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With the ECA gone, should India welcome Food Oligopoly?

The days of traditional tools to check competition in the food sector are redundant, CCI needs to evolve too if it wants to safeguard food of the Indians from an onslaught of food oligopolies. India needs a systemic approach to tackle this new threat. — Indra Shekhar Singh 


As India dismantled her Essential Commodities Act allowing for – removal of food items from its purview, end to stocking limits, and inviting FDI into the food and farming sector, one question remains unanswered, are Indian competition laws mature enough to prevent a food oligopoly in India too?  

Perhaps the government’s advisors over-looked 2.5 lakh crore Dal scam of 2015, and also the highly concentrated global scenario. Today 4 commodity traders without owning any land (through contracts) control over 85% of the world’s grain.  Add to it total revenue of leading six agricultural commodity traders was $377 billion in 2018 versus $295 billion of the combined revenue for the global markets for seeds, pesticides, farm equipment and fertilizer in 2018. Cargill minted $115 billion in 2018, far exceeding global sales of the entire farm machinery sector ($90.7 billion). Meanwhile, Chinese state-owned COFCO International, already a major commodity trader, plans to aggressively increase its global presence and Smithfield Foods/WH Group (China-owned) is also the world’s largest pork processor.

But when it comes to food oligopolies, the US is our lodestar, as 4 corporations control over 84% of the total food. For example the US meat industry, apart from terrible working conditions and under paid workers, does also boasts that “79% US beef, 65% pork, and 57% poultry” come from 4 corporations. Thousands of brands at the grocery supermarkets are owned or supplied by the same companies, in fact many of the supermarkets are also owned by the same people. So the complete link from seed to plate is vertically integrated and owned by a handful. 

But are the American farmers better? Slaughterhouse Blues: The Meat and Poultry Industry of North America, answers this question, “most of them don’t really own the animals they raise. Virtually all the chickens sold in the United States are grown under production contracts to a handful of companies, who own the birds from egg to supermarket.” Further in last ten years retail meat prices increased by over 40% and simultaneously gross farm income for small- and medium-sized pig and cattle farmers fell by 32% and 71% chicken farmers lived under the poverty line.  It’s no secret that many Iowa farmers own about 20 percent of the land they farm, while 80 percent is rented. They are tenants and farm-hands on good days.

The US government did bring out Sherman Anti-trust Act in the 1890 to prevent monopolies in the beef, meat, etc industry, but Ronald Reagan administration changed this to accommodate relaxations if the “proposed merger promised to lead to greater marketplace “efficiency”, Barry C. Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction is a good read to understand these changes. 

Unfortunately, Reagan’s measures were counter-productive. For by 1995 Department of Justice (DOJ) had filed 126 criminal cases against 73 corporations and 80 individuals in 18 states, resulting in fines totalling $59 million. 29 saw jail time. The corporations were alerted and changed their “efficiency” tactics. They started using vertical integration and mergers to escape anti-trust probes. 

Big Ag new tactics involved “deals” of various kinds - joint ventures, strategic alliances, intellectual property swaps, employee swaps, cartel arrangements and more. But the trump card was horizontal shareholding by giant institutional investors aka asset management firms. With the information of their shareholder private, the top six of asset management firms together own majority stakes in the global seed to agro-chemical to grain supply. They are buy shares of competing companies and also aggressively increasing their investments in all segments of the food chain. Vandana Shiva’s Oneness vs the 1% gives a detailed analysis of new threats to the food system.    

But US is not alone, all across Europe, North America and even in Japan a handful of corporations control the major super markets and grocery stores. 2014 OECD report on Competition Issues in the Food Chain Industry  highlights “countries like Japan, Finland, Italy and Hungary consider that traditional competition policy tools are not enough to deal with issues of buyer power and unfair trading practices.” Thereafter special laws are enacted to even consider 30% share as dominant position in some countries. 

Given our laurels on the hunger index, India must be very cautious for food is not industry and “agri-dollars” only, it is a matter of survival and national security. India need to reconsider FDI policy in retail and food sector by inviting companies to invest in India, but make majority ownership strictly Indian and also introduce clauses for compulsory regional partnerships in states of operations. The CCI after understanding the global scenario needs to adopt a maximum of 25% market share as dominant position, bring rules against vertical ownership/integration to allow for a healthy competition and real time assessment of market share. As most of these firms are invested in the seed to the supermarket, the new paradigm is needed to prevent monopolies and ownership of the food sector by a handful of assets management firms. Plus, CCI has already had an acidulous tryst with a foreign seed company refusing to comply; the case is being heard in the courts. One begs the question will the CCI have powers to effectively probe foreign corporations in the future too?  The days of traditional tools to check competition in the food sector are redundant, CCI needs to evolve too if it wants to safeguard food of the Indians from an onslaught of food oligopolies. India needs a systemic approach to tackle this new threat.              

(Views are personal.)
(Director – Policy and Outreach, National Seed Association of India) 

References – 
1.    https://etcgroup.org/sites/www.etcgroup.org/files/files/etc_platetechtonics_a4_nov2019_web.pdf
2.    https://www.nybooks.com/articles/2020/06/11/covid-19-sickness-food-supply/
3.    Barry C. Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction (Wiley, 2011), pp. 135–138.
4.    https://disparitytoparity.org/a-farmer-controlled-consumer-oriented-food-system/
5.    https://www.forbes.com/sites/csr/2012/08/06/choice-at-the-supermarket-is-our-food-system-the-perfect-oligopoly/?sh=28548bb8334e
6.    Claire Kelloway, “Why Are Farmers Destroying Food While Grocery Stores Are Empty?,” Washington Monthly, April 28, 2020.
7.    https://www.oecd.org/daf/competition/CompetitionIssuesintheFoodChainIndustry.pdf
8.    https://financialpost.com/news/retail-marketing/canadas-grocery-oligopoly-missed-a-glorious-opportunity-and-may-now-pay-the-price-one-way-or-another
9.    https://www.bloomberg.com/news/articles/2020-11-09/surging-food-prices-test-latin-america-s-top-central-banks
10.    https://unctad.org/system/files/non-official-document/tdb61_c01_UNCTAD.pdf
11.    http://www.etcgroup.org/sites/www.etcgroup.org/files/files/blockingthechain_english_web.pdf
12.    http://www.ipes-food.org/_img/upload/files/Concentration_FullReport.pdf
13.    Vandana Shiva’s ‘Oneness vs the 1%
14.    https://www.bloombergquint.com/politics/pm-invites-canadian-businesses-to-invest-in-education-agri-manufacturing-sectors
15.    https://thewire.in/economy/surge-in-2015-pulse-prices-was-a-result-of-cartellisation
16.    https://www.farmaid.org/issues/corporate-power/corporate-power-in-ag/
17.    https://thewire.in/rights/india-ranks-94-among-107-countries-in-global-hunger-index-2020
18.    https://www.livemint.com/news/india/delhi-hc-dismisses-plea-by-monsanto-to-quash-probe-initiated-by-cci-11590001104120.html

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