CMA finalises infant formula market study and recommends improvements

Competition and consumer law experts, Angelique Bret and Tadeusz Gielas, of Pinsent Masons, were commenting on the CMA’s final conclusions and recommendations after completing its year-long review of the UK’s infant formula market.

The infant formula and follow-on formula market study, which began in February 2024, was initiated to explore and address concerns about market outcomes influenced by the current regulatory framework, manufacturer and retailer behaviours, and consumer needs. The final report (185 pages/2.5 MB), which follows an interim report published in November, highlights several issues, including the design and operation of current regulations and the responses of consumers to advertising which emphasises branding despite all infant formula meeting babies’ full nutritional needs.

To tackle this, the CMA has urged the UK, Northern Irish, Scottish and Welsh governments to take action in order to improve outcomes for parents in terms of both the choices they make and prices they pay for formula.

The market study was conducted using the CMA’s competition powers under the Enterprise Act 2002, which enable the authority to examine whether markets are competitive and functioning properly and, if they are not, recommend measures to address the concerns it identifies. Where serious competition concerns are found the CMA may launch a more in-depth market investigation which then gives the enforcer even stronger powers to intervene and impose a wide range of remedies. 

In the present case, which did not lead to an in-depth market investigation, the CMA considered a range of infant formula products, including those labelled by manufacturers as foods for special medical purposes but sold without the need for a prescription – such as “anti-reflux” or “comfort” formula. The market study also considered follow-on formula products, often used as a substitute for infant formula for babies aged between six and 12 months old. Additionally, formula marketed for children 12 months or older, such as “growing up” or “toddler” milk, was reviewed within the study.

The CMA found that a combination of factors is “leading to poor outcomes for parents, who could be saving around £300 a year by switching to a lower priced infant formula brands”. It received evidence that “parents on lower incomes are disproportionately affected due to higher rates of formula feeding”.

The CMA’s final recommendations cover areas such as providing standardised infant formula packaging in hospitals; providing clear information to parents in healthcare and retail settings on the nutritional sufficiency of all infant formula; making it easier to compare prices of different brands; extending the ban on advertising to include follow-on formula; and allowing parents to use vouchers and store loyalty points to buy infant formula.

Whilst the CMA has considered that changing existing regulations to allow price promotions for infant formula could potentially lead to cost savings for parents, it has ultimately not recommended this course of action, recognising that the restrictions are underpinned by the public health goal of supporting breastfeeding. However, the CMA has said that it “stands ready to support further consideration of this option if asked” by governments.

Gielas said: “The CMA has identified three different potential routes to improve market outcomes and has opted for a middle-ground package of measures ‘to sharpen the effectiveness of existing regulations to maximise the ability of parents to make choices that suit their preferences and budgets’. In line with its provisional recommendations, the CMA has refrained from recommending more interventionist measures, such as imposing price controls.”

Bret said: “This market study is yet another example of how the CMA can use its competition powers to help achieve outcomes intended to directly benefit end consumers.  It makes sense that the CMA’s market studies and market investigations work sits alongside its consumer protection work so that the authority is able to take a holistic approach to the issues faced by UK consumers and can use either or both enforcement toolkits to develop tailored and effective measures to address any concerns.”

Having published its final recommendations, the CMA will now engage with the UK, Northern Irish, Scottish and Welsh governments, working with other organisations where appropriate, to explain these measures and support their implementation.

The market study is part of wider ongoing work by the CMA seeking to address cost-of-living pressures faced by consumers across the UK. The authority has recently also examined housebuilding and road fuel markets, and continues its in-depth market investigation into veterinary services.  

Work to drive better outcomes for consumers across the infant formula market also aligns with the UK government's new draft 'strategic steer' to the CMA, which emphasises that competition and consumer protection will drive the country’s economic growth. The CMA’s competition law powers were strengthened on 1 January with the commencement of the Digital Markets, Competition and Consumers Act 2024 (DMCC Act). From April, the DMCC Act will also substantially strengthen the CMA’s powers to enforce consumer protection law, closely aligning these powers with competition law enforcement.