US Begins Inquiry Into Industry’s Role In Infant Formula Supply Shortages

A severe shortage of baby formula has prompted the Federal Trade Commission to begin an inquiry into the industry’s consolidation and whether online resellers have taken advantage of desperate families struggling to find formula.

“The FTC is launching a public inquiry to identify factors that contributed to the shortage or hampered our ability to respond to it,” Lina M. Khan, the agency’s chair, said in a statement on Tuesday. “Learning from this experience can help determine how we can minimize the risk of similar shortages in markets for other life-sustaining products.”

The agency said it would examine patterns of mergers and acquisitions to better understand how the industry – which is now dominated by four manufacturers – became so concentrated and how consolidation should 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 input on instances in which families believe they have been scammed when trying to buy formulas or have been forced to pay exorbitant prices from online resellers.

The US infant formula industry has come under intense scrutiny in recent weeks, with lawmakers and consumer advocates questioning why a critical source of production of infant nutrition has long been controlled by only a handful of players. Abbott Nutrition, which controls about 48 percent of the market, threw the baby formula market into disarray in February when it voluntarily recalled some of its most popular powdered formulas and shut down a plant after four babies who consumed some of Abbott’s products became ill. bacterial infections. Abbott has said there is no evidence that its formula contains four illnesses, and no samples of the bacteria, Cronobacter sakazakii, from the infants have matched strains found at the plant.

The dire shortages are left parents frantically searching for food for their children and stores in the infant formula of limiting sales. The Biden administration has taken steps to ease the supply of lack, including by invoking the Defense Production Act to ramp up manufacturing.

The inquiry follows growing calls from lawmakers to investigate and overhaul the industry. Senator Tammy Duckworth, an Illinois Democrat, urged the FTC to launch an expansive study this month into industry and market conditions that led to shortages.

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

State WIC agencies cannot legally buy formula from any manufacturer. They are required to bid competitively and select a company, which becomes the exclusive provider of formula for all WIC recipients in the state. In return, manufacturers must give significant discounts for formulas.

Researchers say the bidding system could make it more difficult for smaller companies to enter the market. Brands that secure exclusive contracts gain more prominence in stores, boosting sales among families who do not receive WIC benefits, according to research from David E. Davis, an economics professor at South Dakota State University.

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