Market power along the food chain is a recurring concern for stakeholders, academics and policy makers (OECD, (2014[198]), Howard (2016[199]), Wesseler et al. (2015[26]) MacDonald (2017[102]), Saitone and Sexton (2017[200]), Sheldon (2017[201])). An abuse of market power could allow dominant firms to extract rents from other players in the food chain, and could lead to an inefficient allocation of resources. At the same time, researchers have pointed out that a high degree of market concentration is not necessarily harmful. For instance, economies of scale and other mechanisms may provide offsetting efficiency gains (Sexton, (2013[202]); Mérel and Sexton, (2017[203])). In an innovative industry in particular, a concentrated market could still be characterised by intense competition between a few large players (MacDonald, 2017[102]); these firms may be the only ones large enough to finance the high costs of R&D. A similar logic holds for the evaluation of mergers, where efficiency gains may exist that offset the potential harmful effects of increased market power.
Theoretical arguments can help clarify potential mechanisms and potential risks, but the question of whether concentration and consolidation along the food chain is harmful is ultimately an empirical one. Yet, an informed debate on these questions has been hindered by a lack of detailed data on levels of market concentration, evidence on its effects, and information on relevant policy options.
In this spirit, the present study has tried to bring together relevant information for the global seed industry. Given the challenges confronting the global food system, it is important to safeguard competition and innovation in the seed industry, which has an important role to play in improving agricultural productivity, sustainability, and resilience. Over the past decades, the industry has undergone a tremendous consolidation, culminating in three major transactions since 2015: the merger of Dow and DuPont, the acquisition of Syngenta by ChemChina, and the merger of Bayer and Monsanto. The changes taking place in the global seed industry have attracted an unusual level of public attention, with the European Commission’s Directorate-General for Competition receiving over a million petitions, emails and tweets expressing concerns about the Bayer-Monsanto merger (European Commission, 2018[204]).
An important conclusion from this study is that aggregate figures on market shares and concentration are not very useful in informing the public debate. The detailed data presented here shows large variations in seed market concentration across different crops and countries. Moreover, the set of firms competing in a market varies. Despite their broad scope in terms of geographies and crops, the former “Big Six” firms were not active in all seed markets, although they have a more pronounced role in the market for GM traits.
It is precisely such a detailed assessment of market shares which underlies the decisions of the Competition Authorities regarding the mergers. In several jurisdictions, the mergers were only allowed after considerable divestitures. In the Bayer-Monsanto merger, Bayer was required to divest practically its entire seed business, as well as its glufosinate-based herbicide, the main alternative to Monsanto’s glyphosate-based herbicide. These and other Bayer assets were sold to BASF, which may emerge in the coming years as an important new player in global seed markets.
A second conclusion is that competition policy is not the only factor influencing the future path of the global seed industry. EU Competition Commissioner Vestager pointed out that many of the concerns voiced by citizens regarding the Bayer-Monsanto merger were about genetically modified organisms and the use of glyphosate herbicide. These topics go beyond the scope of competition policy and are the proper domain of regulatory authorities on human health and the environment (European Commission, 2018[204]).
A similar point can be made about innovation and competition in the seed industry. The seed industry is affected by a range of public policies beyond competition policy, which creates scope for policy makers to consider complementary policy options to safeguard and stimulate competition and innovation. This study has identified a number of possibilities under three broad themes: avoiding unnecessary regulatory barriers to entry, facilitating access to intellectual property and genetic resources, and stimulating both public and private R&D in the industry. As each country faces a different agro-ecological and economic context, and different policy preferences, there is no single set of policies to be adopted in this regard. Rather, a range of options exist for policy makers to enable the seed industry to meet the challenges of increasing the productivity, sustainability and resilience of agriculture.
