Business Week
The Justice Department has intensified its antitrust investigation into Monsanto Co., demanding internal documents that outline marketing tactics of the world's biggest seed company.
The demand, disclosed Thursday by Monsanto, formalizes a months long investigation into possible antitrust violations at the company, which has gained unprecedented power in the multibillion market for biotech seeds. It has already provided millions of pages of documents to the department and is cooperating with the agency's civil probe, spokesman Lee Quarles said Thursday.
The government asked this week for information on Monsanto's biotech soybean business, Quarles said. Monsanto's patented genes are inserted into roughly 95 percent of all soybeans and 80 percent of all corn grown in the U.S.
The government is examining whether farmers and seed companies will have access to Monsanto's popular Roundup Ready soybeans after the seeds' patent expires in 2014. The company is trying to shift customers to the next generation of patented soybeans, but said in a statement it will grant full access to the current variety even after the patent expires.
Justice Department spokeswoman Gina Talamona would not comment on the matter, but confirmed for the first time the department is "investigating the possibility of anticompetitive practices in the seed industry."
Last month, an Associated Press investigation uncovered contracts showing that Monsanto's business practices squeeze competitors, control smaller seed companies and protect its dominance over the genetically altered crops market.
One contract clause, for example, bans independent companies from breeding plants that contain both Monsanto's genes and the genes of any of its competitors, unless Monsanto gives prior written permission. That could let Monsanto effectively lock out competitors from inserting their patented traits into the vast share of U.S. crops that already contain Monsanto's genes.
Scott Partridge, Monsanto's deputy general counsel, said the company has done nothing wrong.
"Monsanto continues to cooperate with the U.S. Department of Justice inquiries, just as we have over the last several months," Partridge said in a statement Thursday. "We respect the thorough regulatory process. We believe our business practices are fair, pro-competitive and in compliance with the law."
Monsanto shares fell $1.22, or 1.5 percent, to $82.73 in afternoon trading Thursday.
Morgan Stanley analyst Vincent Andrews said antitrust troubles would likely fade with time and not have a significant impact on Monsanto's business. Because the department asked about access to Roundup Ready products after the patent expired, it is likely not interested in other issues around Monsanto's practices, Andrews said in a report Thursday.
"We expect this to be the sole focus of the Department of Justice's inquiry into Monsanto, and that a formal lawsuit will not be filed," Andrews said in the report.
Monsanto, which is based near St. Louis, introduced its first commercial strain of genetically engineered soybeans in 1996. The Roundup Ready plants were resistant to the herbicide, allowing farmers to spray Roundup whenever they wanted rather than wait until the soybeans had grown enough to withstand the chemical.
The company gained broad market reach over the last decade by letting competitors and independent seed companies sign licensing agreements allowing them to insert Monsanto's patented genes into their own strains of corn, soybeans and other crops.
Monsanto has the right to control how its genes are used because they are patented. Competitors worry that Monsanto could prolong its dominance for years if customers aren't allowed to use Roundup Ready seeds after the patent expires in 2014.
Monsanto said in a Dec. 15 letter to the American Soybean Association that seed companies and farmers will have access to the Roundup ready trait after its patent expires.
The company's business practices also are at the center of civil antitrust suits filed against Monsanto by its competitors, including a 2004 suit filed by Syngenta AG, that was settled with an agreement, and ongoing litigation filed this summer by DuPont in response to a Monsanto lawsuit.
The demand, disclosed Thursday by Monsanto, formalizes a months long investigation into possible antitrust violations at the company, which has gained unprecedented power in the multibillion market for biotech seeds. It has already provided millions of pages of documents to the department and is cooperating with the agency's civil probe, spokesman Lee Quarles said Thursday.
The government asked this week for information on Monsanto's biotech soybean business, Quarles said. Monsanto's patented genes are inserted into roughly 95 percent of all soybeans and 80 percent of all corn grown in the U.S.
The government is examining whether farmers and seed companies will have access to Monsanto's popular Roundup Ready soybeans after the seeds' patent expires in 2014. The company is trying to shift customers to the next generation of patented soybeans, but said in a statement it will grant full access to the current variety even after the patent expires.
Justice Department spokeswoman Gina Talamona would not comment on the matter, but confirmed for the first time the department is "investigating the possibility of anticompetitive practices in the seed industry."
Last month, an Associated Press investigation uncovered contracts showing that Monsanto's business practices squeeze competitors, control smaller seed companies and protect its dominance over the genetically altered crops market.
One contract clause, for example, bans independent companies from breeding plants that contain both Monsanto's genes and the genes of any of its competitors, unless Monsanto gives prior written permission. That could let Monsanto effectively lock out competitors from inserting their patented traits into the vast share of U.S. crops that already contain Monsanto's genes.
Scott Partridge, Monsanto's deputy general counsel, said the company has done nothing wrong.
"Monsanto continues to cooperate with the U.S. Department of Justice inquiries, just as we have over the last several months," Partridge said in a statement Thursday. "We respect the thorough regulatory process. We believe our business practices are fair, pro-competitive and in compliance with the law."
Monsanto shares fell $1.22, or 1.5 percent, to $82.73 in afternoon trading Thursday.
Morgan Stanley analyst Vincent Andrews said antitrust troubles would likely fade with time and not have a significant impact on Monsanto's business. Because the department asked about access to Roundup Ready products after the patent expired, it is likely not interested in other issues around Monsanto's practices, Andrews said in a report Thursday.
"We expect this to be the sole focus of the Department of Justice's inquiry into Monsanto, and that a formal lawsuit will not be filed," Andrews said in the report.
Monsanto, which is based near St. Louis, introduced its first commercial strain of genetically engineered soybeans in 1996. The Roundup Ready plants were resistant to the herbicide, allowing farmers to spray Roundup whenever they wanted rather than wait until the soybeans had grown enough to withstand the chemical.
The company gained broad market reach over the last decade by letting competitors and independent seed companies sign licensing agreements allowing them to insert Monsanto's patented genes into their own strains of corn, soybeans and other crops.
Monsanto has the right to control how its genes are used because they are patented. Competitors worry that Monsanto could prolong its dominance for years if customers aren't allowed to use Roundup Ready seeds after the patent expires in 2014.
Monsanto said in a Dec. 15 letter to the American Soybean Association that seed companies and farmers will have access to the Roundup ready trait after its patent expires.
The company's business practices also are at the center of civil antitrust suits filed against Monsanto by its competitors, including a 2004 suit filed by Syngenta AG, that was settled with an agreement, and ongoing litigation filed this summer by DuPont in response to a Monsanto lawsuit.
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