“I’m from the government and I’m here to help.”
Those are the nine words that President Ronald Reagan famously said are the most terrifying in the English language. And they sure do seem to ring true a lot … including right now, as mothers search frantically for baby formula to feed their children and some babies wind up hospitalized as a result.
The baby formula crisis is just the latest chapter in what has been an extremely weird last couple of years in these United States. So weird have the past 27 months been that if you don’t believe in a pre-trib rapture, you might be forgiven for thinking we’re smack-dab in the middle of the Great Tribulation. Even after things began to go south when covid arrived on our shores, and then murder hornets, if someone had predicted, “Babies are going to get sick because their mothers can’t find food for them!” you’d have envisioned a poor, helpless third-world country somewhere across the ocean. You certainly wouldn’t have envisioned America. But here we are.
The baby formula crisis began after Abbott — which makes Similac and several other brands of formula — voluntary closed its factory in Michigan amid concerns over contaminated formula that was linked to the deaths of two infants. Thankfully, Abbott is set to reopen the plant this weekend, which should get us on the road to putting the 2022 baby formula crisis behind us, though it isn’t clear how long it’ll take before the grocery store shelves are full of formula once more.
But how did we get here? How can the closure of a single factory create a nationwide crisis?
Simple. It’s a 10-letter word that starts with G and ends with T.
The government is here to help — or, at least, to try to help — amid the current crisis, shipping in emergency supplies of formula from Europe and Australia. But the government is only intervening in a crisis that was its own making.
Abbott controls about a 40% market share of America’s baby formula. A second company, Mead Johnson, controls another 40% of the market share. That’s 80% between just two companies. And Abbott makes about half of its products at the Michigan factory that shuttered operations in February. So, it goes without saying that if that factory goes down, there’s going to be a shortage of formula. Indeed, by May there was a 40% shortage of formula nationwide, according to some estimates. Panic-buying didn’t help matters any — similar to the toilet paper shortage of 2020 that was exacerbated by folks hoarding Charmin and Angel Soft in their bathroom closets.
But how is it that in a free market like ours, two companies control such a large industry? It’s complicated, and there are several reasons why, but a big part of the reason is the U.S. government.
Back in the early 1990s, the Federal Trade Commission declared war on the big players in the baby formula industry, reaching a settlement with Mead Johnson and filing antitrust charges against Abbott. The allegations: the companies participated in price-rigging and colluded with other companies to limit consumer advertising.
When you think of powerful lobbyists, you typically think of Big Tobacco, Big Pharma, Big Oil, and et cetera. Those are the ones that have been demonized, right? Turns out, Big Formula has a pretty potent lobbying strategy in its own right. Vox details how Abbott and Mead Johnson have worked hard and successfully to maintain their stranglehold on the market, and how their lobbying efforts have led to the federal government being complicit in that effort. (Read more here and here.)
For one, the Food & Drug Administration has policies that limits the importation of formula from other countries — increasing reliance on domestically-produced formula. And in recent years, the U.S. has added big-time tariffs on formula from Canada. But perhaps most damning is policies of the Women, Infants & Children program (WIC) that allows formula-makers to contract with states to provide all the formula for WIC recipients within that state. (If you’ve ever been a WIC recipient, you know that you can’t just go grab any old can of formula off the shelf at the grocery store; it has to be a certain kind, depending on which state you’re in.)
So, as a result, the two major players in the infant formula industry have been granted a monopoly — partly their own doing through savvy business strategies and cutthroat competitiveness, but also with more than a little help from the federal government.
Within a few weeks, we’ll hopefully be on our way to the end of this crisis. And, even more hopefully, the final result will be congressional action that gets government the heck out of the infant formula industry. But don’t hold your breath … that’s probably no more likely than Congress doing something to alleviate the through-the-roof gasoline prices.