FTC launches probe of baby-formula makers, looking at possible collusion

The Federal Trade Commission is investigating whether Abbott Laboratories and other baby formula makers engaged in collusion while bidding on government contracts.

More than half of infant formula sales are made through an Agriculture Department program that provides free formula to low-income families, according to FTC documents that detailed of the probe, which was reported earlier Wednesday by the Wall Street Journal. Contracts for those programs are administered through a state-level bidding process.

In 2022, the FTC kicked off an investigation into whether participants of baby formula market - which it said is dominated by a small number of manufacturers - coordinated in the bidding process to maintain control of markets in states where they remained dominant. The agency said the companies would be incentivized to do so because sales through government formula program can boost commercial sales.

Nestlé, which produces Gerber formula, told The Washington Post that the company has received an information request from the FTC and has responded. Reckitt Benckiser told The Post that while it does not comment on specific government investigations, it complies with regulatory and enforcement agency requests "as a matter of principle."

An Abbott spokesman told The Post it was cooperating with the FTC's requests. In a February letter to the FTC, a lawyer for Abbott wrote that the company is "unaware of any evidence that creates even a hint of collusion or coordination."

Last February, contamination at an Abbott Nutrition production plant in Michigan led to a formula shortage that was exacerbated by pandemic related supply chain issues.

The Justice Department has opened a criminal investigation into the Abbott plant in Sturgis, Mich., which closed after four babies fell ill, with two of them dying, after consuming powdered formula manufactured there. Abbott said in January that it was cooperating.

The Jan. 27 document detailing the FTC's probe did not explicitly mention the incident or formula shortage, although it did highlight that Abbott controls 48 percent of "a highly concentrated market."

Four formula producers - Abbott, Reckitt, Nestlé and Perrio - control 90 percent of the formula market, CNBC reported last May.