Anti-Trust on an International Level

In a major international anti-trust lawsuit, Australia’s government moved to block the acquisition of GrainCorp by Archer Daniels Midlands. GrainCorp is the largest seller of grain in Australia, while ADM is the largest producer of corn in the world. The move, according to Australian treasurer Joe Hockey, “would not be in our national interest.” The government did however allow ADM to increase its stake in Graincorp from 20% to 24.9%.

This move comes in the wake of public pressure from farmers, who fear a concentration of market power in the sale of grain, which would threaten their livelihoods and independence. For its part, ADM maintains that the “acquisition of Graincorp would have created value for shareholders…, grain growers and the Australian economy.” The move also reflects national concerns in the face of an increasingly globalized world economy. In particular, the Australian government felt that ceding almost complete control of the Australian grain market to foreign entities by allowing the acquisition would be dangerous for Australia.

This story illustrates one of the key facets of mergers and acquisitions; namely, that government permission often is the deciding factor in whether firms can merge. It also demonstrates the way in which the global economy is increasingly concentrating into the hands of fewer players, which leaves the question of how will world governments respond to this concentration going forward?

http://www.bbc.co.uk/news/business-25134103

2 thoughts on “Anti-Trust on an International Level

  1. It is interesting to think about what different markets are trending towards in the global economy in terms of concentration. There seems to be a movement towards highly concentrated markets for natural resources and agricultural markets, in contrast to highly competitive markets for technology.

  2. Increasing market concentration in grain may threaten individual farmers, but offer benefits to society. Reducing inefficient farmers from the market may allow economies of scale to be captured if restricting regulations (similar to the us tobacco leaf industry before 2004) are reduced or erased. If more efficient producers are able to squeeze less profitable farmers from the market. If the benefits outweigh the costs would be an empirical question.

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