The fifteenth meeting of the UNCTAD Research Partnership Platform was held on July 3 in Geneva, Switzerland. Alexey Ivanov, Director of the BRICS Competition Centre, spoke at the session entitled "Global Food Markets, Competition and Consumer Policy Issues".
Problems in food markets require constant attention from antimonopoly authorities and consumer protection agencies.The possible effects of high concentration in the food sector are magnified by the high social importance of the agriculture sector and agri-food markets, especially in the aftermath of the coronavirus pandemic outbreak and in times of instability, said Teresa Moreira, Head of the UNCTAD's Competition and Consumer Policies Branch.
It was not only agricultural commodity prices that were volatile, but also input prices, in particular fertilizer prices, stressed Rodrigo Cárcamo-Díaz, Officer in Charge, Commodity Policy Implementation and Outreach Section, UNCTAD. Fertilizer prices had spiked during the 2008 financial crisis, after the COVID-19 pandemic and during the fighting in Ukraine. This posed serious problems for farmers and had a negative impact on competition.
A critical issue is the economic sustainability of the agricultural value chain. In many developing countries, if the value chain is not sustainable, farmers, particularly smallholder farmers, do not have the funds to invest in staying into the market.This leads to dynamic effects in terms of concentration down the line, the speaker noted.
Concentration in the agricultural and food markets is also enhanced by technological progress. Today, cartelization can take the form of high-tech partnership agreements for which companies do not ask for permission from the antimonopoly authority, said Alexey Ivanov, Director of the BRICS Competition Centre.
"These partnerships are not formalized as joint ventures and pass under the regulators' radar. In some cases, antitrust authorities show interest in these JVs, but more often they do not. Large traders such as Bunge, Viterra or Cargill are involved in this type of collusion and go unnoticed,"
Ivanov said.
It is necessary to adapt merger review policies in developing countries to the current realities and increase cooperation between antitrust authorities, believes the Director of the BRICS Center. One of the wrong presumptions in merger reviews around the world is that it is up to regulators to prove the anticompetitive nature of a transaction, although it would be more logical to require companies to prove the necessity and value of their mergers to the market.
"Antimonopoly authorities can no longer think only about local markets. They should think about how global value chains are organized, become a kind of regulators of these chains and intervene in the mechanism of their interrelations,"
Ivanov concluded.
Simon Roberts, Professor of Economics at the University of Johannesburg in South Africa, continued the theme of coordination of companies' economic activities. Companies are colluding in a more technological and sophisticated way than they did 15 years ago. What is needed is greater cooperation among competition agencies, greater attention to different formats of business consolidation, and the creation of a knowledge base on key global mergers. The BRICS Centre is already doing this, but it needs to be done on a much larger scale, Roberts said.
"We have to measure our progress by the changes that are being made by corporations. And I'm afraid, if we're honest with ourselves, we're not moving forward fast enough, and in relative terms, we may be going backwards. So this is a kind of a real call to action,"
the economist emphasized.
New challenges related to the development of the so-called bioeconomy were highlighted by Prof. Ioannis Lianos, Professor, Chair in Global Competition Law and Public Policy, Faculty of Laws, University College London. As defined by the European Commission in 2012, the bioeconomy encompasses the production of renewable biological resources and the conversion of these resources and waste streams into value added products in food, feed, bio based products and bioenergy. All these sectors have great innovation potential through the use of a wide range of scientific, enabling and industrial technologies. Current research is already noting merger activity in the context of synthetic biology and artificial intelligence (AI) companies, Yiannis Lianos pointed out. It is important to realize that not any innovation is good per se, but only sustainable one.
"For example, the European Commission's decision on the Dow-DuPont merger states that it is not any type of innovation that will be encouraged, but rather sustainable innovation. This idea emphasizes the need to avoid isolating the economic sphere from other realms of social activity. (...) First of all, we need to look at value chains, but also at ecosystem competition. This is something that has received a lot of attention recently, as we are now moving from agrochemical and technological consolidation to a wave of mergers in agricultural trade."
Today, four global traders — ADM, Bunge, Cargill and Louis Dreyfus — control about 70% of the world grain trade, while engaging in financial speculation in commodity markets, recalled Doris Tshepe, Commissioner of the South African Competition Commission. This market structure represents an antitrust failure, as these four traders continue to acquire companies or form JVs. Bunge's recent acquisition of Viterra is a good example of this.
"The problem is that competition authorities operate within their national jurisdictions without international coordination, and many agencies recognize that they lack the knowledge of how to analyze such mergers and conduct enforcement in these global markets,"
Doris Tshepe noted. Antitrust agencies need to conduct joint research on value chains and share information on enforcement practices and investigations. In addition, they need to work with other regulators to ensure coordination of food policy and potentially use other policy levers to address these issues, the head of the South African Competition Commission said.
The focus of antitrust authorities' attention is increasingly on the issue of market structure, not just market efficiency, said Prof. Dina Waked, Professor, Science PO, Paris.
"There is a new understanding that it's not just about prices, but how these markets are organized. We're starting to look more and more at market structure.”
Dina Waked also called for a closer look at cross-shareholdings and vertical agreements between companies. She said cooperation among countries in the Global South would open the door to active enforcement of global M&A to "block harmful mergers, even if the regulator does not have sufficient evidence and reason to block in its jurisdiction."
“In this collaboration, there can be some sort of collective empowerment, but also alternative means to think about these mergers,”
she emphasized.
Fairness in the value chain is also an issue in developed jurisdictions, said Nathalie Harsdorf-Borsch, Director General of the Austrian Federal Antitrust Office. Local farmers often lack bargaining power and cannot assert their interests. "In Austria, they often don't even get written contracts. So they are the weaker part in the value chain," said Dr. Natalie Harsdorf-Borsch.
According to the World Bank, 42% of the world's population cannot afford a healthy diet, and by 2050 there will be 2 billion more people to feed. Ms. Liz Coll, Connected Consumers, United Kingdom, spoke about the threats to food security and consumer problems. According to her, consumers are caught in a vicious circle. The cheapest and most readily available food is most likely to be the end product of a system that's depleting natural resources, that's polluting through production, and is providing often highly processed, low nutrition food. Furthermore, there is no guarantee that the established system, dominated by large producers, will even withstand supply chain shocks and shortages that occur through natural, political, or economic events.
"Involving consumers and producers in the design of a better food system is vital,"
believes Ms. Liz Coll. It is necessary to improve the system of distributing agricultural subsidies, strengthen monitoring to stop greenwashing practices and provide antitrust authorities with the right tools to investigate pricing, said the founder of Connected Consumers.
The Research Partnership Platform on Competition and Consumer Protection was established in 2010 as an informal mechanism to engage researchers in UNCTAD’s work on competition and consumer protection. The eighth United Nations Conference to Review All Aspects of the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, held in 2020, recognised “the useful role of the platform in strengthening UNCTAD research and policy analysis capacities and linking research findings to the UNCTAD technical cooperation pillar".
