Today, the Federal Trade Commission staff launched an inquiry into the ongoing shortage for infant formula that has caused hardship for countless American families. The inquiry seeks information about the nature and prevalence of any deceptive, fraudulent, or otherwise unfair business practices aimed at taking advantage of families during this shortage. It also aims to shed light on the factors that have led to concentration in the infant formula market and the fragility of the supply chains for these crucial products. FTC Chair Lina M. Khan released a statement in conjunction with the public inquiry committing to a series of actions to confront this crisis.
"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," said Chair Lina M. Khan in her statement. "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."
The Request for Information seeks public input on whether the FTC itself or state or federal agencies may have inadvertently taken steps that contributed to fragile supply chains in the market for these crucial products for many American families. Comments should be submitted to regulations.gov and must be received no later than Friday, June 24, 2022 by 11:59pm ET.
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. The FTC encourages members of the public with any information to comment on the public docket and share their experiences and knowledge with FTC staff about the following topics:
- Instances where families have experienced fraud, deception, or scams when attempting to purchase infant formula or been forced to purchase formula from online resellers at exorbitant prices;
- Families’ experiences purchasing infant formula through the Special Supplemental Nutrition Program for Women, Infants, and Children (“WIC”) throughout the crisis;
- Retailers’ experiences obtaining brands not ordinarily covered by their state’s WIC programs and their experiences working with distributors and manufacturers throughout the crisis;
- Whether small and independent retailers have faced particular difficulties accessing limited supplies of infant formula compared to large chain retailers;
- The impact of mergers and acquisitions on the number of infant formula suppliers, capital investment, and total manufacturing capacity;
- The impact of state WIC competitive bidding on the number of infant formula suppliers, capital investment, and total manufacturing capacity;
- The impact of FDA regulations on the number of infant formula suppliers, capital investment, and total manufacturing capacity, including capacity located outside the United States; and
- Whether there are other regulatory barriers that have prevented companies located outside the United States from entering the infant formula market.
In her statement, Chair Khan commits to investigating and enforcing the law against anyone who has deceived, defrauded, or scammed desperate families. Additionally, her statement says that the FTC will examine whether manufacturers or distributors are engaging in unlawful discrimination that may be limiting remaining infant formula supplies at smaller retailers. Chair Khan also pledges that the FTC will investigate the long-term causes of the crisis and apply any lessons to prevent future shortages in similar, life-sustaining industries going forward.
The FTC will also work with the USDA, which administers WIC, to analyze the results of the public inquiry. WIC represents approximately fifty percent of the infant formula market and is a vital source of nutrition for mothers and families. 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. The FTC and USDA will work together to conduct a thorough analysis of the information received through this public inquiry to help determine what policy changes might be necessary to reduce concentration and expand resiliency into the infant formula market to prevent future shortages.
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