Monsanto and the Per Se Illegal Rule for Bundled Discounts

Abstract

Recent statistics indicate that 90% of the soybeans and 70% of the corn and cotton grown in the United States are Roundup Ready crops. The Roundup Ready gene, patented by Monsanto, allows those crops to withstand application of Roundup, an herbicide originally produced solely by Monsanto with the active ingredient of glyphosate, which kills weeds on contact. Although Monsanto’s patent on the Roundup herbicide expired in 2000, the company’s business practices made it an industry giant in both the seed and herbicide markets. Monsanto requires that farmers sign a technology agreement when purchasing Roundup Ready seeds that restricts the purchase of herbicide to products produced by Monsanto. The company also heavily encourages farmers to purchase their brand of herbicide with Roundup Ready seeds through discounting programs. This note will examine whether Monsanto should be held accountable for unlawful bundling under a theoretical judicial standard that finds both tying and bundling per se illegal — with no need to prove further consumer forcing. The argument is based on Einer Elhauge’s recent critique of the rule of reason, a rule which states that tying and bundling schemes are illegal only if there is proof of substantial market foreclosure. Application of the rule of reason, the currently favored judicial approach, over the rule of per se illegality has made it virtually impossible for challengers to successfully dispute tying and bundling schemes. Such schemes should be susceptible to judicial scrutiny to protect consumer welfare — precisely the goal of the Sherman Antitrust Act.