Competition Issues in the Seed Industry and the Role of Intellectual Property

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2010-01-01
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Moschini, Giancarlo
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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The reawakened interest in competition issues in agricultural markets might appear to have found its ideal poster child in the seed industry. Concentration is high and market structure has shown remarkable dynamics over the last 15 years, with high-profile mergers and acquisitions by key players. A dominant firm—Monsanto—seems to have emerged, at least from the perspective of biotech traits perceived as essential in modern seed varieties. The two largest U.S. seed companies, DuPont and Monsanto, have embarked on a tough legal battle. And the Department of Justice (DOJ) has opened a formal antitrust investigation of Monsanto practices. Yet, despite its many motives of interest, the seed industry’s competition issues are probably not representative of what matters in other agricultural markets. A distinctive feature in the seed industry is that innovation is crucial and heavily dependent on sizeable research and development (R&D) investments. Commitment to R&D by private firms, in turn, relies crucially on the existence and enforcement of intellectual property rights (IPRs), patents in particular. Strong IPRs necessarily confer limited monopoly positions. Whereas that is well understood and widely accepted as a reasonable method to promote the provision of innovation by the private sector, there remains an inherent tension between IPR and antitrust concerns in this industry.

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This is a working paper of an article from Choices 25 (2010), available at: http://ageconsearch.umn.edu/bitstream/94757/2/25-2%20Competition%20Issues.pdf.

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