Bayer Pauses Parts of Its Seed Loyalty Programs Following DOJ Scrutiny
Photo by iStock/jetcityimage
Decades of unchecked mergers paired with restrictive patents have allowed a few dominant corporations to control the seed industry and block out new competitors. Antitrust enforcers have been investigating seed companies since the Biden administration, and last month, Trump’s Justice Department announced that one major seed player will pause some of its anticompetitive practices.
Bayer Crop Science, the wholly owned seed division of German pharmaceutical giant Bayer, withdrew certain loyalty payments and incentives that restrict independent seed companies’ ability to work with its competitors. Bayer voluntarily made these changes months ago, but under a new agreement with the DOJ, it will not reinstate them for seven years. The DOJ published very few details about its agreement with Bayer, including what precisely it covers or how it will be enforced. The DOJ and several state attorneys general will continue to investigate Bayer for antitrust violations. The DOJ did not respond to questions about its agreement as of publication.
Just two companies, Bayer and Corteva, sell more than 70% of all corn seed and 65% of all soybean seed in the U.S. These goliaths have dropped seed lines after acquiring competitors and maintained close control over patented seed traits and genetics, reducing farmers’ choices and creating barriers for competitors and researchers to develop new plant varieties.
The Trump administration has been hammering home a message of standing up for farmers against monopolies, especially as agricultural input costs rise due to the blockade on the Strait of Hormuz. Yet without bigger changes to seed contracts, intellectual property restrictions, and other exclusionary tactics, farmers will still struggle to access a wider variety of more affordable seed. Antitrust enforcers under Democratic and Republican administrations have investigated substantially similar conduct in the seed industry since 2009, yet in that time, the industry has only become more consolidated.
The DOJ’s recent announcement focuses on conduct that restricts independent seed companies’ ability to develop generic products or work with competing seed parent companies, ensuring that independents only sell seeds from the largest companies or even limit their offerings to traits and genetics from one seed company.
To sell seeds with the blockbuster qualities that farmers are looking for, such as Roundup or Dicamba resistance, independent seed companies must license patented traits and seeds from dominant corporations. Independents license parent seeds to grow, harvest, and clean their own crop of seeds to sell, generally selecting for varieties that meet local needs. Bayer and Corteva control 88% of all utility patents on corn seed and 71% of all utility patents on soybean seed.
Licensing these traits doesn’t come cheap. Independent seed producers say that licensing is their biggest cost. The Capitol Forum reported in December that corn seed royalties cost three to seven times more than independents’ seed production costs. Licensing contracts also come with conduct restrictions.
A recent lawsuit alleges that Bayer’s licensing requirements are designed to prevent competition from new entrants or generics. 90% of all commercial corn seed planted in the U.S. contains Bayer’s trait for glyphosate (Roundup) resistance, the suit claims. Bayer’s patent on the preferred trait for corn glyphosate resistance expired in 2022, yet it still charges independents to license this off-patent trait. These licensing agreements are non-negotiable and restrictive: independents can only sell seeds with licensed components to other licensed dealers and farmers, and they cannot use licensed products to develop competing generic products, even after patents have expired.
Licensing agreements also require that seed companies share detailed data about their customers and sales. Independent seed companies compete directly with the dominant seed corporations that they license traits from, and dominant seed corporations could easily use this data to undercut independents on price or target their customers. One Iowa-based independent, Latham Quality, alleges that Bayer did exactly this after Bayer learned that Latham was trying to produce generic glyphosate-resistant corn seed. Bayer allegedly increased Latham’s royalty rates and offered Latham’s customers steep, below-cost discounts, dropping their corn seed prices below Latham’s licensing fee. Latham could not reasonably compete and lost over $8 million in annual sales in two weeks, the suit says.
Altogether, Latham’s lawsuit alleges that this regime allows Bayer to maintain close control of its glyphosate resistant corn seed line and prevent competitors from accessing it to develop cheaper, generic alternatives. The suit also alleges that Corteva, Bayer’s primary competitor, pays royalties to use Bayer’s now off-patent glyphosate-resistant corn trait and cannot sub-license the trait, maintaining the monopoly.
In a comment shared with Food & Power, Bayer said that it “believes the allegations lack merit” and that it “competes fairly in all facets of its agricultural business and in compliance with applicable laws.”
To offset rising licensing costs, independents rely on loyalty rebates and marketing payments from dominant seed companies. Bayer offers loyalty payments to seed companies that reach certain sales goals, but if the sales goal is too high, this rebate program effectively penalizes seed makers for buying from competitors. Seed companies may also bundle rebates, so an independent seed maker must buy one company’s corn and soybean seed to get the rebate. Similar bundled rebates exist for agricultural input dealers, who may need to meet sales goals for one company’s seeds, pesticides, and digital software to maximize rebate revenue.
DOJ’s reported agreement with Bayer addresses one aspect of this behavior; for the next seven years, Bayer will not require seed sellers to meet sales goals for both its corn and soybean seeds to receive loyalty payments. Bayer told Food & Power that it will also eliminate the “Performance Incentive” element of its seed licensing program. Technically, Bayer stopped bundling its corn and soybean rewards program last year and announced its plans to drop seed licensing performance incentives for the 2027 growing season in February. Under its agreement with the DOJ, Bayer merely commits to not reinstate these programs for seven more years.
The exact contours of the agreement and how it will be enforced are unclear. “Without any real details and without a consent decree, it’s really hard to know if this will have a meaningful impact on competition in the marketplace that leads to more choice and better prices for American farmers,” says University of Wisconsin seed industry researcher, Kiki Hubbard.
Further, the agreement only focuses on Bayer’s loyalty programs for seed licensees. Hubbard argues that regulators must also establish fair contracting terms for seed licensing agreements to truly promote competition. “If regulators do not address the anticompetitive effects of these licensing agreements, I don’t have a lot of hope that this private agreement will lead to much change and make it easier for independent seed companies to not only remain profitable year to year, but to remain solvent,” Hubbard says.
Antitrust enforcers have interrogated the seed industry for decades with little action. In 2012, the Obama administration quietly closed a three-year investigation into then-Monsanto’s restrictive licensing agreements. The Biden administration brought an antitrust lawsuit against Corteva for using loyalty rebates to block generic pesticide competitors, which could set precedent for similar conduct in seed, but does not address unique issues with seed licensing contracts. Biden’s USDA also launched a Seed Liaison project, which helped farmers and seed breeders navigate the complex world of seed patents and labels. The Trump administration cancelled the cooperative agreement that funded Seed Liaison staff last year.
What We’re Reading
Your F&P author and Open Markets legal director, Sandeep Vaheesan, wrote a guest essay for the New York Times on the need for aggressive antitrust action in the food industry. (New York Times)
Cargill locked out and stopped paying workers from its Fort Morgan plant after the staff union rejected the packer’s latest offer in their contract negotiations. (Rocky Mountain PBS)
A new white paper from Columbia’s Sabin Center outlines anticompetitive practices by major food corporations that may slow the development of alternative proteins. (Columbia Law School)