Environmental Regulation, Market Power and Price Discrimination in the Agricultural Chemical Industry



In Canada, at the federal level, pesticide use is regulated by the Pest Management
Regulatory Agency (PMRA) established under Canada’s 1985 Pest Control Products Act.
All pesticides used in Canada must be registered by the PMRA. The terms and scope of
use are determined by the Canadian registration and sold under a PMRA-approved label
that describes the product and its specific approved uses. Pesticides registered for use in
the United States and sold under a U.S. label cannot be used legally in Canada even if its
active ingredients are identical to one that has received a Canadian label. Similarly,
pesticide use in the United States is regulated under the provisions of the 1947 Federal
Insecticide, Fungicide, and Rodenticide Act, (FIFRA), as variously amended, and each
agricultural chemical is sold under an EPA-approved label. Thus a pesticide registered
and sold for use in Canada cannot legally be used in the United States even if its chemical
formulation is identical to that of a product that is registered and sold for use in the
United States.6 Thus, the two countries’ regulatory processes prevent legal arbitrage that
would otherwise erode price differences. Price differences for the same agricultural
chemicals have therefore persisted even between components of the markets that are
spatially adjacent.

These price differences have been economically important. In 2000, for example,
a past president of the Montana Grain Growers Association was found guilty of illegally
conspiring to obtain Roundup from Canada and sell it to other farmers in Montana and

6 Within the Unite States, under the provisions of FIFRA, individual states may impose stricter (but not
weaker) controls over the use of specific pesticides than those required by the EPA and may prohibit the
use of certain chemicals even though EPA has approved their use. In Canada, registration of a herbicide is
either provided for the whole country or for one or more of three regions - the Prairie region (Alberta,
Manitoba, Saskatchewan and the Peace River in British Columbia), the Atlantic Region (consisting of the
maritime provinces), and the third region consisting of Ontario, Quebec and the rest of British Columbia.



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