Clapp 2021 Growing Corporate Concentration
Clapp 2021 Growing Corporate Concentration
Clapp 2021 Growing Corporate Concentration
https://doi.org/10.1038/s43016-021-00297-7
What are the potential consequences when a relatively small number of large firms come to dominate markets within the global
food system? This Perspective examines the implications of corporate concentration and power in the global seed and agro-
chemical industry, a sector that has become more consolidated in recent years. It outlines the pathways via which concentrated
firms in this sector have the potential to exert power in food systems more broadly—both directly and indirectly—in ways
that matter for food system outcomes. Specifically, concentrated firms can shape markets, shape technology and innovation
agendas, and shape policy and governance frameworks. This Perspective makes the case that a range of measures are needed
to ensure that corporate concentration and power do not undermine key goals for food systems, such as equitable livelihoods,
sustainability and broad-based participation in food system governance. These include measures to strengthen competition
policies, to bolster public sector support for diverse food systems, and to curb corporate influence in the policy process.
A
relatively small number of transnational firms have come agricultural input firm, Corteva Agriscience, was one of three major
to wield a high degree of influence within the global mergers that the agricultural seed and chemical industry saw in the
food system. Recent years have seen firms all along agri- 2015–2018 period. ChemChina purchased Syngenta in early 2016,
food supply chains merge and acquire one another, to form giant shortly after the Dow–DuPont deal was announced, and in 2018
‘mega-companies’ that are central players in what can only be Bayer purchased Monsanto. What was already a highly concen-
described as a profound reconfiguration of the world food economy. trated industry dominated by what were known as the Big Six firms
This process is happening in markets for farm inputs, agricultural since the early 2000s is now dominated by just four large firms:
commodity trading, and food processing and retail1–3. In parts of the Bayer, Corteva, ChemChina-Syngenta and BASF (which grew by
global food system where just a few giant firms control a large share purchasing assets the other firms sold to get their merger deals
of the marketplace, these firms can influence the types of seeds approved by regulators).
farmers plant, what crops are grown, what breeds of livestock are Closer examination of this sector reveals that there are mul-
raised and in what types of facilities, working conditions for food tiple ways in which concentrated firms can exert power—both
system workers, and the types and prices of food items that appear directly and indirectly—that matter for food system outcomes: by
on grocery store shelves, to name just a few examples. shaping markets, by shaping technology and innovation agendas,
There is long-standing concern that powerful firms in concen- and by shaping policy and governance frameworks. Without poli-
trated markets are more incentivized to advance the short-term inter- cies in place to keep corporate power in check, there is a risk that
ests of their shareholders rather than the public good4,5, a concern concentrated markets can undermine key goals for food systems,
that extends to food systems. Civil society groups worry that concen- such as the provision of equitable livelihoods, sustainability and
trated agrifood firms might pursue profit maximization strategies in broad-based participation in food system governance. Policies to
ways that undermine the livelihoods of small-scale producers, push rein in corporate power in food systems will require efforts on mul-
up prices, limit product choices and damage the environment. As tiple fronts, and a focus on these efforts should be prominent on the
preparations are underway for the 2021 UN Food Systems Summit agenda of the UNFSS.
(UNFSS), which has goals of making food systems more equitable,
healthy and sustainable, civil society groups have expressed concern Shaping market dynamics
that the Summit agenda does not sufficiently focus on the implica- When only a few firms dominate within a market, those firms at
tions of corporate power in food systems6. This relative neglect is the top tend to have power to shape how that market functions. The
especially puzzling in the context of growing global concern about desire to have more power over market dynamics is in fact a big
the potential harm from concentrated markets in other sectors, such reason why firms engage in mergers and acquisitions in the first
as Big Tech. Because food systems are so important for multiple place—to expand their market share and deliver higher returns to
reasons—food is a basic need as well as a basic human right, food their shareholders. Economists have long been concerned about
systems provide livelihoods for nearly a third of humanity, and food ‘market power’ associated with highly concentrated sectors because
systems are intimately connected to ecosystems—it is imperative it can stifle competition and potentially lead to higher prices that
that we have a better understanding of the potential consequences of can harm consumers9. For this reason, most regulatory attention is
corporate concentration and power in the sector. paid to the potential impact of market power, and in particular, its
This Perspective examines the implications of corporate power impact on consumer prices.
in one highly concentrated sector—the global seed and agrochemi- The recent mergers in the global seed and agrochemical sector
cal industry—that has become more consolidated in recent years7,8. generated enormous concern about the potential impact of greater
The merger of Dow and DuPont in 2015, which spun out a new corporate concentration on markets7,10. In 2009, the share of the
School of Environment, Resources and Sustainability, University of Waterloo, Waterloo, Ontario, Canada. ✉e-mail: jclapp@uwaterloo.ca
global market held by the top four firms at the global level for seeds Recent research indicates that labour’s share of income in the econ-
was 54%, and 53% for agrochemicals, up significantly from 21% and omy in the USA and many other countries drops as firms become
29%, respectively, in 1994, prior to several rounds of mergers in the more concentrated24. Mergers among dominant firms can also con-
sector11. This level of concentration was approaching the thresh- tribute to job losses, especially if the resulting firm seeks to make its
old of what most economists consider to be a highly concentrated operations more ‘efficient’ by combining key functions. The merger
market, where anything over a 40% share for the top four firms is of Dow and DuPont, for example, resulted in 1,700 job losses, while
considered moderately concentrated, and over 60% is highly con- Bayer cut 12,000 jobs in the wake of its purchase of Monsanto25,26.
centrated. In 2018, after the most recent mergers, the top four firms
controlled even more of the market—around 70% of the global pes- Shaping technology and innovation pathways
ticides market12 and around 60% of the global seed market13. When just a few concentrated firms dominate within a sector,
Some analysts warn against reading too much into these aggre- those firms can influence technological innovation trends in
gate global market share figures regarding concentration levels important ways27. Firms pursuing mergers and acquisitions often
because there are differences in specific crop seed market shares at make the case to regulators that they need to consolidate into larger
the domestic level14. However, even those data show that in many entities to put more funds towards R&D that can result in break-
domestic markets, just a few firms dominate sales of key staple through innovations that promise wide-scale benefits, including the
crop seeds in a wide range of countries, in many cases with mar- possibility of lowering costs for consumers. However, at the same
ket shares above 80%, including the USA, the UK, Turkey, South time, concentrated markets can also work to impede innovation,
Africa, Thailand, Italy, Denmark, Indonesia and Brazil. In Brazil, especially when they result in higher barriers to entry for other
for example, the top four firms controlled 97% of the maize seed firms28,29. A key question for regulators is to tease out which force is
market by value in 201610. Such high levels of concentration usu- likely to prevail, if any. Untangling the implications of these compet-
ally are red flags for regulators who seek to ensure that markets ing dynamics for innovation in the seed and agrochemical sector is
remain competitive. not an easy task14.
Concentration at these levels can impact seed prices through It is important to consider how the impact of concentration
weakened competition, especially in cases where there are signifi- on innovation can change over time, as technological changes
cant barriers to entry facing new firms due to high costs for research emerge and settle, and as markets become more concentrated and
and development (R&D), as is the case in the seed and agrochemical potentially shut out new entrants due to high R&D costs. There was
sector. There are relatively few studies that examine this question a boost in seed innovation that followed mergers among seed and
empirically in the sector, given difficulties in accessing data that are chemical firms in the 1970s–1990s period, for example11, when firms
held behind paywalls by the private sector. The peer-reviewed stud- were consolidating to invest huge sums into R&D operations for the
ies that do exist looked at time-series data for key crop seed mar- development of agricultural biotechnology that resulted in new seed
kets in the USA and found that market concentration is at least one varieties. However, as the sector became more highly concentrated
significant factor contributing to higher seed prices15–17. A recent in the late 1990s and early 2000s, innovation in the agricultural bio-
Organisation for Economic Co-operation and Development study10 technology sector slowed29. Moreover, throughout the entire period,
that analysed proprietary cross-country seed price data also found a herbicide R&D languished at the big firms because their innovation
linkage between concentration and seed prices, but only at levels of agenda focused almost exclusively on the relatively less costly strat-
market concentration above 80% (although this study was limited egy of modifying seeds to work with existing herbicides30–32.
by the fact that it looked at data from only one year, 2016). The Simply focusing on whether firms ‘innovate’ in general gives
finding of the link between concentration and seed prices in these an incomplete picture of the power of concentrated firms to shape
studies raises concern about the potential implications for equity, food systems. We must also pay attention to the kinds of innova-
making this area worthy of further study. If farmers are paying more tion dominant firms promote and whom that innovation serves. In
than they would otherwise for their inputs due to market concen- other words, what matters is not whether new seed varieties and
tration, they are likely absorbing these costs in the form of lower herbicides are introduced at all, but rather, what types of seed vari-
compensation for their work. The reason is that it is difficult for eties and other related technologies are being developed (or not
farmers to pass on those higher costs to consumers because they are developed) and whether end users were consulted and social and
often selling their products to concentrated intermediary firms who environmental implications were taken into account33. In concen-
demand lower prices. trated sectors such as seeds and agrochemicals, the firms that hold
Influence over pricing is not the only way in which concentrated the most market share have tended to focus on very narrow inno-
firms can shape market dynamics. Fewer firms controlling a mar- vation pathways that privilege high-tech and relatively high-cost
ket can also limit choice by making certain products more available proprietary technologies, such as genetically modified seed and
than others. In some markets in the USA, for example, it is becom- agrochemical packages, over other less capital-intensive and more
ing increasingly difficult for farmers to access non-transgenic vari- accessible innovations, such as agroecology34. In other words, firms
eties of seeds, as the big firms with more market share can exert tend to invest in innovation pathways that are good for their own
influence over product availability18 and incentivize distributors to bottom lines, rather than developing more accessible and low-cost
focus on sales of genetically modified versions of seeds that deliver technologies for the world’s farmers, especially small-scale produc-
higher profits and the sale of other products, such as associated her- ers in the developing world.
bicides19. Intellectual property protection that transnational seed A narrow focus on certain technologies over others can also
companies hold over hybrid and genetically modified varieties also foster technological ‘lock-ins’ for users that can have undesirable
limits the ability of farmers to save seeds for replanting20. This kind environmental and social consequences. The technological innova-
of market control is intensified when there is vertical integration of tions that came with the agricultural biotechnology revolution, for
businesses across different parts of the agrifood value chain21. The example, locked farmers growing certain crops into using geneti-
seed and agrochemical businesses were once distinct industries but cally modified seeds that were designed to work only with certain
have now morphed into one because genetically modified seeds are chemical herbicides. Furthermore, glyphosate, which was once just
designed to work with specific inputs (such as certain herbicides), one of many non-selective herbicides in the 1970s, rose to become
in an integrated way. the world’s most widely used herbicide due to the fact that most
Giant firms that dominate markets also typically have more bar- genetically modified seeds were altered to be resistant to it35. As
gaining power over working conditions and labour compensation22,23. we are becoming more aware of the potential risks associated with
but as the above analysis shows, they are not the only implications between lobbying and government employment, would help to
of corporate power that result from greater concentration. Stronger reduce conflicts of interest.
and more consistently applied competition policies are needed to At the same time, it is essential for governments to foster more
ensure that a broader range of potential impacts of concentration equitable and democratic policy and governance spaces that priori-
are taken into account5,64. This means evaluating proposed mergers tize key goals such as the right to food and food system sustainabil-
and acquisitions not just on the grounds of whether they are likely ity rather than corporate profits28,57. This means creating dedicated
to affect consumer prices or innovation in a narrow sense, but also spaces for policymakers to engage in a meaningful way with the
with respect to their impact on market structures and how those voices of food producers and civil society and prioritizing indepen-
impacts are likely to affect society more broadly. A focus on mar- dent science to inform policymaking decisions. It also means estab-
ket structure impacts, for example, would reveal whether mergers lishing and enforcing rights frameworks for farmers and food system
would create undue barriers to entry for smaller and medium-scale workers, as well as upholding the right to food for all citizens68.
enterprises that may offer more opportunities not only for a The problem of concentrated corporate power in food systems,
more diverse base of entrepreneurship but also a wider range of and potential measures to address it, should be featured much more
innovation that can reduce inequities, improve productivity and prominently in the UNFSS deliberations. The measures outlined
promote sustainability. above should be considered as potential strategies to contribute to
It is also important to ensure that competition policies bet- the Summit’s ultimate goals of transforming food systems to bet-
ter articulate with strong public policies in other areas, including ter serve both people and planet. As one of the conditions of their
environmental, social, labour and health regulations to prevent participation in the Summit, civil society groups have proposed an
large firms from exploiting their access to market power in ways additional Action Track focused specifically on the need to trans-
that undermine goals in these areas64. Strong policies along these form corporate food systems6. No matter one’s views on corporate
lines would also ensure that more robust competition in food sys- power in food systems, it is important to have an open and con-
tems does not lead to ‘race to the bottom’ dynamics that encour- structive debate on this topic.
age firms to externalize costs to stay afloat in the market. More Looking beyond the UNFSS, governments will need to create
international coordination on competition policy is also needed dedicated spaces to discuss the problem of market concentration
to protect the public interest in all countries to ensure that firms and corporate power in food systems (for example, through inter-
do not simply seek out other jurisdictions to escape those with governmental governance forums such as the Committee on World
stronger regulations. Food Security). There are no quick fixes, but at a minimum, more
transparency and research are needed to understand the scale of the
More public sector support for diverse food systems. It is impor- problem and to develop effective means to address it.
tant for governments to commit to broader support for public sec-
tor food and agricultural R&D that encourages innovations that are Received: 22 February 2021; Accepted: 29 April 2021;
not driven solely by profit. More funding for public plant-breeding Published: xx xx xxxx
programmes as well as support for non-profit initiatives promot-
ing open source seeds, for example, would expand farmers’ seed
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