The infant formula crisis: Public comment to the Federal Trade Commission

Katheryn (Kadee) Russ (PIIE) and Phillip Baker (Deakin University)

Public comment submitted for a Federal Trade Commission inquiry into the market for infant formula

June 27, 2022

This comment begins by describing the market structure for commercial milk formulas (CMFs) globally and in the US, with implications for US trade policy. It also will argue that policymakers should pay special attention to a unique feature of the market: a primary competitor with CMF producers to serve the demand for infant nutrition is human breastmilk. This introduces important public health issues crucial to understanding and supporting resilience in supply chains for infant nutrition. Our main messages are as follows:

  • National markets for CMFs are highly concentrated across many countries, including the United States.
  • Import barriers—both tariff and non-tariff—are likely contributors to the high level of concentration in the US domestic market.
  • While it may favor large firms, the WIC program forces competitive behavior among oligopolistic producers of CMF by generating head-to-head, price-based competition.
  • Given risks of unintended consequences in service to small and especially vulnerable markets, prior to any redesign of WIC policymakers could consider four courses of action to address market power and resilience in supply chains for infant nutrition:
    • Designing a whole-of-government approach to support parents who wish and are able to breastfeed their infants. The US Breastfeeding Committee and the World Health Organization provide a host of recommendations for ways to do this. Breastmilk is the biggest potential competitor to sales of CMFs by any company.
    • Reducing barriers to imports of CMFs. This is likely to increase competition in the US commercial market for CMFs. It is consistent with continued (or enhanced) competitive bidding within the WIC auctions. Availability of imports could also provide a buffer in times of domestic production shocks such as the one the US is experiencing now.
    • Revisiting US trade policy toward CMFs more broadly, including the US role in the design of international standards. The US so far has been hostile at the World Trade Organization and Codex Alimentarius Commission toward efforts by countries to prevent aggressive marketing of CMFs, which can interfere with public health measures to support and protect breastfeeding for parents who wish to undertake it.
    • Exploring ways to support expanded human donor milk banks that do not create new harbors for monopoly power could also ensure greater resilience in the supply of breastmilk for the most vulnerable infants.

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Katheryn (Kadee) Russ Senior Research Staff

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