The U.S. has launched an investigation into the role of industry in the infant formula supply deficit

A serious shortage of child sources has prompted the Federal Trade Commission to begin an investigation into whether industry consolidation and online resellers have taken advantage of desperate families struggling to find sources.

“The FTC is launching a public investigation into the factors that contributed to the deficit or hindered our ability to respond,” the agency’s chairwoman Lina M. Khan said in a statement on Tuesday. “Learning from this experience can help determine how we can reduce the risk of similar shortages in the market for other life-sustaining products.”

The company said it would examine the patterns of integration and acquisition to better understand – which is now influenced by the four manufacturers – how it has become so concentrated and how that integration should inform future integration reviews. The FTC will also examine federal regulations and trade barriers that prevent foreign companies from entering the childcare market.

Federal officials are also seeking public input on instances where families believe they have been scammed or forced to pay extra from online resellers when trying to buy formula.

The U.S. infant formula industry has come under intense scrutiny in recent weeks, with lawmakers and consumer advocates questioning why the production of an important source of child nutrition has long been controlled by only a handful of players. Abbott Nutrition, which controls about 48 percent of the market, plunged the baby formula market into chaos in February when it voluntarily withdrew some of its most popular powdered formulas and shut down a plant after four children became ill after receiving some of Abbott’s products. Bacterial infections. Abbott said there was no evidence that the source had caused the four diseases and that no samples of the chronobacter Sakazaki bacteria from children matched the strain found in the plant.

Terrible shortages have left parents in search of food for their children and limited sales of baby formula. The Biden administration has taken steps to alleviate the shortage of supplies, including through the Defense Production Act to increase production.

The investigation follows growing calls from lawmakers to investigate and overhaul the industry. Senator Tammy Duckworth, an Illinois Democrat, called on the FTC this month to begin a comprehensive study of the industry and market conditions that have created the deficit.

The FTC said it would work with the Department of Agriculture to test the impact of a program aimed at helping low-income families buy formula and that the deal would help large companies become huge players in the industry. The Special Complementary Nutrition Program for Women, Infants and Children, better known as WIC, is a federally funded program that provides grants to states to ensure access to food for low-income pregnant or postpartum women and their children. Operated by state agencies, the program purchases more than half of all infant formula supplies in the United States.

State WIC firms cannot legally purchase formulas from any manufacturer. They will have to bid competitively for the contract and select a company that will become the sole provider of the formula for all WIC recipients in the state. In return, manufacturers must offer significant discounts to states for the formula.

Researchers say the bidding system could make it harder for small companies to enter the market. David E., professor of economics at South Dakota State University. According to Davis’ research, brands that secure exclusive deals tend to dominate stores, increasing sales among households that do not receive WIC benefits.

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