FTC probing baby-formula makers for collusion: report

The Federal Trade Commission is looking into whether baby-formula makers colluded on bids for lucrative state contracts.

In question is whether Abbott Laboratories and other formula manufacturers have “engaged in collusion or coordination with any other market participant regarding the bidding” for state contracts, according to documents on the agency’s website and reported by the Wall Street Journal.

FTC Commissioner Alvaro Bedoya wrote that the FTC is also investigating whether company coordination affected sales more broadly, outside the Women, Infants and Children formula-supply program.

Abbott, which sells Similac formula, said it is cooperating with the FTC’s investigation.

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Nestlé, which supplies Gerber formula through WIC, has also received a request for information and has responded to the FTC.

Reckitt Benckiser, the third company frequently awarded WIC contracts, said it can’t comment on specific government investigations

Abbott’s lawyers said in an email to the FTC, in February, that they weren’t aware of any evidence suggesting collusion.

Abbott has been the subject of several probes launched by federal agencies, including a criminal investigation by the Justice Department.

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That probe followed the closure of a manufacturing plant that contributed to a nationwide formula shortage.

New details about the FTC investigation emerged on the agency’s website, detailing Abbott’s efforts to pare back the information request and the FTC’s rejection of the company’s request.

The documents didn’t suggest a link between the shortages last year and the FTC’s investigation.

The Food and Drug Administration and academics have said the infant-formula market remains vulnerable to shocks in part because the market is dominated by a few companies.

The WIC supplemental nutrition program provides formula and certain nutritious food items to low-income families.

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The contracts can be lucrative for formula makers because they significantly increase the winning company’s market share in a given state.

As of May, Abbott held contracts with 32 states to supply formula for WIC. Reckitt’s Mead Johnson division works with 12 states, and six work with Nestlé to offer Gerber products.

States have been required since 1989 to solicit competitive bids for formula under the WIC program, in an effort to contain costs.