.2d
at 17. DuPont, referencing the Division's review of Monsanto's
abandoned attempt to purchase DPL in 1998, suggests that the
``government has an extra burden * * * when it changes its view on an
identical transaction.'' \24\ But the assertion finds no support in the
language of the statute or the caselaw. This is not surprising given
that it contravenes long-established precedent holding that a
prosecutor's exercise of discretion carries no estoppel effect.
Moreover, DuPont's position would inappropriately require the court to
engage in extensive fact finding of historical events--in essence, a
trial within a trial--simply to determine whether the two transactions
were in fact ``identical'' and whether the government accepted a less
effective remedy than it would have the first time.\25\
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\24\ DuPont Comments at 3.
\25\ In fact, DuPont's factual premise is flawed. Contrary to
DuPont's suggestion, the fact that Monsanto abandoned its initial
proposed acquisition of DPL in the face of a threatened enforcement
action by the United States does not imply that no remedy would have
been acceptable to the United States in 1999. Rather, it implies
only that Monsanto was at that time unwilling to agree to remedies
deemed necessary by the United States.
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[[Page 18617]]
B. The Appropriate Inquiry Is Whether the Remedy Preserves Competition,
Not Whether It Replicates DPL
Some of the commentors criticize the remedy, particularly the
Enhanced Stoneville Assets divestiture, for not creating a competitor
that mirrors DPL in scope and independence.\26\ But they pose the wrong
standard for evaluating the effectiveness of the remedy. Because the
antitrust laws seek to protect competition, the purpose of the remedy
is not to recreate DPL but to preserve the competition that DPL brought
to the market--to ensure that cotton farmers continue to realize the
competitive benefits they would have had but for the merger.
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\26\ See, e.g., States Comments at 7 (``divested Stoneville is
not the equivalent of DPL''); WFU Comment at I (proposed remedy
``does not even come close to replacing independent DPL'').
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Thus, the key questions in evaluating the remedy are: (1) Does it
ensure that farmers will continue to benefit from competition to
develop, commercialize and sell cottonseed in the MidSouth and
Southeast?, and (2) Does it preserve the likely benefits to competition
that would have arisen from development of cottonseed for the MidSouth
and Southeast containing non-Monsanto traits? The proposed remedy does
both, as we explain in more detail below.
For some commentors, however, no remedy would suffice for this
transaction or even any other potential acquisition of DPL. They
essentially argue not only that the sole effective remedy in this case
would be to block the transaction outright but that DPL must be kept as
it is--independent of any trait provider--in perpetuity, available at
any time for partnership with any trait provider that chooses to work
with it.\27\ This is a extraordinary proposition, and it is wrong. It
relies on a static view of the market, presuming that DPL is essential
to a competitive traited cottonseed market; it discounts the incentives
and abilities of others, such as Bayer and Syngenta, to compete; it
ignores market facts, such as Stoneville's efforts and growing success
in the MidSouth and Southeast; and it would deny DPL and consumers the
efficiencies that would come from vertical integration with a trait
provider (evidenced by the significant number of seed companies that
are vertically integrated into trait development).
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\27\ See, e.g., States Comments at 7 (``[S]toneville has been
divested to Bayer, a trait development competitor of Monsanto.
Because of this, Stoneville can never duplicate DPL's unique
position as an independent cotton seed company that can use its
successful and high-quality germplasm to partner with several
different biotech companies to develop viable competitive
alternatives to Monsanto's monopolies in traits.''); OFU Comments at
1 (Enhanced Stoneville Assets do ``not take the place of an
independent Delta and Pine Land'').
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In short, the remedy, when considered in light of the applicable
legal standard and the appropriate inquiry, satisfies the public
interest requirements set forth in the Tunney Act.
IV. Response to Comments Criticizing the Sufficiency of the Remedy
Several commenters offer criticisms regarding the sufficiency of
particular aspects of the remedy.\28\ Before addressing these
criticisms, it is important to note that the remedy should be evaluated
as a whole. It is not necessary that each asset included within the
remedy package, on a stand-alone basis, sufficiently preserves
competition. Rather, the key determination is whether, as directed by
the proposed Final Judgment, the entire remedy maintains competition
for the development, commercialization and sale of traited cottonseed
in the relevant markets. The remedy here accomplishes this goal by
bringing together:
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\28\ See States Comments at 6-8; ICTA Comments at 6-8; AAI
Comments at 8-16; DuPont Comments at 9-18; OFU Comments at 1; WFU
Comments at 1; Texas Cotton Associations at 2; ICTA Comments at 1;
Plains Justice Comments at 1; ISA Comments at 1; 0CM Comments at 2.
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An ongoing, historically successful cottonseed company,
Stoneville, that has sold cottonseed in the MidSouth and Southeast
since 1922, and in which Monsanto has recently invested heavily;
Changes in Stoneville's trait licenses with Monsanto that
give the purchaser of the Enhanced Stoneville Assets terms similar to
those held by DPL;
All of Monsanto's ongoing germplasm enhancement efforts
that supported its internal predictions of substantial Stoneville
market share growth over the next five years;
Eight DPL elite conventional breeding lines that serve as
the germplasm source for approximately 60% of DPL's sales in the
MidSouth and Southeast;
Twelve DPL elite conventional breeding lines that DPL
anticipated would be the germplasm source for its next generation of
traited seed in the MidSouth and Southeast;
The requirement that the purchaser of the Enhanced
Stoneville Assets be capable of and committed to using the assets to
compete for traited cottonseed sales in the relevant markets;
Divestiture to Syngenta of the VipCot development work to
prevent any significant delay in bringing cottonseed with non-Monsanto
traits to the marketplace; and
Changes in Monsanto's trait license agreements with other
cottonseed companies to allow them, without penalty, to stack non-
Monsanto and Monsanto traits and to sell cottonseed that includes non-
Monsanto traits.
This far-reaching remedy does not depend on the future success of
each and every one of its components. Even if some component of the
remedy were to fall short of expectations--e.g., one of the next-
generation DPL lines fails to continue exhibiting the high performance
characteristics that it has exhibited thus far--it would not jeopardize
the efficacy of the remedy. Taken as a whole, there is no question that
the remedy satisfies its goal of curing the competitive harms alleged
in the Complaint. Nevertheless, we respond below to commentors'
particular concerns.
A. Divestiture of the Stoneville Business Unit and Monsanto Germplasm
Provide the Acquirer a Firm Foundation on Which To Compete in the
MidSouth and Southeast Markets
Some commenters claim that Stoneville will not provide the acquirer
of the Enhanced Stoneville Assets with an adequate foundation on which
to compete against Monsanto/DPL.\29\
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\29\ See DuPont Comments at 6, 13 and 14; 0CM Comments at 2;
States Comments at 4 and 7.
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Stoneville, however, is an ongoing business, which has operated in
the relevant markets for over 80 years and has significant capabilities
and growth potential. It offers high quality germplasm and has a strong
developmental pipeline. Its divestiture, coupled with additional cotton
germplasm from Monsanto's breeding programs, will provide the principal
acquirer--Bayer--a well-developed infrastructure and significant
germplasm assets.
1. Stoneville Infrastructure
When Monsanto acquired Stoneville in 2005, Stoneville was a
freestanding cottonseed company with a strong breeding program, as well
as a national sales and marketing force. These existing assets had been
sufficient to position Stoneville as a national provider of traited
cottonseed--second only to DPL in the MidSouth and Southeast. As
described above, Monsanto nonetheless took several steps to enhance
Stoneville's breeding capabilities. With these investments, Stoneville
is poised for significant growth, as reflected by Monsanto's internal
projections.
DuPont nevertheless suggests that Stoneville's lack of viability as
an
[[Page 18618]]
ongoing business is evidenced by trait developers choosing not to work
with Stoneville between 1999 and 2005, when Stoneville was independent
of Monsanto.\30\ In making this argument, DuPont fails to note the
fundamental reason why trait companies, including DuPont, chose not to
work with Stoneville; namely, that under Stoneville's licenses with
Monsanto at that time, Stoneville could not stack a non-Monsanto trait
with a Monsanto trait.\31\ Similarly, Stoneville was likely to be
reluctant to provide a platform for an unproven trait because the terms
of its Monsanto licenses became less lucrative if it worked with a non-
Monsanto trait (e.g., it received a smaller share of the trait fee
collected by Monsanto from farmers). In contrast, DPL could freely work
with non-Monsanto traits, including stacking them with Monsanto traits,
without risking reduction in its fee share or losing its Monsanto trait
license altogether. The Enhanced Stoneville Assets include trait
licenses from Monsanto that are comparable to those held by DPL pre-
merger, and free of the restrictions that previously existed in
Stoneville's licenses.
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\30\ DuPont Comments at 15.
\31\DuPont further suggests that Stoneville's inferiority as a
trait partner is evidenced by Monsanto choosing to purchase DPL.
DuPont overlooks the important fact that DPL had a pending lawsuit
against Monsanto under which Monsanto faced a potential $2 billion
liability. By purchasing DPL, Monsanto eliminated that liability.
Although not a merger-specific efficiency, eliminating this
potential liability provides an explanation for Monsanto's decision
to undertake the acquisition. Monsanto's desire to resolve that
litigation also contradicts ISA's assertion that ``the clear reason
for Monsanto's acquisition of Delta is elimination of competition in
seeds.'' ISA Comments at 1.
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DuPont also claims that the divestiture is insufficient in that it
does not provide the acquirer enough breeding stations, comparing DPL's
eleven global breeding stations with Stoneville's two breeding
stations.\32\ That comparison, however, is misleading. Though DPL has
eleven breeding stations worldwide, only five develop varieties for the
MidSouth and Southeast. The divestiture includes the two breeding
facilities that Stoneville used for developing MidSouth and Southeast
varieties,\33\ and Bayer has two additional breeding stations located
in those regions, bringing Bayer's total to four after the divestiture.
Accordingly, as a result of the sale of Enhanced Stoneville assets to
Bayer, DPL-Monsanto and Bayer will have breeding infrastructures
similar in size and scope focused upon developing varieties suited for
the MidSouth and Southeast.
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\32\DuPont Comments at 15; see also States Comments at 3.
\33\Monsanto also used facilities in Georgia and North Carolina
in part for cottonseed development. Because Monsanto used those
facilities for development of several crops besides cotton, and
Monsanto included in the Enhanced Stoneville Assets the cottonseed-
related tangible assets kept at those sites, the United States did
not require divestiture of the real property supporting those
facilities.
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2. Monsanto/Stoneville Germplasm
The remedy provides the acquirer of the Enhanced Stoneville Assets
all U.S. Stoneville cotton germplasm, as well as germplasm from
Monsanto's Advanced Exotic Yield and Marker Assisted Breeding programs.
For various reasons, commentors fail to understand the significance of
these divestitures.
a. The Breeding Process
Much of the criticism results from lack of familiarity with the
cottonseed breeding process. To address that deficiency, we provide
below a short primer on cottonseed development.
There are two breeding stages in the development of quality,
traited cottonseed. Breeders first develop elite conventional
(nontraited) lines and, from those, they proceed to develop commercial
traited varieties. In developing an elite conventional line, the
breeder begins by crossing two elite lines that the breeder anticipates
will produce quality offspring. The result of that cross will be many
progeny plants with differing characteristics. The breeder then
evaluates and selects some subset of the progeny as promising enough to
continue in the breeding process. In the greenhouse, the breeder then
self-pollinates the progeny plant (i.e., crosses the plant with
itself), evaluates its progeny, and makes further selections. This
process is typically repeated four times in the greenhouse as the
breeder continues to make selections based on observable plant
characteristics. Promising lines then are grown in the field and
subjected to additional testing.
At the end of this process, which takes approximately six years,
the finished line can take either or both of two paths. If the seed
company intends to commercialize the line as a conventional variety,
the company will subject the line to an additional year of field trials
and then over the course of the next two years ``bulk'' the line up for
commercial sale. If the seed company intends to use the finished line
as a traited variety, the seed company will subject the line to a
separate procedure. The finished line (the ``recurrent parent'') will
first be crossed with a donor plant that contains the desired trait to
introduce or ``introgress'' the trait into the recurrent parent line.
After that initial cross, progeny plants are selected on the basis of
agronomic characteristics and the presence of the trait. Those plants
are then typically ``backcrossed'' with the recurrent parent, which
involves pollinating the plants with pollen from the recurrent parent.
Backcrossing brings the plant closer to the genetics of the recurrent
parent, except that the trait is now present. Breeders typically
backcross three to five times. Once the backcrossing is completed, the
seed company puts the resulting traited seed through a period of
increased testing and eventually bulking up for commercialization.
Limited quantities of a traited variety from that recurrent parent will
be commercially available approximately five years after the recurrent
parent is available for breeding.\34\
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\34\ Breeding a traited variety from elite parents can take as
little as four years or as long as seven. The seven year outer time
frame can be reduced by several means, including: using counter-
seasonal breeding; using molecular markers to reduce the number of
crosses used in introgression and increase stages; using high
quality germplasm as the trait donor, in the case of creating a
stacked variety, using a trait donor that contains both of the
desired traits; limiting the number of official variety trials prior
to making the seed available for sale; and bringing a more limited
volume of seed to market in the launch year.
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b. Stoneville Germplasm
The proposed Final Judgment provides the acquirer of the Enhanced
Stoneville Assets with all of Stoneville's U.S. germplasm.\35\ DuPont,
however, questions the likelihood that the varieties in Stoneville's
development pipeline will be successful.\36\ The evidence, however,
shows the strength of the pipeline and, as Monsanto itself had
predicted, its strong likelihood of commercial success.
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\35\ As discussed above, this includes all germplasm with the
exception of the NexGen varieties Americot acquired.
\36\ DuPont Comments at 9-10.
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Stoneville has over fifty lines in its pipeline for possible
commercialization in the MidSouth and Southeast between 2008 and 2012.
Stoneville's pipeline is the product of its traditional focus on mid-
to full-season varieties found in the MidSouth as well as a more-recent
sustained and intensive research effort to develop germplasm suitable
for the Southeast.\37\ Stoneville has historically been more successful
at capturing sales in the MidSouth than in the Southeast (as evidenced
by its 2006 share of 16% in the MidSouth versus 8% in the Southeast)
because its breeding program had focused primarily on varieties
[[Page 18619]]
harvestable early in the growing season. When Emergent Genetics
(``Emergent'') acquired Stoneville in 1999, however, it saw the
Southeast as a lucrative growth area and began taking steps to increase
Stoneville's efforts to breed mid- to full-season varieties (i.e.,
varieties better suited to the longer growing season afforded in the
more southern growing areas). To this end, in 2001 Emergent acquired
Helena Chemical's breeding program, which included germplasm lines
suited for the Southeast. In addition, Emergent established a breeding
station in Arizona with the specific mission of breeding mid- and full-
season varieties.
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\37\ Full-season varieties typically perform better in the
Southeast than the early- to mid-season varieties that excel in the
MidSouth.
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When Monsanto acquired Stoneville in 2005, it continued these
efforts to breed varieties suitable for the Southeast, significantly
increasing the number of testing plots and aggressively using counter-
season production to accelerate the introduction of full-season
varieties. According to Monsanto's internal field tests, conducted
prior to entering the agreement to acquire DPL, several of Stoneville's
lines are performing in yield trials on par with DPL's most successful
varieties in the MidSouth and Southeast, DP555 and DP444. Indeed,
Monsanto anticipated that its efforts to improve Stoneville's breeding
program would result in Stoneville gradually increasing its national
share from 13% in 2006 to nearly 20% by 2010 (this estimate did not
include the likely share increases that would stem from germplasm being
developed by Monsanto outside of Stoneville that the proposed Final
Judgment also requires to be divested).\38\
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\38\ DuPont notes that Stoneville's share in the Southeast and
MidSouth has been in decline as evidence that its potential to
compete in the future is not bright. DuPont Comments at 14. However,
because Emergent's and Monsanto's investments in Stoneville's
breeding capabilities are so recent, Stoneville's share declines do
not accurately reflect Stoneville's potential. In 2007, Stoneville
reversed the trend of declining share. According to USDA's annual
reports on cotton varieties planted, Stoneville's breeding efforts
are, as Monsanto predicted, beginning to produce results. From 2006
to 2007, Stoneville's share increased from approximately 13% to 15%
nationwide and from just over 8% to 11% in the Southeast.
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c. Additional Monsanto Germplasm
The proposed Final Judgment also requires Monsanto to divest cotton
lines from its valuable internal research and development efforts--the
Advanced Exotic Yield lines and the Marker Assisted Breeding (``MAB'')
populations--regardless of whether Monsanto considered those lines to
be part of Stoneville. In this way, the remedy ensures that the
acquirer has the breadth of Monsanto's cottonseed development programs
that would have been used to compete against DPL absent the
transaction.
i. Advanced Exotic Yield Lines
DuPont implicitly criticizes the inclusion of the Advanced Exotic
Yield Lines in the divestiture package, suggesting that because the CIS
describes the value of these developmental lines as ``promising,'' the
lines likely will be of little commercial value to the acquirer of the
Enhanced Stoneville Assets.\39\ Although Monsanto started its Advanced
Exotic Yield program as a means of identifying traits in exotic cotton
plants that would increase yields when bred into more traditional
commercial lines, that program also resulted in the creation of
finished elite lines that have achieved significantly better yields in
field tests than the current leading varieties in the MidSouth and
Southeast. As noted in the CIS, Monsanto planned to bring the first
traited varieties from these lines to market by 2009. Monsanto
forecasted that these traited varieties would be a significant driver
of market share for Stoneville.\40\
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\39\ DuPont Comments at 11 and 15.
\40\ Despite their origin in a trait research program, further
breeding and commercialization of these lines requires only
traditional breeding techniques.
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AAI suggests that the acquirer will have little incentive to
commercialize these varieties because they contain Monsanto traits. The
comment offers no explanation of why the acquirer would forgo a
significant profit opportunity by abandoning germplasm that appears to
have significant advantages relative to competing germplasm that also
contains Monsanto traits. In any case, Bayer has already publicly
touted its acquisition of the Enhanced Stoneville Assets as including
``access to additional high performing cotton products with