Baby Formula Shortage: Federal Investigation Launched Into Manufacturers Amid Nationwide Crisis

A significant scarcity of infant formula has prompted the Federal Trade Commission to launch an investigation into the industry's concentration and whether internet resellers exploited desperate families looking for a formula.

The government stated that it will look at merger and acquisition trends to better understand how the sector, which is currently dominated by four manufacturers, became so concentrated and how that consolidation should shape future merger approvals.

US FTC To Investigate Infant Formula Crisis

The FTC will also look at federal restrictions and trade obstacles that keep foreign firms out of the baby formula business. Federal investigators are also collecting public feedback on situations in which families claim they were duped into paying high rates for a formula from internet dealers.

In recent weeks, the US baby formula business has come under increased examination, with politicians and consumer activists wondering why the manufacturing of a key source of newborn nourishment has long been controlled by a small number of firms.

Abbott Nutrition, which controls roughly 48 percent of the market, threw the baby formula market into disarray in February when it voluntarily recalled some of its most popular powdered formulas and shut down a plant after four babies became ill with bacterial infections after consuming some of Abbott's products, as per New York Times.

On the supply side, officials are wondering if small and independent merchants have had more difficulty getting restricted supplies of baby formula than huge chain outlets.

Only four producers manufacture more than 90 percent of the country's infant formula supply. According to CBS, over 45 percent of formula items nationally were out of stock last week. The worst hurt is parents whose infants have dietary or other restrictions that limit the types of formula they may consume.

President Joe Biden has taken numerous steps to address the growing infant formula shortfall, including Operation Fly Formula, which aims to increase overseas imports of baby formula to increase US supplies. However, his government has been chastised for failing to act sooner as the crisis worsened.

Parents Struggle Amid Baby Formula Shortage

However, Biden officials have stated that parents began to struggle after formula producer Abbott Nutrition was forced to close its Michigan factory due to bacterial contamination. Abbott reported last week that it had reached a deal with the FDA to address safety concerns at the plant, which had been closed for more than three months.

Among the options approved by Biden in response to rising pressure to address the formula shortfall was the authorization of commercial military planes to transport supplies from outside if they fulfill US health requirements. The first consignment of infant formula was flown into Indianapolis, Indiana over the weekend from Ramstein Air Base in Germany. In addition, the president invoked the Defense Manufacturing Act, which requires suppliers to prioritize baby formula production over all other contracts.

Despite the objections of 192 Republicans, the House of Representatives barely passed a bill aimed at alleviating the formula shortfall last week. Republicans have claimed that increasing funding for the Food and Drug Administration, as proposed in the proposal, is not a feasible answer, according to Daily Mail.

Democrats and Republicans both are expected to challenge the administration's handling of the infant formula crisis, even though the Agriculture Department has mostly dodged congressional scrutiny. As previously noted, senators have expressed their displeasure with the FDA while complimenting the USDA for its prompt action. This includes Vilsack allowing WIC beneficiaries to purchase any available formula rather than simply the brand linked with their state's contract.

Because the federal nutrition program buys more than half of all formula in the country, the shortage has been especially disruptive for low-income mothers and their babies who rely on WIC - and it has raised questions about how the state contract system allows a handful of major manufacturers to dominate the formula market. Last week, the House and Senate enacted legislation to ensure that WIC beneficiaries continue to have access to formula amid future shortages and recalls, Politico reported.