06.14.22

Murray, Cantwell, Casey Call on FTC to Investigate Price Gouging of Infant Formula

Murray, Casey, Cantwell push FTC to investigate whether major retail chains have engaged in unfair trade practices by raising prices for specialized formulas during nationwide shortage

 

Senators: “It is utterly unconscionable that anyone would try to take advantage of this shortage to extort scared parents with hungry infants so they can make a quick buck.”

   

(Washington, D.C.) – Today, Senator Patty Murray (D-WA), Chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, Senator Maria Cantwell (D-WA), Chair of the Senate Commerce Committee, and Senator Bob Casey (D-PA), Chair of the Senate HELP Subcommittee on Children and Families, urged the Federal Trade Commission (FTC) to investigate how major retail chains may have engaged in price gouging and raised prices for specialized infant formula amid the nationwide infant formula shortage.

 

“We write to express our alarm about reports of major national retail chains significantly increasing prices on specialized infant formula in the midst of an ongoing nationwide shortage,” wrote the Senators. “We request that … you direct FTC staff to investigate whether major national retail chains have potentially engaged in unfair trade practices by raising specialized infant formula prices in the midst of the ongoing shortage. It is utterly unconscionable that anyone would try to take advantage of this shortage to extort scared parents with hungry infants so they can make a quick buck.”

 

In a letter to FTC Chair Lina Khan, the Senators detailed reports that some major retail chains and online marketplaces have, during the infant formula shortage, significantly increased prices for specialized formula products that parents and caretakers of children with special dietary needs depend on—and called on the FTC to take action to investigate and prevent price gouging of infant formula.

 

“At a time when families are already contending with inflation, these practices harm children and their families when they are most vulnerable. They must be investigated and curtailed.”


Senator Murray and Senator Casey have been demanding answers and accountability for the infant formula crisis from early on. The pair quickly demanded information from Abbott in light of the recall back in February. Senator Murray also pressed FDA for information about its delayed response to concerns about the Abbott Nutrition facility. Senator Casey requested information from the FDA on what steps the agency was taking to ensure infant formula stays on shelves, as well as details of its investigation into Abbott. In recent weeks, Senator Murray and Senator Casey have led their colleagues in pushing infant formula manufacturers to step up and produce more formula to address the national shortage and in calling on the White House to appoint a formula coordinator to lead a national strategy. Senator Murray also chaired a hearing on the infant formula crisis, during which she grilled Commissioner Robert Califf on the FDA’s response to the crisis. Today, Senator Murray led the HELP Committee in advancing legislation that includes new steps, championed by her, Senator Casey, and Senator Burr, to hold FDA and manufacturers accountable to address formula shortage.

 

Full text of the letter below and HERE:

 

June 14, 2022

 

The Honorable Lina Khan

Chair

Federal Trade Commission

600 Pennsylvania Avenue NW

Washington, D.C. 20580

 

Dear Chair Khan,

 

We write to express our alarm about reports of major national retail chains significantly increasing prices on specialized infant formula in the midst of an ongoing nationwide shortage. We were glad to see the Federal Trade Commission (FTC) announce plans to investigate “anyone who deceives, exploits, or scams” families attempting to buy formula and potential “unlawful forms of economic discrimination” by manufacturers and distributors.[1] We request that, as part of that investigation, you direct FTC staff to investigate whether major national retail chains have potentially engaged in unfair trade practices by raising specialized infant formula prices in the midst of the ongoing shortage. It is utterly unconscionable that anyone would try to take advantage of this shortage to extort scared parents with hungry infants so they can make a quick buck.

 

On February 17, 2022, the Food and Drug Administration announced a recall of infant formula products produced by Abbott Nutrition at their Sturgis, Michigan plant.[2] This facility is reported to have produced one-fifth of all infant formula in the U.S.,[3] and most of the country’s supply of specialty formulas.[4] Loss of output from this plant following its temporary closure—which was necessary to ensure the safety of formula produced at the facility—left the industry without the capacity to meet demand and has resulted in nation-wide shortages.

 

In the months since the Abbott recall, parents and guardians have faced significant infant formula shortages. At the end of May, one data provider estimated that 74 percent of the nation’s formula inventory was out of stock, and in some places, including the state of Washington, out-of-stock rates approached or exceeded 90 percent.[5]

 

The ongoing national shortage has been especially difficult for parents and guardians of children with particular dietary needs, such as children with allergies or infants born prematurely. Many preterm infants require specialized formula to help them develop, as do other children with allergies to milk-based products or other medical conditions.[6] Parents of these children are struggling to find specialized formula and are making difficult—and sometimes dangerous—decisions every day about resorting to traditional formula options that might trigger their children’s allergies or illness, or traveling for hours in search of elusive specialized formula. No parent should have to deal with that stress.

 

In the midst of this shortage, we have received concerning reports that some major retail chains and online secondary marketplaces have significantly increased their prices for these specialized formula products in a short period of time.[7] These instances of price gouging appear to take on different forms. One major retailer appears to have increased its price for at least one specialized formula by more than 33 percent between October 2020 and May 2022. An online retailer appears to have significantly increased prices in May 2022 for a specialized formula, according to third-party data on prices. And a number of parents and guardians report seeing prices for specialized formula on online secondary marketplaces that are sometimes more than double the cost in stores. At a time when families are already contending with inflation, these practices harm children and their families when they are most vulnerable. They must be investigated and curtailed.

 

We request your staff investigate how major retail chains, online retailers, and online secondary marketplaces may have engaged in patterns of increasing prices on specialized formula products which may amount to “unfair methods of competition [or] unfair or deceptive acts or practices in or affecting commerce.”[8] We urge you to investigate whether any of those chains, retailers, or secondary marketplaces have implemented policies that allow for price gouging by secondary sellers within their marketplaces. Further, the FTC should work in tandem with state Attorneys General to ensure any companies that engage in price gouging relating to specialty formula products is held accountable for their immoral business practices. Finally, we request a briefing with our staffs to discuss FTC’s ongoing efforts relating to the infant formula shortage and the shortage of specialty formula products in particular.

 

Sincerely,

 

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[1] https://www.ftc.gov/system/files/ftc_gov/pdf/Statement%20of%20Chair%20Lina%20M.%20Khan%20re%20Solicitation%20for%20Public%20Comments%20on%20Infant%20Formula%20Shortage__final.pdf

[2] https://www.fda.gov/food/outbreaks-foodborne-illness/fda-investigation-cronobacter-infections-powdered-infant-formula-february-2022

[3] https://www.npr.org/2022/05/19/1099748064/baby-infant-formula-shortages

[4] https://www.washingtonpost.com/business/2022/06/04/abbott-baby-formula-factory-reopens/

[5] https://www.bloomberg.com/news/articles/2022-06-02/us-baby-formula-shortages-hit-74-despite-biden-action

[6] https://www.healthychildren.org/English/ages-stages/baby/formula-feeding/Pages/choosing-an-infant-formula.aspx

[8] The Federal Trade Commission Act (15 U.S.C. §§ 41-58)