The Latest from the Prospect
 ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

View this email in your browser

 

MAY

**10, 2022**

Dayen on TAP

Monopolies and the Baby Formula Shortage

Four companies sell almost all baby formula in the U.S., magnifying
supply shocks that cause families to scramble.

****

Families are desperately hunting around drugstores and groceries for
baby formula amid a nationwide shortage
.
Analyst Datasembly
indicates
that 40 percent of leading baby formula products were out of stock in
late April. Yes, that refers to all sizes

of the same product (it's 40 percent of the SKU numbers, not 40
percent of all formula), but the problem shouldn't really be
minimized: Businesses are rationing and parents are scrambling, even if
switching brands doesn't typically carry any health consequences
(though that isn't always the case
).

Why is this happening, exactly? Well, there was a large recall of
Similac
,
one of the major brands, in February. But I am having a hard time with
the alibi of another large brand, Enfamil, which has claimed

an "18 percent surge in demand for baby formula nationwide."

Was there a large influx of babies that I'm not aware of? Have they
all gotten hungrier? Contrary to myth, the pandemic and the forced
lockdowns did not lead to a baby boom; in fact, they led to a baby bust
.
U.S. births declined in the first half of 2021
,
the last point for which we have data. Even if there was an uptick
later, it's extremely unlikely to see an 18 percent surge.

Left unsaid by formula manufacturers is their iron grip on the market,
which exacerbates supply disruptions. The shortage is a manifestation of
the same problems we've seen with the supply chain
, made worse by monopoly.

As of 2018, four companies-Abbott (which makes Similac), Reckitt
Benckiser (Enfamil), Nestlé (Gerber), and Perrigo (which makes
store-brand formula)-control about 89 percent of the U.S. market. Any
disruption to one of their products will be magnified, whether it's a
recall for Similac or inability to source ingredients. A few companies
in the market relying on the same sources creates a much more fragile
supply chain.

Keep in mind that baby formula consists mostly of dehydrated cow's
milk, vitamins, and a ton of sugar. Yet it somehow costs at least $150
and as much as $428 a month
,
high enough to sustain a mass crime ring

even before the price jumped 18 percent over the past year. This is
probably not as distressing to the oligopolistic companies selling the
stuff as it is for families.

Some have suggested that the Women, Infants and Children (WIC) program
is responsible for the shortages. Half of all U.S. formula consumption
goes through WIC, which provides free infant formula

through a competitive bidding process where states negotiate bulk
discounts in exchange for market exclusivity. But that program has been
in place since the 1980s; it cannot be responsible for the inflation
over the past year. Similarly, research has found little or no effect

between the WIC program and higher retail prices for non-WIC families.

The competitive bidding setup does tend to concentrate the market,
however. (It's a bit of a chicken-or-egg problem; market concentration
may have caused few WIC bidders, not the other way around.) This is
manageable except in cases of supply shock, as we're now seeing. The
antitrust agencies should definitely take a look.

Meanwhile, one shouldn't deny the fierce use of lobbying to cement the
industry's monopoly. During the Trump administration, U.S. delegates
to the United Nations threatened countries with trade sanctions

and withdrawal of military aid if they supported an anodyne
international resolution in support of breastfeeding as a healthy option
for infants. That was stage-managed by the baby formula industry, which
particularly wanted to keep its lock on the developing world. The
interests of private monopolists were put ahead of public health and
security.

The dominant companies claim to be ramping up production to solve the
shortage. It should be noted that their incentives run in the other
direction, to keep prices high by putting a lid on supply. When you're
a monopolist, you can do that without much trouble.

~ DAVID DAYEN

Follow David Dayen on Twitter

[link removed]

[link removed] Latino
Super PAC Comes to Rescue of Anti-Abortion Dem Henry Cuellar

A new super PAC run by Biden, Obama, and Sanders consultants just
dropped a quarter million into the race against pro-choice woman Jessica
Cisneros. BY ANDREW PEREZ & DAVID DAYEN

[link removed] Airline
Abuses and Government's Dormant Power

The Department of Transportation needs to be more aggressive in
protecting consumers from price-gouging. BY ROBERT KUTTNER

[link removed]
Pennsylvania Oil Lobby Keeps Abandoned Wells Unplugged

The oil and gas industry could jeopardize federal funding to clean up
the state's thousands of abandoned and leaking wells. BY AUDREY
CARLETON

To receive this newsletter directly in your inbox, click here to
subscribe. 

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

 

[link removed]

YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM

The American Prospect, Inc.
1225 I Street NW, Suite 600
Washington, DC xxxxxx
United States
Copyright (c) 2022 The American Prospect. All rights reserved.

To opt out of American Prospect membership messaging, click here
.

To manage your newsletter preferences, click here
.

To unsubscribe from all American Prospect emails, including newsletters,
click here
.