Food giants are strangling Britain's farmers and
consumers. What's the solution? Break them up |
Nicholas Shaxson
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When British farmers protested outside the
Houses of Parliament earlier this year, they
sent 49 scarecrows, after a survey had found
that 49% of UK fruit and vegetable farmers said
they expected to go bust within a year. The
scarecrows stood in for real farmers, who are
mostly too afraid to speak out. One farmer told
campaigners they had grown 60 tonnes of salad
potatoes for a large UK supermarket, only for
the supermarket to suddenly cancel the order,
leaving the farmer "financially screwed". The
arbitrary power that supermarkets wield instils
fear, which the supermarkets leverage to impose
take-it-or-leave-it fees and other unfair
conditions on farmers.

The problem is our monopolised food system.
Think of it as a vast profit machine shaped like
an hourglass, with many food producers at the
top, millions of consumers at the bottom, and a
few dominant firms - such as giant supermarkets
or global food traders - clustered at its
narrowing neck, siphoning a cut from the passing
traffic. This power ripples through global
supply chains. Between 70% and 90% of commercial
grain trading, for example, is now controlled by
five giants, known as ABCCD: ADM, Bunge, Cofco,
Cargill and Louis Dreyfus Company. Together,
they handle the bread, cereals, meat and other
food that lands on our plates.

Bunge now wants to merge with a rival firm,
Viterra, to create a single company, giving
farmers even less choice as to who they can sell
their produce to, and giving the combined firm
more power to pay farmers less. Research from
the University of Saskatchewan estimates this
merger would cut $770m from annual farm incomes
in western Canada alone. These two firms,
incorporated in the tax havens of Switzerland
and Jersey respectively, each operate in about
40 countries. So the annual damage, including to
British farmers, would probably be in the
billions.

This monopolistic power hurts consumers too.
According to research by the economists Jan
Eeckhout and Jan de Loecker, average global
markups - the prices companies charge for goods
above the cost of producing them - have risen
from around 21% above costs in 1980, to 61%
today. So a pizza that may have cost you GBP 12
if markets had been as un-concentrated as they
were 45 years ago, may now cost GBP 16. Think of
the GBP 4 difference as a private monopoly tax
that nobody voted for. Here, monopoly power is
the connecting thread linking supersize
corporate profits with consumer pain, in a
phenomenon dubbed "greedflation".

The sums involved are vast. Forthcoming research
by Somo, an NGO that studies multinationals,
estimates that the top 1% of listed firms
enjoyed total markups of nearly US$7tn last
year: 15 times the estimated annual tax losses
to tax havens. More than 60 new "food
billionaires" were created in the pandemic years
of 2020 to 2022, according to Oxfam. Beyond
food, the scale of the monopoly problem becomes
clear. Mergers and acquisitions now average
$3.5tn annually, McKinsey reckons: so the market
for mergers is worth three to four times the US
defence budget. In market after market, the neck
of the hourglass is narrowing.

How did it come to this? The answer is that our
regulators became blind to the threat of
corporate power. From the 1970s they fell prey
to a "consumer welfare" ideology, which argued
that bigger companies were more efficient, and
that these "efficiencies" would trickle down to
consumers in lower prices and better products.
As long as consumers were OK, they claimed, we
needn't worry about corporate power. As a
result, breaking up companies fell out of
fashion. Mergers were in. These pro-monopoly
ideas were spread, ironically, by "free market"
thinktanks. One result is that the European
Commission, which has an undeserved reputation
as corporate power's most fearsome foe, has only
blocked 14 of 6,500 notified mergers since 2005.

Yet all the evidence shows that this ideology is
nonsense. Monopolists jack up prices, whether
it's our food, smartphones or life-saving drugs,
and pocket the difference. What can be done?
Historically, trade unions or civil society
groups fought corporate power indirectly or from
below, by seeking better tax and trade rules,
for example, or stronger workers' rights. These
are all essential - but if we don't also break
power directly and from above, we will be like
terriers yapping at the heels of giants. To do
this, our regulators must block a lot more
mergers - and break up firms that are too big.

Many people aren't - yet - convinced. Won't
breaking up Amazon disrupt my shopping
convenience? How would splitting Google or Aldi
each into 10 mini companies improve my life?
Think of breakups not as a hammer smashing
perfectly good firms into pieces, but as a Swiss
army knife.

Most dominant firms are sprawling conglomerates,
rife with internal conflicts of interest,
mischief-making business units and profitable
chokepoints. Each can be carefully sliced,
removed or unblocked; the resulting pieces can
then be treated separately with, say, utility-
style regulation, public ownership or more
competition. Breakups are political: by curbing
corporate power they can open wide space for
governments to regulate, tax and police
corporate behaviour.

Breakups are also more feasible than many think.
The first regulator anywhere to break up a big
tech firm was the UK's feisty Competition and
Markets Authority, which in 2021 forced Facebook
to sell off the recently acquired online
graphics firm Giphy - effective not just in the
UK, but globally. There is plenty the UK can do
at home too - such as investigate the
supermarkets, and break them up if they drive
half the farmers out of business.

International collaboration will help. And here
the prospects are improving. In the US, where
monopoly power has become a cross-partisan
issue, regulators are waking up, and the
authorities are now actively seeking to break up
Amazon, Meta and Google, each in different ways.
The EU, meanwhile, is threatening to break up
Google. This would have been unthinkable just a
few years ago.

Don't let Bunge and Viterra merge: break them up
instead, to release billions in monopoly profits
back into our parched economies. The tides are
shifting against corporate power, but not fast
enough. We must now force the pace. Otherwise,
we will fall deeper into the deadening embrace
of the most powerful monopolies the world has
ever seen.

  * Nicholas Shaxson is co-founder of the
  Balanced Economy Project, an anti-monopoly NGO




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