Agriculture

Why India’s Competition Commission Must Stop the Dow and DuPont Merger

Experience shows that the MNCs enjoy a dominant position and it is this position of strength that enables them to act independently of competitive forces.

Should the Dow-Dupont deal go through? Will it have adverse consequences for a sector as vital as seeds? Credit: Reuters

Should the Dow-Dupont deal go through? Will it have adverse consequences for a sector as vital as seeds? Credit: Reuters

The Competition Commission of India (CCI) is currently assessing the likely adverse effects on competition of the proposed merger of Dow Chemical Company (Dow) and E.I. du Pont de Nemours and Company (DuPont). If it goes through, the combined entity will likely be the world’s biggest chemical and materials company.

The two companies have submitted the necessary details of their merger plans to CCI in the prescribed Form IV. The CCI has consequently opened up the procedure for investigating the merger, as per the letter and spirit of Section 29 of the Competition Act of India.

But there are a dozen reasons and more why the combination of the two multinational corporations (MNCs) must be stopped.

Agri-business consolidation

The merger of two already large MNCs must not be seen in isolation, but instead must be measured against the other two big mergers that are simultaneously underway between agri-chemical giants around the globe, namely ChemChina’s takeover of Syngenta and Bayer CropScience’s acquisition of Monsanto.

The ground realities that Indian farmers face – the majority of whom are small and marginal producers, often at the mercy of the seed market – should be reason enough to reign in the MNCs. The corporate-led agro-industrial model is in part responsible for the rural crisis in the country.

US industry wishlist

Both Dow and DuPont are registered in the US. Dow is headquartered in Midland, Michigan, while Dupont is headquartered in Wilmington, Delaware. American MNCs often demand high levels of intellectual property (IP) protection and enforcement. The US government often takes unilateral action to place India on a ‘Priority Watch List’ of the US Trade Representative for having an IP rights regime that is not as accommodating as its MNCs want.

In addition to this, the IP portfolios of these companies add to their monopoly power. In Monsanto’s case, the Ministry of Agriculture was forced to issue the Cotton Seed Price (Control) Order, 2015 under the Essential Commodities Act, 1955 to keep seed prices under check. A merger would only increase the clout of these companies.

Seed industry re-organisation

In the past, through the 1980s and 1990s, there were major policy changes, including the National Policy on Seed Development, 1988, which liberalised the seed sector and encouraged seed MNCs in the country. These MNCs have strengthened and expanded their presence since that time. The split in the seed industry in India in August 2016 led to the formation of the Federation of the Seed Industry of India (FSII). This new federation has all the foreign MNCs operating in the sector (including DuPont Pioneer and Dow Agrosciences) plus the ABLE-AG companies. Individually and as a group, the FSII members have a major part of the market share in India.

Indian law does not allow for patents on seeds; instead a lesser patent is granted in the form of plant variety protection (PVP). As per statistics of the National PVP Authority, DuPont-owned Pioneer has got IP protection for 30 crop varieties in India under the Protection of Plant Varieties and Farmers’ Rights Act, 2001. The effect of such registration is that the company gets a set of exclusive economic rights for 15 years over each registered variety of Indian mustard, maize, rice and pearl millet. There is every likelihood of the company charging the price it likes to keep its large profit margins.

Seed legislation changes

Proposed amendments to the Seed Act, that insist on compliance with industry standards as a necessary requirement to be able to sell seed in the market, create an entry barrier for farmers to sell their own seeds. Farm-saved seed is the biggest competition for seed companies. The Asia and Pacific Seed Association’s Position on Intellectual Property Rights for the Seed Industry makes is clear that it wants governments in the region to stop ‘across the fence’ sale of seeds by farmers.

India has the world’s largest agricultural research system. But it is no longer the dominant player. It offers no credible competition to the MNCs marketing their commercial products in the country. On the contrary, given the public-private partnerships (PPPs), the public sector is not in a position to develop alternatives to the company’s products. The Indian Council of Agricultural Research had itself organised an ICAR-Industry Meet in 2007 for agricultural transformation through PPPs. Thus, there are no vigorous and effective competitors in the market.

The business model of the oligopoly is characterised by cross-licensing of genetic modification (GM) technologies. DuPont Pioneer in-licenses traits from Monsanto and out-licenses the same to other national seed companies, as it does in South Africa. The Ministry of Agriculture had to issue the Licensing and Formats for GM Technology Agreement Guidelines, 2016 to cap the technology fees that these MNCs charge. The guidelines were withdrawn after the ‘Big Six’ MNCs resisted. Even though biosafety regimes are still not up to date, these companies push GM farming through their muscle power.

Sustainable alternatives

There are innumerable local alternatives for low input, chemical-free farming organised around climate-resilient local seeds. These need to be given space.

India is, in fact, going to play host to a global organic farming event – the 19th Organic World Congress in November 2017. Prime Minister Narendra Modi himself has endorsed organic agriculture and has asked state governments to take up organic farming in their areas. The Sustainable Development Goals direct governments to move to more ecological solutions. There is no room for MNCs like Dow Chemicals in this vision and plan.

There are no global rules to contain the rise and concentration of these large corporations. A UN treaty on transnational corporations is still in the making. But the Guiding Principles on Business and Human Rights endorsed by the Human Rights Council in 2011, re-emphasise the obligations of both states and transnational corporations. The UN Special Rapporteur on the Right to Food reiterates this need.

It is the duty of the state to protect human rights by controlling private actors. There are also extra-territorial obligations of the state to regulate the activities of corporations whose conduct they can influence. India is a critical base for the seed industry for its Asia and Pacific operations. Disciplining these MNCs in the Indian jurisdiction will also safeguard farming communities in other countries in the region.

CCI legal challenges

The CCI has first-hand experience of the market power of these MNCs. This can be gauged by the proceedings before the CCI, namely the Department of Agriculture, Cooperation & Farmers’ Welfare & M/s. MMBL, Case No 2 of 2015 and Nuziveedu Seeds Ltd & M/s. MMBL, Case No 107 of 2015. Moreover, the competition body itself faced litigation from these MNCs, when the Monsanto group approached the Delhi high court against the CCI investigation.

Experience shows that in substance, these MNCs enjoy a dominant position. It is a position of strength that enables them to act independently of competitive forces. The merger, therefore, is a serious threat, particularly for a sector as vital as seeds.

Shalini Bhutani is a legal researcher and policy analyst based in Delhi; she tracks how trade rules interface with agriculture and biodiversity in the Asian region.