FTC opens inquiry into baby formula shortage

The Federal Trade Commission (FTC) announced an inquiry Tuesday into the infant formula shortage and said it will assess the impact of mergers and acquisitions in the market.

The agency said it will investigate bots reselling formula at “exorbitant prices” and seek public comment on the factors that “contributed to the shortage or hampered our ability to respond to it.”

The shortage stems from the shutdown of an Abbott Nutrition factory in February due to safety concerns about certain formulas produced at the plant in Michigan.  

“The FTC can also examine the infant formula industry to identify the factors that created such a fragile market, where a single disruption at a single plant can jeopardize supply,” FTC Chairwoman Lina Khan said in a statement.

Earlier this month, the Biden administration reached an agreement with Abbott to reopen the facility. Food and Drug Administration Commissioner Robert Califf said last week that it would be a matter of weeks before the Abbott plant is up and running again.  

Abbott and three other companies — Nestle USA, Perrigo and Mead Johnson Nutrition — control about 90 percent of the domestic infant formula market.

The FTC said as part of the inquiry it will conduct an analysis of the shortage alongside the Department of Agriculture, which administers the government’s nutrition program for women, infants and children (WIC). WIC participants buy about half the baby formula in the U.S., making the program the nation’s largest purchaser of formula.

“The agencies will use this analysis to help determine what policy changes might be necessary to promote competition and resiliency in the infant formula market to prevent future shortages,” Khan said.

President Biden signed bipartisan legislation aimed at expanding the pandemic-era flexibilities granted to WIC participants on Saturday. WIC benefits restrict the types of formulas that recipients can buy as part of the program’s contracting rule.

Biden launched an initiative last week to expedite shipments of baby formula from overseas, dubbed “Operation Fly Formula,” with the first shipment arriving over the weekend. He also invoked the Defense Production Act to speed up production of formula domestically.  

The FTC also said it would leverage the “lessons learned” from the shortage to other fragile, highly regulated markets.

“The FTC will do everything within its power to ensure the markets for other life-sustaining and vital products are competitive and resilient, protecting the ability of Americans to access critical goods even amid disruptions,” Khan said.