Competiton watchdog targets prices of infants' formula milk - Angelique Bret

A recently published interim report on infant and follow-on formula highlights significant concerns and urged organisations to address issues and find suitable solutions.

The CMA found that there is “limited competition on formula prices in shops”, meaning that manufacturers and retailers have little incentive to absorb increases in manufacturing costs, which are instead passed on to consumers “quickly and in full”.

The CMA has also raised concerns about “unintended consequences” of regulations which were designed to support public health goals, such as promoting breastfeeding, but which have resulted in consequences for parents and care givers.

These regulations restrict the advertising and promotion of infant formula, leading to companies focusing on brand-building and marketing strategies that can be difficult for parents to assess, said the report.

The report further highlights a lack of “timely, clear and impartial information” for parents and care givers, among others. It suggests that lacking information about infant formula risks parents making decisions based on brand reputation or price, rather than the nutritional needs of their babies.

The report goes on to outline several potential solutions that may be used by firms across the industry. One important recommendation is to provide parents with better information from the outset when deciding on a baby formula product, and that this is appropriately tailored for both healthcare settings, such as hospitals, and in retail settings such as supermarkets. This may involve clearer labelling on products and more accessible information about the nutritional content of different formulas.

The CMA also recommends a range of measures to encourage more competition among manufacturers and retailers involving the way formulas are marketed and sold – making it easier for firms to compete in the market and potentially to help encourage new market entry.

The CMA report also suggests that regulations could be reshaped to allow for more competition on price while still supporting public health goals, such as allowing some forms or promotion or discounting that do not undermine breastfeeding.

The CMA’s interim findings highlight how strict government regulation of infant formula, intended to achieve positive health outcomes, may inadvertently be suppressing price competition. They also suggest that manufacturers may be leveraging the advertising and branding of their follow-on formula products to cross-promote their infant formula products despite regulatory restrictions.

It will be interesting to see which of the CMA’s wide-ranging provisional recommendations are ultimately adopted. At present the CMA is not recommending price controls as a preferred option, recognising that such measures could lead to unwanted consequences, such as reduced incentives for producers to lower prices or to innovate.

The interim CMA report follows a market study launched earlier this year and is part of the CMA’s wider focus on the cost of living and its impact on essential goods. The market study focuses on the supply chain, pricing, and regulatory framework governing infant formula and follow-on formula, with the CMA aiming to create a more competitive and transparent market that benefits both parents and their babies.

Angelique Bret, Partner and competition and consumer law specialist at Pinsent Masons