Is There Collusion in the Baby-Formula Industry?: FTC Scrutinizes State Contracts Bidding Process

Author: Vandana Singh | May 24, 2023 08:39am

The Federal Trade Commission's (FTC) investigation concerns potential collusion among baby-formula manufacturers as it examines whether companies like Abbott Laboratories (NYSE:ABT) and other formula manufacturers have engaged in collusion or coordination while bidding for state contracts.
Furthermore, the agency is also exploring whether the coordination among these companies has had a broader impact on sales outside of the Women, Infants, and Children (WIC) formula-supply program, as stated by FTC Commissioner Alvaro Bedoya.
Related: Abbott's Baby Formula Brouhaha: Judge Says No Harm, No Foul in Contamination Controversy.
Abbott Laboratories has stated its cooperation with the FTC's investigation, Wall Street Journal reported.
In previous correspondence, Abbott's lawyers denied any knowledge of collusion or coordination and expressed confusion regarding the factual basis of the agency's investigation.
In January, the FTC had initially requested information from Abbott as a part of its investigation into companies bidding for state infant-formula supply contracts.
Nestlé SA (OTC:NSRGF) (OTC:NSRGY) also received a request for information from the FTC and has responded accordingly.
Reckitt Benckiser Group Plc (OTC:RBGLY) (OTC:RBGPF), another company frequently awarded WIC contracts, has not commented on the specific government investigations but stated its commitment to complying with regulatory and enforcement agencies' requests.
While the FTC declined to provide further details, labeling them as nonpublic, the investigation is one among several initiated by federal agencies against Abbott, including a criminal investigation by the Justice Department prompted by the closure of one of Abbott's manufacturing plants last year, which contributed to a nationwide formula shortage.
The recently revealed FTC documents shed light on Abbott's attempts to limit the information request and the FTC's rejection of their request.
Price Action: ABT shares closed at $105.74 on Tuesday.