Mergers in the agrifood sector squeeze farmers’ income and consolidate current models of food production, aggravating environmental and social fallouts, according to experts, who warn that they also create barriers for victims of industrial disasters seeking justice.
A report titled “too big to feed”, published on Friday (13 October) by the international panel of experts on sustainable food systems (IPES), stated that recent mergers between agro-chemical companies will deliver 70% of the sector in the hands of three giant merged companies: the Dow-Dupont conglomerate, Bayer’s $66 billion buyout of Monsanto, and ChemChina’s acquisition of Syngenta for $43 billion and planned SinoChem merger in 2018.
“Mergers are increasingly allowing firms to control information flows along the chain and exercise huge power over the trajectory of food systems”, said Pat Mooney, lead author of the report.
Big Data is highlighted as a key driver of consolidation, allowing companies to bring satellite data services, input provision, farm-level genomic information, farm machinery, and market information under one roof.
The report highlights how mergers and market concentration is happening across all the agri-food sector: from animal genetics, where three companies supply 90% of breeding stock, to the “fork” end of the chain, with deals being struck among food processors (Heinz and Kraft foods = $55 billion), and retailers (Amazon and Whole Foods = $13.7 billion).
“It is also bad for society,” said Olivier de Schutter, former UN Special Rapporteur on the right to food and co-chair of IPES.
“Once they have cornered the market, mega-firms focus on defending their market share and shaping policies to fit their needs – not on delivering the innovation we need to build sustainable food systems.”
Sustainable food is possible
According to the European Environment Agency (EEA), the vertical integration of companies (e.g. companies operating at various steps of the food chain) shifts power away from primary producers to actors further down the value chain (agro-chemical industry, processors and retailers), and has resulted in the prioritisation of short-term profit over wider socio-economic and environmental considerations.
Large companies are also “active in setting policies for their sector”. However, this could also mean that a collective action by relatively few has the potential to substantially change the food system, according to an EEA report published on Monday (16 October).
A sustainable European food system is possible, according to the EEA, but it will require “a fundamental shift towards more ecological approaches by ensuring sustainable use of renewable resources [and] an increase in overall resource efficiency in terms of external chemical inputs, water and energy use, land take and waste generation.”
Impact of mergers on companies’ liability
The European Commission opened an in-depth investigation in the proposed buyout of Monsanto (US) by Bayer (Germany) earlier in July, to assess whether the proposed merger will reduce competition in the pesticide and seed market.
Some actors are concerned that the proposed buy-out would also impact Monsanto’s liability in pending lawsuits, such as the more than 500 cases currently under assessment in US courts on the company’s safety assessment of its weedkiller glyphosate and its commercial formulation known as Roundup.
There is a precedent for this: in the 1984 Bhopal disaster, over 3,000 people died due to a gas leak from a pesticide plant, and toxic pollution of water is still affecting a third generation in the Indian city of Bhopal.
But the US firm that owned the plant was bought by Dow chemicals (US) in 2001. So far, Dow has ignored four notices to appear in Indian courts, which demand appropriate compensation for victims and relatives and paying for environmental clean-up.
Earlier this year, Dow merged with DuPont – which left the UN’s special rapporteur on hazardous substances and waste Baskut Tuncak “deeply concerned” that this may further prevent access to justice for victims of toxic exposure, according to a recent interview with The Independent.
However, the impacts of the proposed Bayer-Monsanto merger do not fall within the remit of the DG competition – the EU’s anti-trust authority.
“Our merger assessment focuses on the effect of a transaction on competition in the markets rather than the distribution of legal liabilities between two merging parties”, a DG spokesperson told EURACTIV.com.
A Bayer spokesperson told EURACTIV.com that under the proposed merger, a wholly-owned US-based subsidiary of Bayer will buy all of Monsanto’s shares.
“Economically, Bayer will assume the business risks from Monsanto company (including any risks related to pending lawsuits) after the closing of the merger. However, legally Monsanto Company remains the only responsible party for its liabilities and pending lawsuits.”
In other words, this does not amount to a fusion in the strict sense of the term. Monsanto will continue to exist and Bayer will step in should Monsanto’s assets be insufficient to cover potential compensation orders, a move perhaps dictated by reputational reasons.
However, it remains unclear what would happen should Monsanto be dissolved. Monsanto did not reply to EURACTIV’s request for comment.