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**MAY 27, 2022**

Kuttner on TAP

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**** A Formula for Public Ownership

What the Similac debacle teaches about the consequences of arrogant
corporate concentration

Here's what we've learned this week about the baby formula scandal.
First off, the Abbott Labs plant in Sturgis, Michigan, whose four-month
shutdown caused the nationwide shortage, was closed by the FDA for good
reason. Scathing testimony

before Congress Wednesday revealed that filthy conditions prevailed at
the plant, causing at least four infants to be infected with Cronobacter
bacteria. Abbott, maker of Similac, has about 48 percent market share,
which is a scandal all by itself.

The source of the information on the Abbott plant was a 34-page
whistleblower document by a former Abbott employee released by Rep. Rosa
DeLauro
.
The report was sent to the FDA in October. The agency didn't begin
investigating until late January.

Meanwhile, the second-largest maker of baby formula, Reckitt Benckiser
Group, the producer of Enfamil, is in negotiations to sell its baby
formula business to a private equity

company. Reckitt bought Enfamil and other infant products from Mead
Johnson in 2017. Enfamil has between 20 and 40 percent of U.S. market
share. But according to

**The Wall Street Journal**, Reckitt wants to unload Enfamil because it
has been insufficiently profitable
.

Here is a terrific test case for Jonathan Kanter, head of the Justice
Department's Antitrust Division, who says he wants to crack down on
concentration and other abuses by private equity. As the shortage
demonstrated when one major plant shut down, the baby formula industry
is one of America's most concentrated, with a duopoly controlling most
of the market. The last thing it needs is private equity ownership.

So consider: Of the two giant companies that control manufacture of this
vital product, one is cavalier about sanitation and safety, and the
other doesn't want to be in the business at all. The government has a
huge amount of leverage because the WIC program buys more than half of
all infant formula.

The remedy is either to break the industry up into lots of smaller
producers, or even better, to have a public option, where a public
entity enters the market as a major producer. FDR called this "yardstick
competition." The stuff isn't hard to make, and WIC provides a
guaranteed market.

When private producers disgrace themselves, social ownership starts
looking very good.

~ ROBERT KUTTNER

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