Opening Statement
Consolidation and Competition in the U.S. Seed and Agrochemical Industry
Senator Mike Lee
September 20, 2016
Thank you Chairman Grassley. I know how important the issues we are here to discuss are to you, Mr. Chairman, and I’d like to thank you and your staff for your leadership on this hearing.
The subject of today’s hearing is the unprecedented consolidation in the seed and agrochemical industry involving five of the so-called “Big Six” companies. Each of these deals raises complicated antitrust questions. Taken together, these deals propose to fundamentally reshape the agricultural industry. This hearing will help assess the competitive risks—and benefits—these transactions may present, both on their own and collectively.
The Dow and DuPont transaction proposes to bring together two classic American companies. The companies plan to merge and then split into three different entities, with the Agriculture company to include DuPont Crop Protection, DuPont Pioneer, and Dow AgroSciences. This new agricultural company would combine Dow’s chemical and trait expertise with DuPont’s strength in germplasm and seeds, which, according to the parties, would allow the combined entity to realize potentially significant efficiencies in research and development with its broader range of proficiencies.
ChemChina proposes to acquire Syngenta for $43 billion. Syngenta is currently the largest seller of pesticides in North America, and the deal may serve to foster sales in China and emerging markets. I have heard repeatedly from farmers in Utah about the acquisition of Syngenta by ChemChina. Should this acquisition be successful, ChemChina, owned by the Chinese government, will control one of the world’s largest manufacturers and distributors of agrichemicals and pesticides. Our farmers are concerned about the effects this type of state ownership may have on the Chinese government’s already stringent approval process for importation of seed traits and crops. Preferential treatment by China of Syngenta products could significantly impact competitiveness throughout the industry. However, it is at least possible that China might improve the transparency and timeliness of its approval process if it possesses a greater stake in trait developments and the agrochemical industry.
And just last week, Bayer announced an agreement to purchase Monsanto for $66 billion. The deal would allow Bayer to add Monsanto’s portfolio of seed and trait products to Bayer’s chemistry strength. The proposed transaction raises hard questions that will need to be considered. These questions include whether the transaction would combine assets that less than 10 years ago the DOJ required Monsanto to divest due to the likely competitive harm that the combination would have caused. And, particularly in light of the previously mentioned transactions, regulators will have to consider whether there will remain any appropriate buyer for any assets that Bayer might be required to divest if there are competitive concerns. However, as with the proposed Dow and DuPont transaction, Bayer post-acquisition would have expertise in chemistry, seeds, and traits, potentially allowing it to create more innovative, integrated solutions and do so in a much more efficient manner.
As with any merger, the relevant antitrust inquiry under the Clayton Act is whether the effects of the deal “may be substantially to lessen competition, or tend to create a monopoly.” And while each of these proposed transactions will be investigated individually, the context of these deals taking place concurrently is also important to consider.
The seed industry is vital not just to our nation’s farmers, but also to each individual consumer. My office has heard many complaints about the potential anticompetitive harms these deals may cause. These concerns include the loss of head-to-head competition, particularly in the corn, soybean and cotton seed markets, reduced incentives and ability to innovate, foreclosure of competing agricultural companies from access to necessary inputs, such as germplasm and traits, and restricted access to foreign markets. On the other side of the ledger are the companies’ and other deal proponents’ claims of new efficiencies and an increase in research and development through more streamlined processes combining a wide array of areas of expertise, which would both be welcome developments in a sector that has been hurt by low commodity prices in recent years.
These deals are complicated and the nature of the antitrust inquiry very fact intensive, so I look forward to hearing from and engaging with our witnesses regarding these issues.
Finally, I think it is important to note that, while the final determination regarding the competitive impact of the deals will be made by the DOJ and FTC, the Judiciary Committee and the Subcommittee on Antitrust can make a valuable contribution to the conversation by closely examining any competitive concerns and looking at what other forces or market realities may be driving consolidation in the agricultural industry. We will, if necessary, return to any topics that require additional exploration in a subsequent Antitrust Subcommittee hearing. For now, I look forward to hearing from our esteemed witnesses and the productive discussion their testimony will no doubt inspire.
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Utah Navajo to Voice Opposition to Monument Designation
WASHINGTON - On Wednesday, September 21, at 4:00 p.m. EDT, the Utah congressional delegation, Utah Gov. Gary Herbert, members of the Navajo Nation from Utah, and Sutherland Institute President Boyd Matheson will hold a press conference at the Senate Swamp highlighting united state and local opposition to a national monument designation in southeast Utah.
Earlier in the day, members of the Aneth Chapter and Blue Mountain Dine’ of the Navajo Nation will deliver an opposition packet to Interior Secretary Sally Jewell that includes:
- A resolution from the Blue Mountain Dine’ opposing the proposed Bears Ears National Monument.
- A petition from the Descendants of Kaayelii opposing the proposed Bears Ears National Monument.
- A resolution from the Aneth Chalpter of the Navajo Nation opposing the proposed Bears Ears National Monument
- A resolution from the City of Blanding, Utah opposing the proposed Bears Ears National Monument.
- A resolution from the City of Monticello opposing the proposed Bears Ears National Monument.
- A resolution from the San Juan County Board of Commissioners opposing the proposed Bears Ears National Monument.
- A letter from the Utah Wildlife Board opposing the proposed Bears Ears National Monument.
- A resolution from the Utah State Legislature opposing the unilateral use of the Antiquities Act in Utah.
Members of the media wishing to attend the event must RSVP to Emily Long (Emily_Long@lee.senate.gov).
Who
Navajo residents of Utah Lewis Singer, Susie Philemon, and Danielle Shirley
President of the Sutherland Institute, Boyd Matheson
Utah Governor Gary Herbert
Senator Orrin Hatch (R-UT)
Senator Mike Lee (R-UT)
Representative Rob Bishop (R-UT)
Representative Chris Stewart (R-UT)
Representative Mia Love (R-UT)
What
Local resident opposition to a national monument designation in southeast Utah.
When
Wednesday, Sept. 21, 2016 at 4:00 p.m. EDT
Where
Senate Swamp
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September 16, 2016
"to elevate the condition of men--to lift artificial weights from all shoulders, to clear the paths of laudable pursuit for all, to afford all an unfettered start and a fair chance, in the race of life." --Abraham Lincoln
Chairman's Note: Keeping Our Republic
Perhaps the most famous words spoken on the day we commemorate today – September 17, 1787 – were those of Benjamin Franklin. After the Constitution had been signed and the Convention adjourned, Franklin was asked by a group of curious Philadelphians gathered outside Independence Hall what type of government the delegates had created. “A republic,” he replied, “if you can keep it.”
This pithy response – more of a challenge than an answer – is so memorable and quotable that we tend to repeat it more often than we pause to reflect on its meaning. So today, on the 229th anniversary of Mr. Franklin’s famous proclamation, it’s worth asking ourselves: what exactly does it take to “keep” the American republic?
To my mind, one of the best answers to this question was given by Abraham Lincoln in an address he delivered in 1838, at the ripe old age of 28, to the Young Men’s Lyceum of Springfield, Illinois. The subject of the speech was “the perpetuation of our political institutions,” which he described as the central and perennial task of republican citizenship.
Lincoln said that every generation of Americans has the responsibility to pass along to its descendants the “political edifice of liberty and equal rights” that had been established by the nation’s founders – our “hardy, brave, and patriotic” ancestors. He insisted that this process of perpetuation – the project of “keeping” the republic – would succeed only if the American people respected the nation’s laws and viewed the government with affection, rather than suspicion or derision.
The “strongest bulwark of any Government” is “the attachment of the People,” Lincoln declared. If “the laws be continually despised and disregarded,” and if the people become estranged from their public institutions, losing trust in the officials charged with making and enforcing the law, “this Government cannot last.”
Lincoln was right. At the heart of the American republic is a social compact based on mutual trust between the people and their representatives in government who are obligated to govern on their behalf. Government officials are given power to make and enforce the laws on the condition that they respect and remain accountable to the interests and concerns of the people they represent.
But today, this mutual trust and respect that are necessary to bind the American people to their public institutions has been deeply corroded. The primary reason is that the vast majority of the federal government’s do’s and don’ts governing our lives are written not by the people’s elected representatives in Congress, but by unelected, anonymous bureaucrats in the Executive Branch.
No wonder only 22 percent of the country believes that most elected officials put the interests of the nation ahead of their own interests, and a mere 19 percent of Americans say they can trust the government always or most of the time.
Following Abraham Lincoln, I believe this crisis of confidence in America today is a grave threat to our ability to preserve our public institutions for the next generation. That’s why, earlier this year, I launched the Article I Project – a new network of policymakers working together to develop a legislative agenda that will reclaim Congress’s constitutional lawmaking powers that today are being improperly exercised by the Executive Branch and thereby restore the democratic accountability on which our system of government depends.
If we are to “keep” our republic, as Benjamin Franklin challenged us to do 229 years ago, we must rebuild the American people’s trust in the nation’s public institutions. And the only way to do that is by finally making Congress responsible again – both in the sense of discharging its constitutional duties and making itself accountable for the consequences.
Issue in Focus: Saving Internet Freedom
The essence of human freedom, of civilization itself, is cooperation: cooperation between friends and family; businesses and customers; entrepreneurs and employees.
History and human experience teach that humans cooperate best when they do so voluntarily, without government coercion. That is why I fully support the eventual transition of control over the Internet from the Department of Commerce and to a private entity.
But I also worry that President Obama is hastily rushing the current transfer of power to the Internet Corporation for Assigned Names and Numbers (ICANN), which could make it easier for the United Nations to take over the Internet.
Today, the Internet is so vast and ubiquitous that is hard to imagine it existing in any other form. But for the first few decades of the Internet’s existence, the basic roadmap for navigating the Internet – the Internet Assigned Numbers Authority (IANA), the system that allocates and records the unique numerical addresses to computers – was managed by just one man on a voluntary basis.
In 1998, the Commerce Department began contracting with ICANN, a California non-profit corporation, to take over management of IANA and the Internet’s domain-name system. For the most part, the Commerce Department has allowed ICANN to govern itself, but it has always maintained the authority to pull the non-profit’s contract, which allowed the federal government to ensure that its contracting partner did not stray from its original mission.
But some governments do not like ICANN’s current hands-off approach to Internet regulation. They want more control over how Internet traffic is managed and what domain names are allowed to exist. Just five years after ICANN was created the United Nations established a Working Group on Internet Governance “to investigate and make proposals for action […] on the governance of Internet.” And in 2012 at the World Conference on International Telecommunications, several authoritarian regimes – including Russia, China, and Saudi Arabia – called for the “sovereign right” of governments to “establish and implement public policy, including international policy, on matters of Internet governance.”
The United States firmly resisted these calls for more international control over the Internet until 2013 when Edward Snowden leaked details of the National Security Agency’s surveillance program, which led the Obama administration to believe it could not maintain international support for the current system. So in March 2014, the Commerce Department announced it would be fully transferring the Internet’s names and numbers functions to ICANN. In other words, the federal government would relinquish its leverage over ICANN by giving up its ability to renew – or threaten to cancel – ICANN’s contract.
Normally, I would applaud the loss of federal government leverage over a private entity. But in this case there are some ominous signs that ICANN is not ready for the role it is about to take on.
ICANN is currently involved in litigation over alleged improper interference from governments who objected to how the organization awarded the .africa domain name. And the organization was recently admonished by an Independent Review Panel for making decisions that were “cavalier” and “simply not credible” in relation to an application for domain names.
Also, it is unclear whether the new bylaws ICANN is set to adopt for the transition will be strong enough to prevent Russia and China from exerting more control over Internet governance.
For these reasons, I am working closely with Sen. Ted Cruz (R-TX) and other senators to delay the final transfer of Internet governance to ICANN. There is no reason this transfer has to happen this year. There is no reason not to allow ICANN to work through its new governance structure on a trial basis for two years so we can make sure it will run smoothly and in a truly independent manner.
If we rush this transition and ICANN fails, it will be nearly impossible to get the Internet back from the authoritarian regimes that are pushing for more control.
That is simply not a risk we can take.
