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