Following a deep dive into the sector, the Competition and Markets Authority (CMA) has issued an interim report detailing a number of concerns.
It found that the “unintended consequences” of the regulations designed to support important public health goals mean that there is limited competition on formula prices in shops. The report also noted that there was a lack of timely, clear and impartial information for parents and carers about formula.
The report outlines several potential options for addressing these issues, such as giving parents better information earlier and reshaping regulations.
The CMA is seeking feedback on these options, and the issues outlined in the CMA’s interim report, ahead of publishing its final report in February 2025.
The watchdog announced its probe into the baby formula market back in February 2024 after finding that the average price of infant formula had risen 25% over the previous two years.
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Strict rules
The CMA found that regulations play a key role in the market, supporting important public health goals, including not to discourage breastfeeding. This includes strict rules around the advertising and labelling of infant formula.
However, the CMA is concerned that some aspects of the regulations have had unintended consequences, contributing to consumers paying higher prices.
For example, regulation dictates that companies cannot promote infant formula, including price reductions or deals, so as not to discourage breastfeeding. This means companies rely heavily on other ways to distinguish their products, such as brand-building and marketing.
The CMA found that manufacturers appear to signal the superiority of their products in ways that are difficult for parents to meaningfully assess.
Due to limited incentives to compete on price, the CMA found that there is little pressure on manufacturers or retailers to shelter customers from increases in manufacturing costs, which have largely been passed on quickly and in full.
Choice of infant formula
The CMA noted that decisions around infant formula usually come with a high amount of pressure, as parents naturally want to do what is best for their baby.
The regulator found that parents often chose a more expensive baby formula brand, believing it to be better quality.
This is despite NHS advice that “it does not matter which brand you choose, they’ll all meet your baby’s nutritional needs, regardless of price”.
Sarah Cardell, chief executive of the CMA, said: “This is a very important and unique market. We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby.
“We have identified options for change, but now want to work closely with Governments in all parts of the UK, as well as other stakeholders, as we develop our final recommendations. Importantly, any changes must continue to support regulation that ensures all formula gives babies the nutrition they need to thrive – as well as supporting Governments’ aims on breastfeeding.”
Parents can give feedback
The CMA has set out a number of potential options that could help improve the sector and reduce costs for parents. These include rules around information and supply in healthcare settings, price promotion in retail settings, the clarifying, and enforcing of existing regulations, and strengthening labelling and advertising rules.
‘Backstop’ measures (not currently recommended) include price controls and public provision of baby formula.
The CMA’s recommendations can be viewed online and interested parties – including parents – can make submissions to the CMA on the potential remedies up until 29 November 2024.
