FTC Investigates Abbott For Alleged Collusion in Federal Baby Formula Contract Bids

The Reyes family wait to receive baby formula in a Walmart Supercenter on July 08, 2022 in Houston, Texas.

Brandon Bell/Getty Images

The Federal Trade Commission is seeking more information from Abbott Laboratories (ABT) about bids for federal nutrition program contracts, as the agency looks into potential collusion among formula manufacturers in the bidding process.

Key Takeaways

  • FTC wants to know more about how the nation's leading infant formula maker bids on state contracts.
  • The agency cites a USDA study that showed potential patterns of non-competitive bidding in state WIC contracts.
  • Abbott makes 48% of the nation’s infant formula in a market with only three manufacturers.
  • Abbott’s formula recall and plant closure was at the center of the 2022 infant formula shortage.

Shares of Abbott, the nation’s largest maker of infant formula, traded nearly 1% lower in intraday trading on the news as of 12:30 p.m. Eastern Time.

In documents posted to the FTC website, the agency said it wanted more information from Abbott on its bids for U.S. Department of Agriculture’s Women, Infants, and Children (WIC) federal nutrition assistance program grants. The consumer protection agency that investigates fraud and anti-competitive behavior told Abbott it wanted information on bids for both WIC and non-WIC infant formula contracts. 

“In 2022, the Commission initiated an investigation into whether any participant in infant formula markets has engaged in collusion or coordination with any other market participant regarding the bidding for WIC contracts,” according to the FTC document issued in April requesting information from Abbott. 

While Abbott has said it will provide information on WIC contracts, the company has pushed back on the FTC regarding providing non-WIC information, agency documents showed. Abbott had already attracted attention from the FTC, USDA, and White House after it was at the center of a nationwide baby formula shortage in 2022.

Abbott Has Dominance in Infant Formula Market

The FTC said Abbott controls 48% of the infant formula market, which has just three manufacturers. More than half of infant formula sales in the U.S. are made through the USDA’s WIC program. State agencies that administer WIC infant formula programs bid them out to suppliers in multi-year contracts.

The FTC cited a 2015 USDA study of bidding on WIC infant formula contracts between 2003 and 2013 that found patterns of potentially non-competitive bidding. Abbott is only one of three manufacturers to bid on WIC infant formula contracts since 1996, the FTC noted. 

Abbott initiated a nationwide recall in 2022 and closed a plant in Michigan after bacterial contamination in the company’s formula was blamed for at least two infant deaths. The resulting shortage and production loss prompted the White House to coordinate a national response.

The FTC documents did not tie issues with bids for WIC contracts to the 2022 formula shortage.

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  2. Federal Trade Commission. “Federal Trade Commission Launches Inquiry into Infant Formula Crisis.”

  3. The White House. “FACT SHEET: President Biden Announces Additional Steps to Address Infant Formula Shortage.”

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