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Monsanto Rounds Up Documents for the DOJ

By Brian Orelli, PhD – Updated Apr 6, 2017 at 1:19PM

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The government investigates the agriculture giant.

Monsanto (NYSE:MON) said yesterday that the Department of Justice has requested information about its business practices for its first-generation Roundup Ready trait. That shouldn't come as much of a shock to investors.

Everyone from rival DuPont (NYSE:DD) to the Associated Press has been critical of Monsanto's business practices. The important thing isn't that the DOJ requested information, but whether it files formal charges.

It's a little hard to tell exactly what will happen. Monsanto tries to paint itself in the best possible light by saying that it won't obstruct farmers or its rivals such as DuPont, Dow Chemical (NYSE:DOW), and Syngenta (NYSE:SYT) from using the trait after it goes off patent in 2014, but that seems to miss the point. I think the DOJ is probably more worried about what Monsanto is doing today than what it'll do in 2014.

You see, the company has already developed a follow-up trait, aptly called Roundup Ready 2 Yield. Monsanto would obviously like farmers to start using the new trait, which has a longer patent life, but the company has to tread lightly. There's a fine line between encouraging a shift in usage and using a monopoly to force a shift, which might get the company in trouble.

For instance, in 2008, Abbott Labs (NYSE:ABT) agreed to pay $184 million to settle a suit accusing the company of switching formulas of its cholesterol drug TriCor to keep cheap generics off the market.

Investors seem to have mostly shrugged off the request for more information yesterday, which seems like the right move to me. Without in-depth knowledge of Monsanto's business practices, it's difficult for investors to know exactly what will happen with the DOJ investigation. The most you can do is factor in a margin of safety and hope for the best.

Monsanto is a recommendation of the Inside Value newsletter. The Inside Value team scours high and low to bring you the best value stocks available. Check it out for free with a 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Syngenta is a Motley Fool Global Gains selection. The Fool has a disclosure policy.

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