The Fertilizer Oligopoly: The Case for Global Antitrust
In this monograph, C. Robert Taylor and Diana L. Moss, explore how large global fertilizer producers have acted collusively to exercise market power.
Fertilizers are a critical input in the agricultural sector where industrial farming is heavily dependent on external inputs of nitrogen, phosphorus, and potassium or potash. A history of supra-competitive pricing by the few, large global producers of fertilizer inputs – coupled with characteristics that make the market conducive to anticompetitive coordination (i.e., collusion) – raise significant competitive concerns. This working paper qualitatively and quantitatively analyzes the exercise of market power by members of the U.S. and Canadian government sanctioned export associations, PhosChem and Canpotex, from 1998-2012. The first part of the paper provides relevant background on the role of fertilizer in industrial food production systems, examines the structure of the global fertilizer industry, and reviews limited antitrust immunity for export associations under the U.S. Web-Pomerene Act.
The latter half of the paper examines indicators that large global fertilizer producers have acted collusively to exercise market power. One part of this analysis focuses on anecdotal evidence of collusion and the disruption in pricing recently induced by the exercise of countervailing market power by powerful fertilizer buyers. A second part of the analysis relies on economic modeling and estimation of dynamic Lerner indices – a well-known measure of market power. The overall analysis supports the notion that fertilizer producers have likely acted in a coordinated fashion to raise prices, to the detriment of competitors and consumers. The paper concludes with a number of major observations that emphasize the need for concerted, organized competition enforcement action. Appendices are available from the authors upon request.