Beginning of US investigation into industry role in infant formula supply shortage

A serious lack of formula milk prompted the Federal Trade Commission to begin an investigation into industry consolidation and whether online resellers were taking advantage of desperate families struggling to find formula.

“The FTC is conducting a public investigation to identify factors that contribute to the shortage or hinder our ability to respond,” said Lina M. Khan, the agency’s president. in a statement on Tuesday. “Learning from this experience can help determine how we can reduce the risk of a similar shortage in the market for other life-sustaining products.”

The agency said it would examine patterns of mergers and acquisitions to better understand how the industry – currently dominated by four manufacturers – becomes too centralized and how that merger will inform future merger reviews. The FTC will also examine federal regulations and trade barriers that prevent foreign companies from entering the infant formula market.

Federal officials are also seeking public comment on cases where families believe they have been scammed trying to buy formula or forced to pay exorbitant prices from resellers. online.

The US baby formula industry has come under intense scrutiny in recent weeks, with lawmakers and consumer advocates questioning why producing a single source of nutrition important for infants has long been controlled by only a handful of companies. Abbott Nutrition, which controls about 48% of the market, threw the infant formula market into turmoil in February when Voluntary withdrawal some of its most popular powder formulations and closed a factory after four kids people who have consumed certain Abbott products become ill with a bacterial infection. Abbott said there was no evidence that its formulation caused the four diseases and that no infant samples of Cronobacter sakazakii resembled the strain found at the factory.

Severe shortages sent parents frantically searching for food for their babies and stores limited the sale of baby formula. The Biden administration has taken steps to alleviate supply shortages, including invoking the Defense Production Act to increase production.

The investigation follows lawmakers’ growing calls to investigate and overhaul the industry. Senator Tammy Duckworth, an Illinois Democrat, urged the FTC this month begin an extensive study of the industry and market conditions have led to shortages.

The FTC said it would work with the Department of Agriculture to look at the impact of a program to help low-income families buy formula and that has helped large contract companies become players. industry giant. The Women, Infants and Children Special Supplemental Nutrition Program, also known as WIC, is a federally funded program that provides grants to states to ensure that women low-income pregnant or postpartum women and their children have access to food. Administered by state agencies, the program purchases more than half of the infant formula supply in the United States.

State WIC agencies may not legally purchase formula from any manufacturer. They were asked to bid competitively for contracts and choose a company that would become the exclusive formula supplier to all WIC recipients in the state. In return, manufacturers must offer the states substantial discounts on formula.

The bidding system could make it more difficult for small companies to enter the market, researchers say. According to research by David E. Davis, an economics professor at South Dakota State University, brands that guarantee exclusivity are more prominent in stores, boosting sales in non-family homes. receive WIC benefits.

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