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Like Mike, we also have a short article in the latest issue of the CPI Antitrust Chronicle.  Also available on SSRN, for those without a CPI subscription.

Here’s our stab at an abstract:

There are very few industries that can attract the attention of Congress, multiple federal and state agencies, consumer groups, economists, antitrust lawyers, the business community, farmers, ranchers, and academics as the agriculture workshops have.  Of course, with intense interest from stakeholders comes intense pressure from potential winners and losers in the political process, heated disagreement over how gains from trade should be distributed among various stakeholders, and certainly a variety of competing views over the correct approach to competition policy in agriculture markets.  These pressures have the potential to distract antitrust analysis from its core mission: protecting competition and consumer welfare.  While imperfect, the economic approach to antitrust that has generated remarkable improvements in outcomes over the last fifty years has rejected simplistic and misleading notions that antitrust is meant to protect “small dealers and worthy men” or to fulfill non-economic objectives; that market concentration is a predictor of market performance; or that competition policy and intellectual property cannot peacefully co-exist.  Unfortunately, in the run-up to and during the workshops much of the policy rhetoric encouraged adopting these outdated antitrust approaches, especially ones that would favor one group of stakeholders over another rather than protecting the competitive process. In this essay, we argue that a first principles approach to antitrust analysis is required to guarantee the benefits of competition in the agricultural sector, and discuss three fundamental principles of modern antitrust that, at times, appear to be given short-shrift in the recent debate.

To expand on Geoff’s post about concentration in the seed industry, there has been a consistent line of discussion throughout the day raising the specter of monopoly and anti-competitive behavior, not only in seed but also in livestock.  There are continual references to adverse price effects and limitations in choice for consumers and producers alike, followed by such tagged-on qualifiers as “if there are any”. The implication is that there is good reason to believe such effects exist and simply have yet to be discovered if we look.

But that question has already been answered. The Government Accountability Office conducted a study of the agriculture sector.  In addition, they consulted the academic literature and scholars and other experts in the field. The GAO concluded there is no evidence that concentration has had any adverse price effects on commodities or consumer producers.

One would expect that someone among the panel of enforcers at the state or federal level, particularly the DOJ or USDA, would be aware of and familiar with the GAO report. I submitted a question to that effect, asking if–or how–the GAO report would inform the activities of the state and federal enforcers. That question was not selected by the moderator to be addressed.

Antitrust is an extremely blunt tool that cuts coarsely through an industry. Wielding such a tool blithely before the face of industry is likely to have chilling effects on investment and innovation. Why would (or should) businesses invest in facilities, producers, or innovations when there is such great uncertainty over how the politicization of antitrust enforcement is going to be brought down upon them?

There is some snow still on the ground here in Iowa. It will melt more slowly given the chill cast upon agriculture by the comments of the enforcers…if the comments have more behind them than just saying what a farmer-oriented audience wants to hear. Perhaps Marvel Comics had it right?

The morning’s panel of farmers represented a variety of perspectives, ranging from more reasoned to more reactionary.  Among the ideas suggested:

More reasoned:

  • Find a balance between food and fuel in the policy debate (though no clear directions how)
  • Increase trade in global markets (always easy to talk about forcing other countries to buy more of our stuff without addressing the domestic industry issues)
  • Invest in new research and technology (and in land-grant universities…now, how can I argue with that?)

More reactionary:

  • Take that research and technology and give it away (thereby eliminating any private incentive for investment)
  • Limit subsidies going to large farms so only small farms benefit
  • Big companies should be busted up (no matter the efficiency implications for consumers or ag producers)
  • Prohibit contracting between packers and livestock producers because it creates “captive supply” and thins out the cash market (thereby eliminating packers’ ability to provide consistent quality meat products to consumers and many producers’ abilities to access financial capital)

In short: Farmers want to make more money and want to change the rules to get more of the money in the system. Surprises, anyone?

The question of the morning (from my perspective):
How much of the consequences associated with some of these ideas are intended or simply foreseeable?

Bill Northey, IA Ag Sec’y, sounds a bit like an economist (ah, turns out he has a degree in ag business and an MBA . . . ).  Yes, price of seeds has gone up, but so has yield, and so has overall value.  The issue, he says, is how to divide the surplus, and he suggests that it’s dividing the pie that drives farmer concerns.  That’s not at all a surprise, but it’s also not much of an antitrust issue.  Unless the pie could be bigger absent, say, Monsanto’s huge investment in seeds and the resulting relatively-concentrated market structure (and basing enforcement on the theoretical possibility of that counter-factual is a perilous enterprise, as Josh and I have suggested many times), this is just a question of pecuniary transfers.  Sure, they matter a lot to the parties involved and there’s always an incentive to deputize the government to put a thumb on the scale of that dispute, but that’s not a matter of allocative efficiency, and not a matter for the antitrust laws.

Now we hear Iowa AG Miller pushing for the development of “the non-antitrust laws to deal with concentration.”  By which he means the Packers and Stockyards Act.  Maybe the DOJ has their Section 5 after all!

As if on cue, AG Miller trots out the pendulum story of antitrust enforcement–”how to bring the antitrust law back to the middle.”  This is not really an accurate description, unfortunately.  Even worse, it’s not an economically-sensible concept, and measuring the efficiency of antitrust enforcement by counting enforcement actions (or looking at rhetoric) is usually just flimsy cover for an essentially-political determination.  Combine that with Miller’s suggestion that the P&S Act’s “unfair practices” language should be enlisted in the service of dealing with concentration, and the risk of false positives is much magnified.  Which, of course, is a perfect lead-in for Christine Varney. Continue Reading…

As readers may know, Eric Holder was added to the workshop at the last minute (see the latest agenda here).  So the day starts out with Holder and Vilsack, and they are joined by Varney and Tom Miller (the Iowa AG) and a host of other politicos including Senator Grassley and Congressman Boswell.

Vilsack is introducing the event, and seems to be lamenting the extraordinary increase in productivity in the farm sector–by which I mean, he laments the loss of farm jobs even though output has increased by leaps and bounds.  That’s an unfortunate framing of the issue, but it suggests that economic efficiency won’t be at the core of the discussion.

Some choice quotes from Vilsack:

“Great efficiencies have led to consolidation.  They’ve also led to lower prices for consumers.  . . . Is marketplace providing a fair deal to ranchers and farmers.”

“We know seed companies control the lion’s share of certain commodities–does that help or hurt farmers?”

“The purpose of the workshops is to determine if the system is fair [not efficient, fair --ed.].”

And now Eric Holder:

“erosion of free competition is one of the greatest threats to our economy.”

“We’ve learned the hard way that reckless deregulation can foster conduct that is harmful [this is a paraphrase . . . ]“

“Enforcement of the antitrust laws does not fully address the concerns of farmers and other stakeholders.  [Which explains why this isn't an antitrust event . . . ]“

And now comments from the panel, moderated by Vilsack . . . I’ll focus on the most relevant (if any) . . .

Holder:

“commitment to enforcing the antitrust laws in the ag sector.”

Grassley:

refers to “concentration and lack of competition in agriculture”

“not enough competition and too much concentration [I'll assume that's not an economic conclusion]“

“bigger isn’t per se bad but it can lead to predatory practices and behavior.”

“I don’t want anything to be done that stifles innovation.”

Well, as the political speeches proceed, there’s not much to report.  I’ll post this and await Varney’s comments . . . .

UPDATE:  Trying to find the right hash tag for the event, I’ve changed the title of this post and we’ll follow the convention for our live blogging today–posts from the Workshop will all have “#agworkshop” in the title.

Later this week Mike Sykuta and I will be winging our way to Iowa on behalf of the ICLE to attend the first of the year-long series of DOJ/USDA Workshops on Agriculture and Antitrust Enforcement Issues.  You can find the agenda for the first workshop, to be held Friday, March 12 in Ankeny, Iowa, here.  Intrepid reporters, we, our plan is to “live blog” the event for those of you unable to attend.  This first workshop, in addition to introducing the series, will focus on farming, which means seeds, which means the dispute between DuPont and Monsanto over licensing terms and everyone’s perennial favorite: industry concentration.

The agenda clearly reflects the highly-politicized nature of the issues under discussion, and, for example, a few news reports have suggested that the agenda has changed in response to pressure from Iowa Senator Tom Harkin.  Regardless, we expect a lively and interesting discussion.

For ease of reference all of our blogs from the workshop will be categorized under “ag/antitrust workshop,” and each post will have “DOJ/USDA Workshop” in the title.

TOTM is no stranger to the issues, and Mike and I have blogged a few times about the antitrust/licensing issues involved.  See:

Competition in Agriculture Redux (Manne, Kieff and Wright)

Competition in Agriculture (Sykuta)

Monsanto’s Licensing Case Victory (Manne)

Yet More Evidence Against the DOJ’s Antitrust Plantings (Sykuta)

The Seeds of an Antitrust Disaster (Manne)

DOJ Disconnect: Do We Really Need a Roadshow? (Sykuta)

Together with Scott Kieff and Joshua Wright, we also submitted a comment to the DOJ on the topic, “Comment on Intellectual Property, Concentration and the Limits of Antitrust in the Biotech Seed Industry,” available here (SSRN) or here (if you prefer to get it directly from the DOJ website).

The news has also been covering the seed industry antitrust issues, the DOJ/USDA workshops and agricultural antitrust issues more generally, and you can find a host of relevant news articles here.

We’re looking forward to the workshops and to your comments on the day’s events.