FTC investigates America’s baby formula shortages
A sign on an empty shelf informs customers that there is no stock in the back for infant formula at a supermarket in 2022 in New York City.
By Parija Kavilanz, CNN
New York (CNN) — The Federal Trade Commission has launched an investigation into the protracted shortages of baby formula in the United States that left store shelves bare of the essential product for several months, probing whether baby formula makers colluded in bidding on state contracts.
The agency, according to documents posted on the agency’s website, is looking into whether Abbott Laboratories and other formula manufacturers have “engaged in collusion or coordination with any other market participant regarding the bidding” for state contracts.
Additionally, the FTC is investigating whether company coordination affected sales more broadly, outside of the Women, Infants and Children (WIC) formula-supply program. The Wall Street Journal was first to report on the probe.
Abbott said in an email to CNN that the company is cooperating with the FTC’s requests.
The company also pointed to its earlier response on March 16 to the FTC in which the company said, “Abbott is unaware of any factual basis to support the WIC-related investigation, and staff have not identified any reason to believe that Abbott or any of its competitors have coordinated or colluded regarding any WIC contract. Abbott has nevertheless agreed to respond to the CID, despite the significant burden and cost to the Company, in order to reassure the FTC that the Company’s bids for WIC contracts are free of coordination or collusion.”
Abbott, according to documents posted on the FTC’s website, petitioned the agency in March to limit the scope of its Civil Investigative Demand issued to Abbott on January 27, 2023.
The FTC denied that request in April, according to FTC documents.
Perrigo said it did not purchase WIC rights as part of the acquisition of the Gateway facility and Good Start formula brand from Nestle in 2022. As such, it said the WIC rights stayed with Nestle. “Perrigo does not participate in WIC and thus any FTC investigation on this topic would not involve Perrigo,” the company said in a statement emailed to CNN.
A Nestle spokesperson confirmed to CNN that the company had received a civil investigative demand related to the WIC contract bidding process and has responded to the FTC. The company said it continues to fulfill its existing WIC contracts to ensure that there is uninterrupted supply.
Reckitt Benckiser said in an emailed statement to CNN that the company doesn’t comment on any specific government investigations. “Reckitt fully cooperates and complies with any regulatory and enforcement agency requests that we receive,” the statement said. The FTC declined to provide a comment.
The formula shortage reached a head in July 2022, when more than 20% of all formula products – including more than 30% of powdered formulas – were missing from store shelves following a major recall of several baby formula products by a leading producer.
By February 2023, about a third of families with an infant younger than 1 said they had had trouble getting supply, according to market research firm IRI. More critically, more than half said they had less than a week’s supply on hand.
Acute shortages have eased a year later but the crisis exacted a heavy emotional on families and caregivers.
The FTC last year began probing the industry on a broad range of topics, including potential fraud, deception, or scams when people tried to buy baby formula during the shortages. The agency also investigated potential price gouging by online sellers of baby formula.
The regulator also probed problems retailers faced trying to obtain baby formula supplies. Specifically, the FTC looked for information about whether small and independent retailers faced more difficulties accessing limited supplies of infant formula compared to large chain retailers.
More broadly, the FTC also investigated the baby formula industry, pattern of mergers and acquisitions among manufacturers of the product and supply chain challenges and whether there are regulatory barriers that have prevented imports of baby formula brands into the US formula market.
The-CNN-Wire
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