The US Federal Trade Commission (FTC) is investigating whether baby-formula companies colluded on bids for profitable state contracts.
FTC commissioner Alvaro Bedoya said the government body is looking at the possibility companies “engaged in collusion or coordination with any other market participant regarding the bidding”.
The baby-formula makers are accused of conspiracy on bids for the US Department of Agriculture’s Women, Infants and Children (WIC) programme that supports low-income families by providing them with free formula.
Bedoya said: “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 is also investigating if the alleged collusion had impacted the market more broadly as the revenue coming from the contracts would likely have raised the concerned companies’ sales.
Heavyweight infant-formula company Abbott Laboratories told the Wall Street Journal newspaper that it is cooperating with the investigation. In a letter dated February, Abbott told the FTC that it is unaware of the existence of any evidence which would prove “even a hint of collusion or coordination”.
Nestlé participates in the WIC programme with its Gerber formula and it too has received a request for information from the FTC.
A Nestlé spokesperson told Just Food: “We, like other companies, received a civil investigative demand related to the WIC contract bidding process and have responded to the FTC.
“We sold our Gateway infant formula factory in Eau Claire, Wisconsin, along with the US and Canadian rights to [Gerber’s Good Start infant formula brand to Perrigo Company in November 2022. In making this decision, we prioritised ensuring parents and caregivers have continuity of a safe, high-quality supply of infant formula. To that end, we continue to fulfil our existing WIC contracts to ensure that there is an uninterrupted supply.”
Reckitt Benckiser, another formula manufacturer that regularly wins bids by WIC, told Just Food that it would not comment on the investigation as it “treats information relating to ongoing investigations as confidential”.
“As a matter of principle, we cooperate and comply with any regulatory and enforcement agency requests that we receive,” said the company.
The FTC and Abbott Laboratories have not yet responded to Just Food’s requests for further comment.
The US suffered from a nationwide baby formula shortage for much of last year after Abbott closed its manufacturing site in Sturgis, Michigan, in February after Cronobacter Sakazakii found in the company’s formula was linked to an outbreak of illness. The company recalled several lines of Similac, Alimentum and EleCare powdered formulas.