CMA to investigate baby formular market

The Competition and Markets Authority (CMA) has launched a study into the supply of infant formula in the UK as part of its efforts to reduce the cost-of-living pressure in the groceries sector.

In November last year, the watchdog found that that prices of baby formula have risen by 25 per cent over the past two years. It estimated that parents could save around £500 during the first year of a baby’s life by switching to a cheaper option but added that parents may not have the right information at the right time to make effective choices.

It explained that the baby formula market is highly concentrated, with two firms holding 85 per cent of the market share and warned that suppliers may not have the right incentives to offer their products at competitive prices.

The regulator said that through the study it will be able to use its compulsory information gathering powers rather than relying on firms to provide it voluntarily.

The study will focus on a number of areas including consumer behaviour and the information available to make buying choices, the supply side features of the market such as barriers to entry, and the role of regulatory framework in influencing market outcomes.

The organisation said that following the study it could recommend actions to the government to address problems in the market, for example on the regulations governing how infant formula is marketed, or on the information provided to parents to help them choose an infant formula brand.

The CMA aims to publish its findings in September.

“Whilst it’s a positive sign that prices of some products have fallen since our update last November, the cost of infant milk remains at historically high levels,” said Sarah Cardell, chief executive of the CMA. “We’re concerned that parents don’t always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.”

She added: “We are determined to ensure this market is working well for the many new parents who depend on infant formula and it’s essential that any changes we propose are based on evidence and a strong understanding of the market. That’s why we’ve now decided to take forward our work on infant formula as a market study, using our formal legal powers.”

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