The Implications of FTC Suing Corteva and Syngenta
Does the lawsuit have validity? What are the implications throughout the value chain?
I was more dismissive to this news last week when I highlighted it than I should have been. I didn’t do the proper diligence, like read the FTC Complaint itself, or talk to others in the USA input industry before making a comment. This was an error on my end.
This week I dug in more and talked to many from the industry as well as a couple of lawyers about the complaint. It seems much more notable than I had initially thought (*Note: I am not a lawyer). I had never explicitly experienced a program emphasizing what are known as exclusion payments to distributors for maintaining a level of generic product sales below a specified threshold.
To be clear, this complaint is targeted at distributor and retail programming, not grower programming.
What I’ve experienced personally is loyalty programs as being incentive driven through enticing distributors to grow the business through the likes of pairing specific products together or growing the entire portfolio year over year. This means the distributor has the ability to expand their business in whatever direction they choose and obtain enhanced rebate dollars from whichever manufacturer program they choose to optimize based on their business needs or priorities (or sell generics with no programming and more margin up front). This could be a 1% rebate for growing total portfolio sales by 3% for example, or a 1.5% rebate for matching product acres of some specific products in the manufacturers portfolio. These to me are legitimate incentive programs, no matter how undesirable they can be.
The specific loyalty program and type of “incentive” that the FTC is going after are known as exclusion payments. Exclusion payments includes the manufacturer incentivizing for the reduction of other portions of the distributors business. This means distributors getting a payment for actively not bringing in and selling specific products, such as generics.