Desperate and uncertain, Maricella Marquez gave her three-year-old daughter a can of baby formula from her kitchen. The can was less than what her daughter, who suffers from a rare allergic esophageal disorder, needed, but it was their last one. Her pantry was empty — and so were the store shelves. Ms. Marquez lives outside San Antonio, a city in which 56 percent of normal baby formula goods were out of stock in early May 2022.
Baby formula is not simply food for many, but it’s also the primary or only nutritional option for developing and vulnerable persons. Many parents cannot or do not breastfeed, and not all baby formula is for newborns. The recent shortage of baby formula flung families across the country into a nightmare scenario, leaving many scared, helpless, and without options.
“I’ve felt a lot of guilt, and I’ve felt a lot of anxiety that he’s not going to get what he needs,’ said Sarah Roy, 33, who takes a daily chemotherapy treatment for leukemia and cannot breastfeed her 5-month-old son. “I have blamed myself. You just think, ‘If I could, if I could, if I could,’ but it’s just kind of out of your hands.”
Four companies — Abbott, Perrigo, Nestlé SA, and Mead Johnson — control roughly 90 percent of the supply of formula in the US. In February 2022, the FDA shut down a main production facility of Abbott, which was contaminated with the bacteria Cronobacter sakazakii that killed two babies and injured two others. Because Abbott provides about 43% of baby formula to the US under various brand names, the shutdown and recall of products manufactured at the facility pulled many Similac, Alimentum and EleCare formulas off the shelves.
On a company investor call in April, Abbott called the recall simply a “short-term hindrance.” Abbott’s share price rose 2.4-percent following the call. Despite the recall, facility shutdown, and suffering of families, Abbott beat quarterly estimates. Abbott is a diversified health care company, doing far more than controlling a large swath of the baby formula market.
The low priority Abbott places in providing safe, high quality formula is revealed by their facility’s old and dirty equipment, releasing of untested formula, lack of product tracing, faulty packaging practices, and serious regulatory breaches. Bacteria was detected eight times at the Abbott facility as the company’s net profits soared by 94-percent between 2019 and 2021. Even as the contaminated formula allegedly started making babies sick, the company did not announce or meaningfully address detected bacteria but rather it increased dividends to shareholders by over 25-percent and announced a $5 billion stock buyback program. Abbott has other revenue streams, market control, and a regulatory structure that supports their monopoly power, leaving little incentive for in-house investment and product-quality guarantees for their baby formula.
“You would think if a company maintains unclean facilities for a span of years to the point where it results in babies falling sick and babies even dying that the company would likely not be in business for very long.”
Although the Abbott facility re-opened and the Biden Administration carried out efforts to relieve the distress of those impacted through increasing supply, these are only short-term solutions. In an interview I conducted with Sarah Miller, Executive Director and Founder of the American Economic Liberties Project — a nonprofit organization that researches monopolies and advocates de-concentration of power in economic markets, Miller related the baby formula crisis to the need to restore more power to consumers and enforce antitrust law. Discussing the formula crisis, Miller said, “You would think if a company maintains unclean facilities for a span of years to the point where it results in babies falling sick and babies even dying that the company would likely not be in business for very long. . . . You can see in life and death terms that the ability to reward innovative businesses and businesses that prioritize quality, privacy, or security all breaks down when you have monopolized industries like we have today.”
Miller argued that the formula crisis and supply shortage are related to the broader issue of monopolization, antitrust enforcement, and a disempowered public. Antitrust policy, which is one part of industrial organization and competition policy, according to Miller, “is intended to maintain a balance of power between corporations, businesses, and the rest of society.”
This power paradigm requires an antitrust enforcement apparatus that prevents the abuse of dominance, promotes fair open markets, and restores power to consumers to have more choice and vote with their wallets. A harmful imbalance of power can result from consolidation of markets, or monopolization, such that only a handful of companies dominate an industry. For Miller, “consolidated corporate power is hostile to broad based economic prosperity, hostile to a resilient inclusive democracy, and hostile to an economy that works for all.”
“You can see in life and death terms that the ability to reward innovative businesses and businesses that prioritize quality, privacy, or security all breaks down when you have monopolized industries like we have today.”