Stop the merger of Dow and DuPont: ASHA writes to Competition Commission of India

April 11^th 2017

To:

The Secretary,

Competition Commission of India,

18-20, 7^th Floor, Hindustan Times House,

Kasturba Gandhi Marg,

New Delhi 110001

Email: secy@cci.gov.in

 

Dear Madam/Sir,

Sub: Our objection to the proposed merger/combination between Dow Chemical Company and E.I. du Pont de Nemours (incl. associated Indian companies) – please disallow it – reg.

Greetings! This is in response to Competition Commission of India’s invitation to the public to provide comments on the proposed combination of Dow and DuPont as CCI is prima facie of the opinion that this combination is likely to have an appreciable adverse effect on competition. We agree fully with you and seek to explain our position further through this letter.

We introduce ourselves as a large informal national network called Kisan Swaraj or ASHA (Alliance for Sustainable & Holistic Agriculture) working to promote sustainable farm livelihoods, with more than 400 associated organisations and individuals spread over 25 states of India. More information about our work is available at www.kisanswaraj.in.

Amongst other areas of work, we have been working in the area of seed diversity revival in farmers’ fields and to ensure seed sovereignty of farming communities, and thereby the nation. It is not an exaggeration to say that such seed sovereignty is closely linked to our national food security and sovereignty too, given that big agri-business corporations have shown time and time again that they will use all the means at their disposal, whether it be IPR laws or technologies like hybrid and Genetic Use Restriction Technology (GURT) or market maneuvers like the proposed merger between Dow and DuPont to ensure exclusive monopolistic markets. In their pursuit to do so, they will not hesitate to sue farmers or governments or other corporations in the national seed industry, as has been experienced in India as well as elsewhere. CCI is already familiar with the practices adopted by similar corporations like Monsanto when it studied the subject of Bt cotton and royalty/licensing fees charges in the country, in 2006-07 as MRTPC and in the recent past as CCI.

While the CCI pertains itself to anti-competition behavior of corporations, it is also not out of place to point out that Dow has already been implicated in the past in India, for their ability to dodge liability towards citizens (as in the case of Bhopal gas disaster and the subsequent contamination from the toxic wastes lying in its factory after its take over of Union Carbide), or to resort to corruption as was seen in the case of De Nocil (Dow’s subsidiary) with its pesticides registration. This just goes to show the nature of these corporations.

The 3 mega-combinations in the agri-business sector including that of Dow and DuPont (in addition to Bayer’s takeover of Monsanto, and ChemChina’s merger with Syngenta) are going to result in a concentration of 60% of global market of proprietary seeds and agri-chemicals in the hands of 3 entities, which is effectively buying up competition. Du Pont, as the world’s second biggest seed company and Dow as the fifth largest (in addition to their sometimes-associated agri-chemical businesses), have a combined control over a quarter of the global seed market. The point to be noted is that there could be a chain of linked products brought in, like herbicide tolerant GMOs, for instance, where along with seeds, an associated proprietary herbicide is also marketed by the same entity. This needs to be explored too, with additional information sought on GMO products in the pipeline for these companies.

The concern is with regard to (exorbitant) prices as well as (lack of) choices for farmers both in terms of seeds and pesticides. With competition effectively wiped out, farmers who do not have their own seeds saved will be dependent on these corporations and their cost of cultivation is likely to shoot up. This then has implications for indebtedness as well as farm suicides associated with increased debt burden due to increasing cost of cultivation, not supported by (unremunerative) markets.

The lack of choices will also have serious environmental ramifications for the country, with monocropping being the result of such a situation of lack of competition. Lack of choices for farmers will also mean lack of choices for consumers. Increased cost of cultivation for farmers could also translate into increased food prices for consumers.

It is also apparent that the lobbying power of these mega-corporations will be such that farmers’ interests are not likely to prevail when it comes to individual instances of serious losses or violations with regard to anti-competition rules. State governments in particular, who bear the brunt of such losses incurred by farmers, are neither empowered nor made responsible in any such scenario, even though Agriculture is a State subject as per the Constitution of India. This is of course unfair and unconstitutional.

Form IV published on the DuPont India website[1] stating that neither EI du Pont de Nemours nor Dow have no direct equity interest in the Indian entities/companies, their assets or properties or business, and have no direct presence in India, do not carry on any business in India directly etc., is not material to the fact that these Indian entities do run their businesses in the name of the parent companies and draw upon the parent companies heavily. Further, after the merger, there will be a pure-play agriculture company of DowDuPont. Globally, it is expected that DowDuPont will have a market capitalization of around $130 billion. Form IV clearly shows that the Indian entities overlap in agrochemicals and seeds, amongst other products. This will obviously lead to a significant increment in this business area, contradictory to what is being claimed and presented.

Like in the case of Environment Impact Assessment where cumulative impact is assessed, the Competition Commission of India also should have to assess this case in the context of two other mega mergers/combinations in the offing and thereby, the cumulative adverse effect on competition. Point 14 of Form IV alludes to market shares of other agro-chemical companies which are also undergoing mergers/takeovers, for instance, along with Point 18. The current picture being projected segment by segment of pesticides (incl. fungicides, herbicides, insecticides etc.) may not apply in such a case of other mergers and internal decisions thereby.

CCI has to also consider parameters other than current market shares for different crop segments, like patents and any data exclusivity held by these two entities and their combined entity DowDuPont. Unless this is done specifically for those proprietary products which are giving them the largest market segments, nothing significant can be concluded from the submission made by these companies on effect on “nature and extent of innovation”.

In terms of choices for consumers (Point 24 where the parties submit that consumers have a wide choice between competing products all of which are easily available), anecdotal information available with ASHA shows that MNCs have more attractive “junkets” to offer to their distributors and retailers when it comes to promotion of sales of their products. These include trips to more exotic destinations, compared to what other companies have to offer.

When it comes to corn seed market, combined market share at around 30% is indeed significant, whatever Form IV might argue. We once again point out that the CCI has to take up a cumulative assessment, and not case by case. Meanwhile, more and more farmers are being shifted to hybrid corn cultivation by large scale devious programmes initiated by big MNCs (like Project SunShine, Project Golden Rays etc.) through state government departments, forcing farmers to become dependent on external seed sources by luring them into hybrid corn cultivation through freebies in the initial years. Most of these programmes are being taken up in adivasi/tribal pockets where livelihoods are precarious, to say the least. Our fact finding reports on these programmes are present here: https://kisanswaraj.in/category/reports/. This major expansion of hybrid corn cultivation (induced by mainly Monsanto based on inexplicable, unscientific reasons), in the context of these mega-mergers will induce great riskiness in the livelihoods of the most vulnerable farmers in the country.

In Summary:

It is apparent that this mega merger will have its impacts on India’s farmers, that too some of the most vulnerable (adivasi farmers growing hybrid maize for instance).

 

The Directive Principles of State Policy require the State [Article 39(c)] to ensure that the operation of the economic system does not result in the concentrationof wealth and the means of production to the common detriment[2]. From all evidence that already exists, this is a serious threat to competition, and thereby, farm livelihoods (in addition to several indirect impacts on other citizens and environment too). These mega-combinations should be stopped and the CCI is urged strongly to do so.

 

Sincerely,

 

Kavitha Kuruganti                                  

National Co-Convenor

Mob: 08880067772