Feds Are Quietly Investigating Collusion By Major Companies

The Federal Trade Commission has launched an investigation into whether major baby formula manufacturers such as Abbott Laboratories have engaged in collusion during the bidding process for state contracts.

This is according to a document that was posted to the FTC’s website recently. According to that document, the agency is probing whether these companies “engaged in collusion or coordination with any other market participant regarding the bidding.”

The probe by the FTC into whether there was coordination or collusion in regard to bids first began in 2022. The bids are for companies that would be able to provide baby formula to the Women, Infants and Children program, also known as WIC, that’s offered through the U.S. Department of Agriculture. 

That program provides baby formula for free to families who are eligible due to their low-income status.

Now only do the companies that win the contracts benefit from the money that they make for supplying the formula to the WIC program, they also tend to have higher overall commercial sales compared to competitors.

The document, which was written by Alvaro Bedoya, the FTC commissioner, said:

“Although the boost in non-WIC sales motivates manufacturers to win WIC contracts, it may also create incentives to engage in collusive or coordinated market allocation, whereby incumbent WIC contract holders agree not to bid against each other.”

As part of its probe, the FTC has requested that Abbott Laboratories send them information about its formula sales that happen outside of the WIC program.

According to a spokesperson for the company, they are cooperating with the information requests that the FTC has submitted to them. The spokesperson also made reference to a FTC filing, in which the company said:

“Abbott is unaware of any factual basis to support the WIC-related investigation, and staff have not identified any reason to believe that Abbott or any of its competitors have coordinated or colluded regarding any WIC contract.”

Abbott has been in the news a lot over the last year or so, as the market for baby formula has experienced a lot of turmoil. In February of 2022, the company had to close one of its plants located in Sturgis, Michigan, and also had to issue multiple recalls of its products.

As a result of that, a shortage of baby formula was experienced throughout the country, causing many families to scramble just to be able to find food for their babies.

The FTC issued demands for information to Abbott back in January, and this latest document the agency released is another step in a major disagreement that exists between the two entities over how much information the company has to provide to the FTC.

In addition to Abbott Laboratories, Nestle has confirmed that the FTC is seeking information from them. The company manufactures infant formulas called Good Start.

A spokesperson for Nestle said recently:

“We, like other companies, received a civil investigative demand related to the WIC contract bidding process and have responded to the FTC.”