Michael Sykuta headshot

Associate Professor, Division of Applied Sciences
University of Missouri

Michael Sykuta is an economist and Associate Professor in the Division of Applied Social Sciences at the University of Missouri. He is Executive Director of the Financial Research Institute (FRI), whose programs focus on public utilities regulation and utility industry issues. He is also Co-founder and Director of the Contracting and Organizations Research Institute (CORI), an interdisciplinary research program focused on the economics and law of contracting, organization, and corporate governance.

Intellectual Property

Popular Media

Yet More Evidence Against the DOJ's Antitrust Plantings

A couple weeks ago, Geoff wrote concerning the DOJ’s misguided antitrust interest in Monsanto. With that in mind, I was very interested to see today’s announcement that Monsanto’s earnings and gross margins are significantly off for its fiscal first quarter.  According to the Wall Street Journal report, Monsanto posted a loss for the quarter due to a 36% drop in sales and lower margins resulting from price decreases.  Leading the drop, sales of the company’s Roundup and other herbicide products tumbled 63%!

Clue #1: Falling prices are not typically associated with (legitimate) cause for antitrust concerns.

In the case of Roundup, the popular herbicide is under intense competition from generic brands since the Roundup patent expired. That’s exactly the way our limited-monopoly intellectual property system is supposed to work: allow the innovator a period of time to recoup their investment in the innovation, then open the door to competition that will drive down prices and spread use of the innovation even further (if the innovation is really of value to begin with).

More importantly to the DOJ’s witch hunt, which is not about herbicide but biotechnology and seed products, the WSJ went on to report that sales of seeds and genomics dropped 6.2%!  Seeds containing genetic traits that provide herbicide and pest resistance command a premium, largely reflecting the cost savings to farmers from using less intensive farming practices.  Seems in an era of lower commodity prices, farmers are less willing to shell out the big bucks for biotech seeds.  Who’d have guessed?  Well, maybe someone who doesn’t make a living sniffing around for anticompetitive behavior under ever rock and stone (or competitors who envy a popular, proprietary technology).

Clue #2: If consumers (in this case farmers) are choosing to substitute away from relatively more expensive products (biotech seeds)  in favor of less expensive, even if lower-tech, products, the high-tech product does not, by definition, enjoy a monopoly.  And don’t forget Clue #1.

All this to say, add another piece of evidence against the need for and wisdom of the DOJ and USDA’s impending traveling circus “investigating” the state of competition in the agriculture sector.

Posted in antitrust, business, economics, patent, regulation, Sykuta