Abbott faces a second FTC investigation over baby formula shortage
Bloomberg News February 18, 2023
(Tribune News Service) — Abbott Laboratories is facing another investigation into its role in last year’s baby formula shortage that left millions of American families scrambling for vital nutrition products.
Last month, Abbott received a civil investigative demand from the U.S. Federal Trade Commission seeking information in connection with its probe of companies that participate in bids for formula contracts, according to a financial statement filed Friday with the U.S. Securities and Exchange Commission. The investigation could lead to a lawsuit by the FTC if the agency finds Abbott engaged in anti-competitive conduct, such as collusion with other manufacturers on pricing.
For decades, Abbott and peers Perrigo Co., Nestle SA and Mead Johnson Nutrition Company have held tight control over the infant formula market in the United States. The risks from that level of market consolidation were brought into sharp relief last year, when millions of formula cans were recalled from Abbott’s plant in Sturgis, Michigan, after several infants got sick.
The plant was shut down, which led to a nationwide shortage of powdered infant formula. Abbott’s plant in Sturgis had been making about 20% of the country’s infant formula, including Similac, the country’s most popular brand. Some 70 million cans and containers of Similac, as well as the specialty formulas EleCare and Alimentum, were recalled a year ago.
Other companies ramped up production and the U.S. government loosened import restrictions to counteract the shortage, but shelves remained bare and families struggled to get their hands on essential formula for their infants.
Abbott’s disclosure shows the U.S. government is still looking into the issue months after authorities vowed to hold companies responsible for their roles in the shortages. The U.S. Justice Department has also launched a criminal investigation related to Abbott’s manufacturing of formula, the company confirmed last month. Abbott in May entered a five-year consent decree with the DOJ that gives the U.S. Food and Drug Administration additional oversight of the Sturgis facility.
The company also received a subpoena from the SEC’s Enforcement Division requesting information relating to Abbott’s powder infant formula business and related public disclosures, according to the filing.
Separate from the new investigation, the FTC, which enforces both consumer protection and antitrust laws, last year opened an inquiry into the infant formula market after lawmakers had urged it to look into whether consolidation helped exacerbate the shortage. FTC Chair Lina Khan had said the agency would examine whether mergers contributed to the market’s “fragile state.” A report with the findings from that probe, in which the agency sought information from the public, is expected to be released this spring.
Multiple civil lawsuits have also been filed against Abbott regarding its manufacturing of certain powder infant formula products, according to the filing.
The FTC declined to comment. Abbott spokesman Scott Stoffel said the company is cooperating with the FTC.
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