US begins inquiry on infant formula shortage, amid calls for monopoly breakup

25 May 2022 --- The US Federal Trade Commission (FTC) is launching a public inquiry on how the infant formula industry has become so concentrated, as New York City has declared a state of emergency over the nationwide shortage.

“We have been monitoring and will continue to monitor the ongoing infant formula shortage, which is causing enormous anxiety, fear and financial burden for American families,” says FTC Chair Lina Khan.

“The FTC is launching a public inquiry to identify the factors that contributed to the shortage or hampered our ability to respond to it. Learning from this experience can help determine how we can minimize the risk of similar shortages in the markets for other life-sustaining products.”

As part of the inquiry, the FTC will examine the pattern of mergers and acquisitions in the infant formula market to better understand current concentration, how it came to be, and how that should inform future merger review.

Currently, the industry is dominated by four companies: Abbott, Mead Johnson Nutrition, Nestlé and Perrigo.

The FTC aims to investigate price gouging that is proliferating the infant formula market.Market fragility
The FTC also aims to investigate price gouging that is proliferating the market. This includes increasing observation of the use of online bots that automatically purchase and resell formula at “exorbitant prices”.

“While the FTC does not regulate the safety or manufacturing of the impacted products, it can take steps to address any anticompetitive, unfair, or deceptive acts or practices that have contributed to or are worsening this problem,” underscores Khan.

As part of the public inquiry, the FTC will also work with the US Department of Agriculture (USDA) and WIC (the special supplemental nutrition program for women, infants and children). 

WIC represents approximately 50% of the infant formula market and is a vital source of nutrition for mothers and families, the FTC notes. 

“However, concentration in the infant formula market has created market fragilities that, combined with certain features of the program, may impede WIC’s ability to quickly respond to lengthy product recalls, factory shutdowns or other disruptions.”

Abbott apologizes
As part of New York City’s state of emergency, the department of consumer and worker protection will be empowered to prevent price gouging for formula. 

“This emergency executive order will help us to crack down on any retailer looking to capitalize on this crisis by jacking up prices on this essential good. Our message to struggling mothers and families is simple: Our city will do everything in its power to assist you during this challenging period,” Mayor Eric Adams underscores.

More than 40% of retailers in the tristate area are out of stock of formula, he adds.

Meanwhile, Robert Ford, chairman and CEO at Abbott, apologized for the shortage in an op-ed published in the Washington Post.

“We believe our voluntary recall was the right thing to do,” he remarks. “We will not take risks when it comes to the health of children.”

“The data collected during the investigation, genetic sequencing, retained product samples and available product from the four complaints did not find any connection between our products and the four reported illnesses in children.”More than 40% of retailers in the tristate area are out of stock of formula.

“However, the FDA’s investigation did discover a bacteria in our plant that we will not tolerate. I have high expectations of this company, and we fell short of them,” he underscores. 

Military helping with supply
This week, 35 tons of formula were shipped from Switzerland to the US through military planes, as part of Operation Fly Formula. 

Meanwhile, Abbott is set to restart production at its Sturgis facility on June 4 and will release limited quantities of its specialty EleCare item, following a decision by the US District Court for the Western District of Michigan. 

The announcement follows a consent decree between Abbott and the US Food and Drug Administration (FDA) to reopen the site for production, including meeting the FDA’s food safety standards. 

Abbott will release limited quantities of its EleCare specialty amino acid-based formulas that were previously on hold, following the company’s voluntary recall. It expects to begin shipping products within the next several days. 

The product will be shipped directly to healthcare professionals, hospitals or consumers. Once production resumes in the Sturgis facility, Abbott will prioritize manufacturing of EleCare and other specialty and metabolic formulas to restock supplies as quickly as possible.

“Releasing this product immediately will help families impacted by the lack of availability of EleCare,” says Ford. “When we restart our Sturgis facility the first week in June, we will produce EleCare first and make enough so that several months of supply will be available.”

By Andria Kades