Updated March 8, 2023
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By Jenny Zimmer |
Corruption can feel abstract: insider trading, kick-backs, deal-cutting.
But right now, corruption is having a real, noticeable impact on some of the most vulnerable Americans: families and babies who rely on formula in the middle of a supply shortage.
So what caused the baby formula shortage?
In February 2022, one of the largest formula manufacturing plants in the country shut down following a U.S. Food and Drug Administration (FDA) investigation. The investigation looked into why four infants were hospitalized for a dangerous bacterial infection.
The Michigan plant, run by Abbott Nutrition, was a major producer of formula used across the country. This closure, combined with existing supply chain issues, has contributed to the increasingly low stock of formula in stores. The people who were hit the hardest were those who needed specialized formulas for children with allergies and specific dietary needs. It was also devastating for many low-income families who couldn't afford to stock up.
How is the formula supply issue a corruption problem?
In short: Our government is serving the needs of corporations rather than the needs of its people.
1. The formula sector is a monopoly. There’s little to no competition in the market.
The United States has antitrust laws that are supposed to break up monopolies. However, the Federal Trade Commission (FTC) has not used those laws to break up the highly consolidated infant formula industry. That leaves us with a mere four companies that control 90% of the formula market. Very specialized formulas are often more consolidated than that. That means that when one massive plant shuts down production, or one company struggles to secure the ingredients they need, it becomes a national crisis.
2. Exclusive contract negotiations for the federal WIC program led to further consolidation of power for just a few providers.
More than half of the baby formula purchased in the U.S. is purchased through the Women, Infants, and Children (WIC) program. WIC is a national program established to support low-income families. Each state negotiates its WIC contracts with one company in a bidding process. The goal of this single-source contracting process is to cut expenses for the WIC program. But it also means that over the past 30 years, just three companies have received contracts with WIC. This contributes heavily to the highly-consolidated formula industry.
One of those companies is Abbott Nutrition – the company whose factory shuttered in 2022. Abbott is the sole formula provider for roughly half the infants receiving formula purchased through WIC.
Because Abbott’s supply is severely impacted, many states had trouble finding formula approved through the WIC program. Some of the most vulnerable formula users were unable to find or afford the food they need for their babies.
This prioritization of low costs over the safety and availability of life-saving nutrition demonstrates the failure of a government that puts corporate interests before the interests of the people they serve.
3. Protectionist policies effectively ban importing baby formula
One more way the U.S. protects the big domestic formula producers, and hurts consumers, is by heavily restricting imports of formula. In theory, these regulations are to ensure the safety of infants. But by banning formula created and used in other countries – including Canada – it also creates less competition and makes our formula supply vulnerable to shortages. (Note: In May 2022, President Joe Biden eased some of these restrictions in an effort to bring more formula into the country.)
4. Lack of a federal standard for paid leave
Paid leave is an incredibly popular policy. A poll last year found that 84% of likely voters support a paid leave policy for new parents. A majority of those polled across all parties and political perspectives also said they would pay more taxes to ensure a federal paid leave standard. However, despite this overwhelming support, America still doesn’t have a national paid leave policy. Because it’s popular, politicians tout it on the campaign trail, only to see it fizzle in Congress year after year. In the year 2022, only 23% of American workers had access to paid leave.
Lack of paid leave has aggravated the formula shortage by increasing the number of parents dependent on formula to feed their infants and making it more difficult for parents to get time off work to find formula in this crisis.
RepresentUs has long decried the gap between the popularity of policies and which policies become law. When politicians aren’t accountable to their voters, we can’t count on them to pass the policies we desperately need to improve our lives.
In 2022, supply chains were complicated and slow across a whole range of industries. But the fact the baby formula shortage is continuing a year later is a tragedy. Perhaps the commodity in shortest supply here is responsive federal policy, and a government that is accountable to all Americans. Even the very tiny ones.
So what can we do?
At RepresentUs, we’re fighting corruption every day. Join us to:
- End partisan gerrymandering so that voters pick their representatives, NOT the other way around.
- Promote Ranked Choice Voting and break the two-party duopoly.
- Get money out of politics.
- Ensure our elections are free and fair by protecting nonpartisan election officials.
- And more!
Contributors: Dexter Williams, RepresentUs Research Analyst; Susan Hildebrand, RepresentUs National Mobilization Director