The Front

Monsanto Sued

Monsanto has led a global cartel engaged in biotech product- and price-fixing, charges a landmark class action lawsuit filed in December in the U.S. District Court for the District of Columbia.

The Foundation on Economic Trends and the National Family Farm Coalition filed the suit on behalf of both U.S. and international farmers who purchased genetically modified (GM) corn and/or soybeans, as well as farmers engaged in farming non-GM crops in the 1999-2000 growing season.

A 1996 internal Monsanto document known as the "Maize Protection Business Plan" describes how the company, along with numerous co-conspirators, including DuPont, Dow Chemical, Novartis and AstraZeneca, formed a global cartel to monopolize and restrain trade in the GM seed market, effectively precluding additional competitors from entering the marketplace, according to the plaintiffs' complaint.

The lawsuit also alleges that Monsanto failed to adequately test GM seeds and crops for human health and environmental safety prior to marketing them, thereby causing a collapse in international consumer and regulatory confidence in GM food products. As a result, U.S. and international farmers suffered economic losses, the complaint alleges.

Because of cross-pollination in the field and intermingling during handling and storage, even farmers who grew non-GM seeds suffered in the market, the suit alleges.

The lawsuit seeks both damages and injunctive relief, with the plaintiffs petitioning the court to ensure that GM seeds are no longer sold until Monsanto has "adequately tested GM seeds and crops for human health and environmental safety, and subjected such tests to independent scientific review and public disclosure."

"It is my hope that this class action lawsuit will refocus the global discussion around GM foods by shifting the public debate away from the more narrow issues of trade relations and government regulatory protocols toward the broader issue of corporate concentration of power over world agriculture in the emerging biotech century," says Jeremy Rifkin, president of the Foundation on Economic Trends.

"Monsanto and the other co-conspirators named in this class action litigation represent a new and potentially dangerous exercise of influence over agricultural markets just as was the case at the beginning of the twentieth century when Standard Oil controlled much of the oil market and used its influence to dictate the terms of industrial life," Rifkin says.

Rifkin says there is a chance that the government might join the lawsuit sometime this year and that similar cases could be filed in other countries.

"This action is another in a series of unsuccessful attempts by veteran antagonists to stop a technology with the potential to improve our environment, increase food production and improve health," responds David Snively, assistant general counsel for Monsanto. "We're confident this suit will be dismissed."

The Foundation on Economic Trends and the National Family Farm Coalition are launching a public education campaign to parallel the litigation. Rifkin kicked off the campaign on December 15 with a briefing for members of the French National Assembly and business leaders in Paris. Three hundred seventy non-governmental organizations in 47 countries have already consented to be advisers to the lawsuit.

"As a family farmer, I can tell you that farmers and consumers of the world have been sold a bill of goods because genetically modified organisms (GMOs) do not perform as advertised," says Bill Christison, president of the National Family Farm Coalition.

"The efforts of Monsanto and their co-conspirators has been to flood the world with seeds that produce products consumers do not want to eat," Christison says.

"For family farmers this lawsuit is historic. Today, Monsanto and its co-conspirators have monopoly control over our food system. Their operations threaten world food security. This litigation exposes their practices."

In a prepared statement, Monsanto stated that claims that it has monopolized the GM corn and soybean seed markets are groundless because "farmers today have more choices of high quality seed than ever before. This year in the U.S. alone, hundreds of locally suited seed varieties, both with and without traits imparted through biotechnology, were available to growers. This is in contrast to several decades ago, when growers could expect only a limited number [of] new seed varieties in each crop each year."

The company also claims that its seeds have been "subjected to intense scrutiny by regulatory agencies," including the U.S. Department of Agriculture, EPA and FDA.

"Monsanto is committed to the farmer's right to have access to high quality seed choices that allow them to continue in the outstanding progress they have made in producing more food with fewer resources on less land," Snively adds.

In 1998, the market for soybeans in the United States was estimated at $17.7 billion. The 1999 U.S. corn market was slightly larger, estimated at $20 billion.

— Charlie Cray

Corporate Welfare Challenged

Now that distinction is about to face a challenge in a lawsuit expected to be filed in Toledo in late January.

On behalf of a number of residential and small business plaintiffs, Toledo attorney Terry Lodge and his co-counsel, Northeastern University Law Professor Peter Enrich, plan to challenge a massive subsidy from Toledo and the state of Ohio to DaimlerChrysler to keep a Jeep plant in the city.

Faced with the threat of the existing Jeep plant closing, Toledo showered a $281 million local, state and federal subsidy package on the multinational to support company $1.2 billion plant expansion plans. The package includes a property exemption for 10 years, transfer of free land, including site preparation, transfer of environmental liability from DaimlerChrysler to the city and assorted other corporate welfare handouts.

In exchange, Daimler Chrysler has committed to expand its Jeep facilities — but will actually reduce the number of Jeep jobs from the current 5,600 to 4,900 (DaimlerChrysler’s public claim) or 4,200 (the level the company specifies it will try to preserve in an unenforceable provision in its agreement with Toledo) or something much lower (a likely result based on United Auto Worker estimates and recent layoffs at the plant).

The Toledo deal has also attracted national attention because it requires the displacement of a community near the plant. With the threat of a taking by eminent domain in the background, the City bought out 89 households, and will transfer the community’s land to DaimlerChrysler. In its public explanations, Jeep identifies the community’s parcel as a potential truck waiting area; but in its map, the area is to be used for landscaping — a truck waiting area is designated for another parcel of land.

The lawsuit challenging the subsidies will be based on two theories. First, small, local businesses assert that the subsidy package denies them equal protection under the law, on the grounds, Lodge says, that “they get no benefit from the corporate largess, and have not prospect of qualifying [for such subsidies] absent a threat to leave the state” — not a realistic threat for local businesses. The residents and small businesses contend that they are being asked to subsidize Daimler-Chrysler unfairly.

The second claim in the lawsuit is on behalf of Michigan residents, where DaimlerChrysler threatened to move its plant if Toledo did not provide them with subsidies. In an initially filed version of the suit (voluntarily dismissed without prejudice), the Michigan residents contend, “The purpose and effect of [the Toledo subsidy] and of the Agreement [with DaimlerChrysler] is to induce DaimlerChrysler and other business enterprises to locate their economic activities in Ohio, rather than elsewhere, by conditioning favorable tax treatment on the enterprises’ agreement concerning the location of investment and jobs.”

Such subsidies, they argued in the initial version of their suit, are unconstitutional. “The statute and Agreement discriminate in favor of in-state business activity and against out-of-state investment, in violation of the restrictions imposed on discriminatory state and local taxation by the Commerce Clause.”

Neither the City of Toledo or DaimlerChrysler responded to requests for comment about the suit.

The challenge to the Toledo subsidy seemingly would require a court to rule against the prevailing, tangled Commerce Clause jurisprudence which seems to permit subsidies.

But it also pushes the courts to make their Commerce Clause positions on penalties against out-of-state business and subsidies for in-state businesses consistent.

Moreover, Enrich argues that, as a tax matter, the Supreme Court has not had occasion to rule on business-location tax incentives.

Since the Supreme Court has held unconstitutional tax measures that penalize out-of-state firms, it should logically strike down in-state subsidies, he argues in a 1996 Harvard Law Review article, challenging the notion that a ruling such as that requested in the Toledo case would contravene Commerce Clause precedent.

“The Court has repeatedly invalidated state tax provisions if they provide an in-state business or activity with protections or benefits that are not similarly available to its out-of-state competition,” he writes. “Indeed, the case law leaves the distinct impression that any tax provision structured in such manner will be held to discriminate unconstitutionally against interstate commerce.”

The stakes are high in this innovative case. The Toledo-DaimlerChrysler agreement is a typical, if extreme, business subsidy package, with a locality desperate to attract or retain jobs bidding against all other suitors and itself. If such subsidies are held unconstitutional, corporations' ability to use job blackmail against states and localities will be severly undermined.

- Robert Weissman

Lawrence Summers Memorial Award

The January/February 2000 Lawrence Summers Memorial Award* goes to Halfway, Oregon, Half.com and Maryland software engineer Jim Sorenson.

The Halfway, Oregon City Council is seriously debating whether it should change its name for 2000 to Half.com, after an internet company of the same name in Philadelphia. The town and the start-up company are negotiating how the company would compensate the town for this unique arrangement. The company says it will promote the town on its website, and has offered computers for local schools.

("City Weighs Price of Its Good Name," New York Times, January 11, 2000.)

Jim Sorenson's partner, Valerie Muller, thought Gabrielle might be a good middle name for the couple's new daughter. But Sorenson had a better idea: auction off the naming rights to their baby to the highest bidder. "We live in a dot-com corporate America where many little companies are trying to get their advertising out," Sorenson says.

("The Reliable Source, Washington Post, January 14, 2000.)

In a 1991 internal memorandum, then-World Bank economist and current Deputy Secretary of Treasury Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" Summers wrote. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.