Jeremy Rifkin's Spurious Suit Against Monsanto
At this point, shareholders in life-sciences giant Monsanto have to be
wondering what else can go wrong. Last year, the company's prospective merger
with American Home Products unraveled in acrimony over leadership and strategy
questions. The company's agribusiness unit, which it had once planned to make
the center of its operations, became the target of serious opposition in Europe
to genetically modified seeds and crops. Even as the major stock indices
continued to rise briskly, Monsanto's shares have languished. And this past
week has seen bad news on two different fronts. Last Tuesday, a class-action
lawsuit orchestrated by environmental gadfly Jeremy Rifkin was filed against
the company, while today investors reacted to news of Monsanto's planned merger
with Pharmacia & Upjohn by sending the company's shares down 12
percent.
I've written enough here about the vices of mergers, and those vices are
well-documented enough, to make any extended comment on the Monsanto/Pharmacia
deal superfluous. There's no good reason to think that this deal will work, and
it smacks of a move made--by both Monsanto and Pharmacia--to preempt other,
perhaps hostile, suitors. So the Street's reaction to the deal was sensible.
The one interesting element of that reaction, though, was that investors were
frustrated that, as part of the deal, Monsanto will be spinning off just 19
percent of its agribusiness unit. That unit is now generally acknowledged to be
a drain on the company's stock price, and so Monsanto shareholders have been
hoping for a full spin-off. But in the wake of this deal, tax considerations
make anything more than a 19 percent spinoff next to impossible to pull
off.
In the long run, that may actually be a good thing. Given the ongoing uproar
over genetically modified crops, an uproar that has played an important role in
the opposition to the World Trade Organization and that has become a key trade
issue between the United States and Europe, agribusiness certainly seems to be
a short-term loser. But half of all the soybean crops and a third of all the
corn in the United States are already genetically modified varieties, and the
possibilities of using genetic modification to increase crop yields and protect
against pesticides, to say nothing of creating vitamin-enhanced crops, are so
wide-ranging that it seems difficult to imagine they will be dismissed out of
hand.
Of course, that's exactly what Jeremy Rifkin would like to do. The lawsuit
filed last week on behalf of a small group of American farmers and a French
organic farmer was a haphazard and scattershot collection of charges that might
have been designed to demonstrate the excesses to which the U.S. legal system
can be driven. The lawsuit accuses Monsanto of introducing products without
testing them sufficiently for safety, misleading farmers about these products,
and monopolizing the patents and sale of these unsafe products. In other words,
it's a class-action unsafe-product, fraud, antitrust lawsuit. The damages being
asked for are "unspecified," but Rifkin has said they could amount to hundreds
of millions of dollars. How he reached that figure remains unclear.
The suit is exactly what it appears to be: a publicity stunt. To begin with,
Monsanto hasn't violated any law by selling genetically modified seeds, and in
fact its products have been certified by the FDA (which, needless to say, does
not certify "normal" seeds). And the company can't be accused of selling unsafe
products because there's no evidence that the products are unsafe. That's why
the suit just says they should have tested more. The fraud charge seems equally
spurious, since Monsanto has been straightforward about its testing procedures.
And as for the antitrust charge, the fact that Novartis, DuPont, Dow, and
AstraZeneca are all named in the suit as "co-conspirators" (though not actual
defendants) makes the monopoly charge a bit hard to believe. Perhaps we could
next sue Ford, GM, DaimlerChrysler, Toyota, and Volkswagen for monopolizing the
auto market.
Obviously, there are important issues about genetically-modified agriculture
that have yet to be resolved. And just as obviously, the major agribusiness
companies have hurt themselves by obstinately opposing things like labeling of
genetically modified crops (which is now required in Japan, the E.U., and South
Korea). But class-action lawsuits are not useful ways of determining public
policy. (Perhaps the most ridiculous aspect of this whole farce is Rifkin's use
of the word "populist" to describe the suit.) They are, though, very useful
ways of fomenting ill-considered controversies. And in that sense, I suppose,
the suit is already a great success.
