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18th Nov 2017

Focus

Legal study sounds alarm on 'Baysanto' merger

  • A new legal study by University College London says that the Bayer-Monsanto merger does not pass muster under EU competition law. (Photo: Wikimedia)

The mega-merger between Bayer and Monsanto is a defining moment in how the European Commission views the welfare of its citizens, according to Olivier De Schutter, co-chair at the International Panel of Experts on Sustainable Food Systems (IPES-Food) and former UN special rapporteur on the right to food.

"This is a test case," he told EUobserver. "A significant moment. The regulation under which the commission is conducting its investigation obliges it to take account of one element, which is the welfare of consumers. The [big] question is how that is interpreted."

Competition law is founded on whether the consumer is getting a good deal. Historically, that translates to low prices, and tries to prevent any negative effect on quality, choice or innovation.

Health and environmental issues, meanwhile, are pushed to one side, on the assumption that companies are adhering to relevant EU laws.

De Schutter said it is possible to make a case against the "Baysanto" deal on the grounds of price, but the commission should use a "richer notion" of consumer welfare, which encompasses the impact the merger could have on people's health and the environment.

"Lower prices are not systematically passed on to consumers [and they're not] a long-term solution," he explained. "The aim of a food policy should not be lower prices at all costs but no-one has the courage to say we should move to more 'just prices' than just low prices."

Rampant consolidation

De Schutter spoke following the publication of a two-year study by IPES-Food, which showed how increasing consolidation up and down the food supply chain is squeezing farmers, freezing innovation and pushing prices up.

An analysis by EUobserver raised similar concerns - that with every multi-billion-euro deal the commission waves through, choice in the food Europe grows, processes, markets and buys is further restricted.

"The wide-ranging impacts of mega-mergers often evade the scrutiny of regulators," IPES-Food noted in its report, adding that "… the scrutiny of regulators typically ignores the impacts on farmers, the knock-on effects on governance (for example, increased lobbying power), and broader implications for sustainability".

Pressure is mounting on the EU commission, and in particular on its competition chief Margrethe Vestager, to widen the scope of the investigation she launched into the Baysanto deal back in August.

Baysanto block

Adrian Bebb, a food and farming campaigner at Friends of the Earth Europe, said Vestager "has more than enough arguments" to block the deal, and in so doing she would "send a strong signal that the EU is prepared to stand up to these mega-corporations in order to protect farmers, citizens and our environment".

He added: "It is vital that the European Commission widens its investigation to ensure that we retain the possibility to move agriculture onto a sustainable and resilient footing to help counter climate change and halt biodiversity loss."

Friends of the Earth Europe and University College London (UCL) recently published a legal study claiming that "even a narrow reading" of EU competition law is enough to block the merger.

The study, by professors Ioannis Lianos and Dmitry Katalevsky, highlighted how the Bayer-Monsanto merger forms part of the recent wave of mega-mergers that has transformed the global food value chain.

"This high level of concentration will undoubtedly lead to price rises for seeds and pesticides, the increase of the technological and economic dependence of farmers on a few global integrated one-stop shop platforms, the reduction of independent centres of innovation activity in the industry and consequently of innovation, due to reduced competition," they noted.

Food policy for Europe

M&A activity has accelerated amongst food processors (Heinz and Kraft Foods - €47 billion), drinks manufacturers (AB InBev and SABMiller - €102 billion) and retailers (Amazon and Whole Foods - €11.7 billion).

Lacklustre industry growth is partly to blame, but firms are also looking to expand internationally into untapped markets and reduce costs in the face of rising inflation.

That more and more shoppers are looking for 'fresher and healthier' products has also left some food processors struggling to adapt - so, instead, they've bought up brands that are perceived as 'healthy', 'natural' and 'organic'.

The IPES-Food report concludes: "The high and rapidly increasing levels of concentration in the agri-food sector reinforce the industrial food and farming model, exacerbating its social and environmental fallout and aggravating existing power imbalances."

If the "rampant consolidation" continues "it will have health impacts", De Schutter said, leaving people "dependent on heavily processed foods of poor nutritional quality".

He called for a "food policy for Europe" that brings together agriculture, health, environment, consumer protection, competition and trade under one umbrella.

Earlier this month, IPES-Food reported on the "staggering" health cost of industrial food and farming, claiming that "food systems are making us sick".

De Schutter explained that since the EU's Common Agricultural Policy was introduced, food prices have continued to fall in real terms, but this hasn't led to better nutrition. "Poor families have higher rates of obesity because of the low cost calories that are dumped onto them," he said.

The current system isn't sustainable for farmers either: "Their incomes are squeezed at one end by a handful of input providers, and at the other by processing and retail giants with huge bargaining power," he added.

Fight for fairness

The European Parliament has repeatedly expressed concerns over fairness in Europe's food chain, while demanding that the commission uses its competition laws much more aggressively.

However, Bayer-Monsanto is one of three major deals that could result in up to 70 percent of the world's agrochemicals being controlled by three new hybrid companies.

In September 2016, when they announced their €55 billion merger agreement, Bayer and Monsanto promised it would provide "significant and lasting benefits for farmers: improved sourcing and increased convenience to higher yield, better environmental protection and sustainability".

But De Schutter has urged Vestager not to be believe a word of it.

"Not a single new species has been introduced into the European food system since the era of large-scale mergers began," he wrote in a letter to the commissioner last week.

Analysis

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