Introduction

Biotech seeds have become an enormously-­?valuable part of the food supply in the US and abroad. A substantial portion of soybeans, corn, cotton and other agricultural products grown in the US are derived from genetically-­?modified seeds. The genetic traits that give these seeds their value—traits that confer resistance to herbicide and high yields, for example—are often developed by large agribusiness companies, with enormous research and development investments. The process is technologically advanced, time- and money-intensive, a risky investment, and subject to various layers of regulation. The process of developing a new seed variety can take 15 years and require hundreds of millions of dollars of investment. Regulations from the USDA, the FDA and the EPA can slow or halt the process, and international trade regulations (particularly from countries that ban or severely restrict importation of GMOs) complicate the control and the commercialization of the final products.

In part for these reasons, the biotech seed industry—like all segments of the US agricultural industry—has seen a substantial increase in concentration. Large scale is of obvious benefit to companies engaged in massively expensive R&D programs that can achieve economies of scale and thus lower costs. Meanwhile, there are also likely other vertical efficiencies associated with contractual arrangements between various players in the transgenic supply chain:

Vertical efficiencies such as reduced transactions costs and coordination achieved by exploiting the complementarities between traits and traited seed assets can also reduce costs. Closer, more precise coordination between levels in the transgenic supply chain may result in more efficient creation of new transgenic varieties in increasingly differentiated product markets.[1]

Thus it is not surprising that the period of increasing innovation has been accompanied with an increase in concentration as innovating firms assembled the necessary, complementary assets to develop and commercialize their innovations, often through vertical and horizontal mergers and acquisitions.[2] The remarkable gains in biotech seed development since the industry’s infancy less than 20 years ago, along with the complexities of the industry and our limited understanding of the economic significance of organizational choices in the industry, should counsel strongly against hasty antitrust intervention in the industry. Consumers enjoy significant benefits from innovation that must be considered before responding too quickly or improperly to complaints about increased concentration, especially if the complaints come merely from competitors.

Read the full comment here.

[1] Diana L. Moss, “Transgenic Seed Platforms: Competition Between a Rock and a Hard Place?,” American Antitrust Institute White Paper (October 23, 2009), available at http://www.antitrustinstitute.org/Archives/seed.ashx.

[2] Id. at Figure 2. While Moss happens to conclude that this inverse correlation is a surprise and struggles to find explanations for the seeming contradiction, the proffered explanations are unpersuasive (or irrelevant). See Nicholas Kalaitzandonakes & Bruce Bjornson, Vertical and horizontal coordination in the Agro-­ biotechnology industry: Evidence and implications, 29 J. AG. AND APPL. ECON. 129 (1997) for a more relevant analysis of industry forces.

Biotech seeds have become an enormously-valuable part of the food supply in the US and abroad.  A substantial portion of soybeans, corn, cotton and other agricultural products grown in the US are derived from genetically-modified seeds.  The genetic traits that give these seeds their value—traits that confer resistance to herbicide and high yields, for example—are often developed by large agribusiness companies, with enormous research and development investments.  The process is technologically-advanced, time- and money-intensive, a risky investment, and subject to various layers of regulation.  The process of developing a new seed variety can take 15 years and require hundreds of millions of dollars of investment.  Regulations from the USDA, the FDA and the EPA can slow or halt the process, and international trade regulations (particularly from countries that ban or severely restrict importation of GMOs) complicate the control and the commercialization of the final products.

Read the full comments here.

I’m delighted to report that the Liberty Fund has produced a three-volume collection of my dad’s oeuvre.  Fred McChesney edits, Jon Macey writes a new biography and Henry Butler, Steve Bainbridge and Jon Macey write introductions.  The collection can be ordered here.

Read the full piece here.

A TOTM reader sends me the following interesting development on an emerging dispute over shelf space competition in Israeli supermarkets…

Read the full piece here. 

Leading antitrust critic and abolitionist, Dominick Armentano, has a letter to the editor in the WSJ.  The point of the letter to the editor is rather specific: that FTC’s attack on Intel is no outlier in the historical context of antitrust enforcement, contrary to the WSJ’s description.  To the contrary, Armentano argues that Intel is just another in a long line of misguided enforcement actions.

Read the full piece here.

Judge Saris’s district court opinion denying the motion to exclude one of the plaintiff’s economic experts in  Natchitoches Parish Hospital v. Tyco International recently came across my desk.  It is an interesting case involving allegations that Covidien, a leading supplier of “sharps containers” used for the disposal of various needle-involving medical products (syringes, IVs, etc.) violated the antitrust laws with various market share discounting arrangements with buyers and exclusive dealing contracts with GPOs.   I’ve not been following this litigation very closely, which has now apparently survived summary judgment.  What caught my eye was a passage from the Daubert opinion to exclude Professor Einer Elhauge’s expert economic testimony on behalf of the plaintiff.  As an interesting side note, we’ve had occasion to opine ourselves on some of Professor Elhauge’s views on the related topic of loyalty discounts here.  If you’d like to get caught fully up to speed, read the briefs.  I’ll start you off with the motion to exclude , the opposition, and a declaration submitted by John Bates Clark Medal / Nobel Prize winner Daniel McFadden in support of the motion to exclude.

Read the full piece here.

The Nanny Brigade has once again descended on the Windy City. It previously sought to protect us from unhealthy trans fats, smoking in private establishments that we voluntarily patronize, and those oh-so-offensive theatrical depictions of smoking. The Nannies are now working to protect Chicago’s well-heeled from risks associated with the locally produced, artisanal sausages sold in some of the city’s finest restaurants. Whatever would we do without these folks (other than enjoy our lives more)?

Read the full piece here.

Occasionally I read Mr. Krugman’s column for entertainment purposes — sort of like watching Project Runway or Animals Gone Wild. This morning was one of those occasions. The man is a partisan hack of the worst sort. Why does anyone take his political observations seriously?

Read the full piece here.

When I first met my father in law, he spent hours trying to convince me of the cultural superiority of his tastes. Some of these were indeed triumphs. I’m thinking here of “Dr. Strangelove,” “The 400 Blows,” and the music of Richard Wagner. (Others were not. I’m thinking here of “Children of Paradise,” a movie about mimes.) His love of Wagner is curious; he was born in Israel and almost his entire family was murdered in the Warsaw ghetto. This is not a trivial issue. Hitler loved Wagner too, and used his music for political ends. Wagner was himself a hater of Jews. Accordingly, Israel banned public performance of Wagner’s music nearly six decades ago, and the taboo was not broken until 1995 when “The Flying Dutchman” was played on Israeli radio. Six years later Daniel Barenboim (a Jew) led the Berlin Staatskapelle in a performance of an overture from “Tristan und Isolde” at an Israel Festival, which only reignited the controversy.

Read the full piece here.