Baby formula shortages last year were exacerbated by Abbott Nutrition’s product recall and factory closure © Photo by sod tatong via GettyImages
Baby formula shortages last year were exacerbated by Abbott Nutrition’s product recall and factory closure © Photo by sod tatong via GettyImages

US watchdog investigates baby formula manufacturers for collusion

The Federal Trade Commission (FTC) has launched an inquiry into the bidding practices of baby formula manufacturers, including Abbott Laboratories, for possible collusion over state contracts.

The FTC is investigating whether bidders for the state-run Women, Infants, and Children (WIC) programme – an initiative to provide free formula to low-income families – were encouraged to “engage in collusive or coordinated market allocation”.

It said it is investigating whether Abbott Laboratories – which controls 48% of the market – along with other undisclosed manufacturers “engaged in collusion or coordination with any other market participant regarding the bidding for WIC contracts”.

Abbott, along with three other manufacturers, supplied nearly 90% of the US baby formula market as of May 2022, and more than half of US infant formula sales are made through the state-run programme. Abbott is one of only three manufacturers who have bid on WIC contracts since 1996.

In February, Abbott said it received a civil investigative demand from the watchdog into a probe of the companies participating in bids for WIC formula contracts. 

The FTC requested information about Abbott’s commercial sales unrelated to the state contracts, noting that winning WIC contracts tended to lead to better commercial sales. The FTC said it has met with Abbott multiple times since then, and Abbot has expressed “objections to the substantive and temporal scope” of the investigation. 

"Although the boost in non-WIC sales motivates manufacturers to win WIC contracts, it may also create incentives to engage in collusive or coordinated market allocation, whereby incumbent WIC contract holders agree not to bid against each other,” the FTC document, written by commissioner Alvaro Bedoya, said.

In a petition to delay the deadline for compliance with the FTC’s information request, as well as reduce the scope of the investigation which was rejected, Abbott said it was “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”.

Nestle, which produces the Good Start brand of baby formulas, confirmed it is also being investigated by the FTC. 

A Nestlé spokesperson told Supply Management: "I can confirm that we, like other companies, received a civil investigative demand related to the WIC contract bidding process and have responded to the FTC."

The investigation comes on the back of a baby formula shortage last year, which was triggered in part after Abbott was forced to recall various products and shut down a factory following a bacterial contamination which resulted in the death of two infants. Abbott was forced to fly in emergency supplies from its plant in Ireland to alleviate shortages.

In April last year, six states – Iowa, Missouri, Texas, Tennessee, North Dakota and South Dakota – had sold out of more than half of available baby formula.

Abbott has been approached for comment. 

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