32 I EUROPEAN SEED I EUROPEAN-SEED.COM that emerges is one of heterogeneity, with some seed markets more concentrated and others less so – underscoring the impor- tance of using detailed information on specific seed markets rather than broad global aggregates. HOW DOES MARKET CONCENTRATION AFFECT PRICES AND INNOVATION? Intuitively, less competition in a market would be expected to lead to higher prices. The data collected in the OECD study makes it possible to test this hypothesis. Using data for 87 seed mar- kets, and correcting for crop-specific and country-specific effects and several other factors, the analysis did not find evidence of higher seed prices in markets with higher levels of market concentration. However, the analysis does suggest that a greater market share for public plant breeders, and a greater share of farm- saved seed, reduce average prices. Does market concentration lead to lower levels of innovation? To explore this question, the OECD study developed a new measure of innovation in seed mar- kets using data for the European Union. Measuring innovation is usually difficult, and researchers often use imperfect measures such as R&D expenditures or patents. These measures have their shortcomings, because they do not really capture useful new innovations. However, the EU requirement that new seed varie- ties need to be registered in the National List of a member state allows for a better measure in the case of plant varieties. As registration requires passing a test for the value for cultivation or use (VCU), a new entry on the National List probably repre- sents a valuable innovation. This measure is still not perfect, but probably gives a good approximation of the “true” rate of innovation in the market. The OECD study analysed data for the number of new entries by crop and by country in the period 2013-2017 and evaluated the link with market concentra- tion as well as crop- and country-specific effects and other factors such as market size. One striking result is that larger markets have more innovation. By con- trast, the study did not find any evidence that higher levels of market concentration reduce innovation in EU seed markets. These analyses have their limita- tions. For instance, the overall number of observations is quite limited, and the data cannot account for differences in seed quality. Hopefully future research can build on these findings. RESPONSES BY POLICYMAKERS As with other large mergers or acquisi- tions, the recent transactions in the seed industry were scrutinised by competition authorities. Because of the global scope of the mergers, competition authorities of different jurisdictions (the European Union, the United States, Canada and Brazil, among others) coordinated their work in this area. In addition to tradi- tional concerns about mergers potentially leading to higher prices, the question of innovation was on regulators’ minds as they evaluated the transactions. Before allowing the mergers, firms were required to divest themselves of several businesses to safeguard competition in the industry. For instance, the European Commission required DuPont to sell its crop protec- tion R&D organisation – not only those units in the European Union, but globally. Bayer agreed to sell nearly its entire seed business to BASF, as well as several other businesses, as shown in the table below. While most of the discussion on the mergers has focused on decisions by com- petition authorities, several other policy options exist to stimulate competition and innovation in the seed industry. The OECD study identifies opportunities in three areas. First, although proper reg- ulations are necessary to create trust in markets, excessive regulation could create barriers to entry (which could in turn contribute to higher levels of market concentration) and could slow down inno- vation in plant breeding. Policy makers should therefore make sure to avoid unnecessary regulatory barriers. This point is of course especially important given the new plant breeding techniques, which could present opportunities to smaller enterprises. A second important area involves plant breeders’ access to the genetic resources and intellectual property nec- essary to develop new varieties. Efficient procedures for accessing genetic mate- rials and a regulatory framework which makes it easy to access or license intel- lectual property can help provide plant breeders with the “inputs” needed for varietal development. Third, policy makers should stim- ulate both public and private R&D. Historically, progress in plant breeding has often come from the interplay of public sector and private sector efforts; in many countries, public plant breeders are still an important source of commercially available varieties. As private-sector investment is ramping up, public sector R&D can focus on more fundamental “pre-competitive” research, such as the development of new plant breeding tech- niques or genome mapping. Policy makers can also stimulate private R&D through public-private partnerships, for instance by providing matching funds. Given the challenge of feeding a growing population with ever scarcer natural resources, sustainable produc- tivity growth is a top priority for global agriculture. Improved varieties have a major role to play in this regard. For this reason, competitive and innovative seed markets should be high on the agenda of policymakers everywhere. OECD (2018) Concentration in Seed Markets: Potential Effects and Policy Responses, Paris: OECD Publishing. Available online at https://doi.org/10.1787/9789264308367-en Crop Protection Seeds & Traits Digital Farming ·  Global glufosinate- ammonium herbicide business (Liberty, Basta, Finale) ·  Selected glyphosate- based herbicides in Europe ·  3 non-selective herbicides under development ·  Selected seed treatment products ·  Essentially the entire soybean business ·  Essentially the entire canola/rapeseed business ·  Cotton business (except India, South Africa) ·  Global vegetable seeds business ·  LibertyLink technology ·  R&D capabilities for divested crops ·  R&D platform for hybrid wheat ·  Digital Farming business (Bayer receives a non- exclusive license for certain applications outside North America) TABLE 1: BAYER ASSETS DIVESTED TO BASF Source: Bayer investor presentation: “Monsanto Acquisition Update,” June 2018.