CMA rejects ‘in-depth’ investigation into infant formula market

Competition authorities will not launch an in-depth investigation into the UK infant formula market despite highlighting “significant concerns” about the sector.

Britain’s Competition and Markets Authority (CMA) launched an initial investigation into the sector amid fears that market behaviour and its regulatory framework had led to parents paying excessive amounts to feed their children.

The watchdog said on Friday it wanted to identify industry problems “as quickly as possible” and offer suggestions to governments that could be implemented.

A market study into the infant formula sector began in February as part of efforts to address cost of living pressures affecting British consumers.

The review was launched after the CMA found that infant formula prices had risen by a quarter between March 2021 and April 2023, and that families could save more than £500 in the first year of a baby’s life by buying alternatives to premium brands.

Following six months of extensive work, the CMA believes many shoppers are paying “more than they need to” for infant formula and lack the information needed to make “well-informed purchasing decisions”.

In addition, the regulator has heard that formula makers can increase brand awareness and influence brand choices, even though laws require all infant formulas to have similar composition requirements.

In addition to this, she said parents and caregivers selecting an infant formula brand for the first time “generally do not choose cheaper options” while prices are rising due to the “vulnerable circumstances” in which they make those decisions.

The CMA added: ‘Naturally, many parents and carers do not focus on comparing products and prices when they need to make the decision to start buying formula, and once they have found a product that works well for their baby, they are reluctant to change.

‘This brand loyalty means that new entrants face considerable barriers to gaining the trust of parents and carers and gaining market share while staying within regulatory constraints.

He believes that a combination of the regulatory framework, the behaviour of manufacturers and suppliers and the needs of people buying formulas were “resulting in poor market outcomes”.

Rather than conducting a lengthy investigation, the CMA will continue its market study before publishing an interim report in October.

This report will outline possible options for governments and other stakeholders to achieve “better outcomes” in terms of pricing and choice.

You will then prepare a final market research report based on the feedback you get from the interim report.

The CMA concluded that “it would be important… to understand any action governments plan to take following the publication of our final report, and the timeline for this.”

‘In light of the responses from governments, including in respect of possible changes to the legislative landscape, the CMA may further consider whether it would be appropriate to take action to address the concerns identified and, if so, what action it would take.’