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 ‘significant concerns’ about the sector.

The UK Competition and Markets Authority (CMA) has launched an initial investigation into the sector amid concerns that parents were paying too much to feed their children due to market behaviour and regulation.

The regulator said on Friday it wants to identify the sector’s problems “as soon as possible” and make suggestions to governments that can be implemented.

In February, the company launched a market survey into the infant formula sector as part of efforts to address cost-of-living pressures facing British consumers.

The investigation 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 their baby’s first year of life by buying alternatives to ‘premium’ brands.

After six months of in-depth research, the CMA believes many consumers are paying “more than they need to” for infant formula and do not have the information they need to make “informed purchasing decisions”.

Furthermore, the regulator has learned that manufacturers of infant formula can increase brand awareness and influence their choice of a particular brand, even though the laws require all infant formula to meet similar compositional requirements.

In addition, the report found that parents and caregivers choosing a brand of infant formula for the first time “generally do not opt ​​for the cheaper options”, while prices are rising because of the “vulnerable circumstances” in which they make those decisions.

The CMA added: ‘Many parents and carers are, of course, not focused on comparing products and prices when deciding whether to buy bottle feeding. And once they have found a product that works well for their baby, they are reluctant to switch.

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

She believes that a combination of the regulatory framework, the behaviour of manufacturers and suppliers and the needs of people who buy formula ‘resulted in poor market outcomes’.

Rather than launching a lengthy investigation, the CMA will continue its market research and publish an interim report in October.

This report outlines possible options for governments and other stakeholders to achieve ‘better outcomes’ in pricing and choice.

It will then prepare a final market research report based on the feedback it receives from the interim report.

The CMA concluded that it would be ‘important…to gain insight into the actions that governments plan to take following the publication of our final report, and the expected timing for these.

‘In light of government responses, including any changes to the legislative landscape, the CMA may further consider whether and what action the CMA should take to address the concerns identified.’