May 24 (Reuters) – The U.S. Federal Trade Commission (FTC) is probing whether Abbott Laboratories (ABT.N) and other companies that make baby formula colluded in bidding on state contracts, according to a document posted on the agency’s website.
The FTC is looking into whether the companies “engaged in collusion or coordination with any other market participant regarding the bidding,” according to the document.
The Wall Street Journal was first to report the probe.
According to the document, in 2022 the FTC began looking into potential collusion or coordination in bids to provide formula for the U.S. Department of Agriculture’s Women, Infants and Children (WIC) program that provides free formula to low-income families.
The document said studies showed that in addition to the money made from the contracts, the contract win tended to lead to better commercial sales.
“Although the boost in non-WIC sales motivates manufacturers to win WIC contracts, it may also create incentives to engage in collusive or coordinated market allocation, whereby incumbent WIC contract holders agree not to bid against each other,” the document, written by Commissioner Alvaro Bedoya, said.
The antitrust agency also requested information about the company’s formula sales outside of the program.
A spokesperson for Abbott said that the company was cooperating with the FTC’s information requests, and pointed out a filing to the FTC where the company said: “Abbott is unaware of any factual basis to support the WIC-related investigation, and staff have not identified any reason to believe that Abbott or any of its competitors have coordinated or colluded regarding any WIC contract.”
The FTC did not immediately respond to a request for comment.
There has been increased focus on the formula market since Abbott’s February 2022 closure of a plant in Sturgis, Michigan and subsequent recalls, which together caused a nationwide shortage of formula.
The FTC document is the latest step in a disagreement between the agency and Abbott over how much information the company was required to provide in response to a demand issued in January.
Nestle (NESN.S), which makes the Good Start line of infant formulas, confirmed the FTC had also sought information from it.
“We, like other companies, received a civil investigative demand related to the WIC contract bidding process and have responded to the FTC,” a spokesperson said.
Reporting by Rahat Sandhu in Bengaluru; Editing by Shailesh Kuber
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