The Federal Trade Commission has launched an investigation into the baby formula shortage, saying it will root out any fraud, price gouging, and other illegal business tactics making it harder for parents to secure supplies.

The FTC, which enforces consumer protection and antitrust laws, is requesting that the public disclose instances of deceptive business practices during the national shortage. The agency will also investigate any anti-competitive business practices in the baby formula industry, which is dominated by four major companies: Abbott Nutrition, Mead Johnson Nutrition, Nestle, and Perrigo.

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“The FTC is launching a public inquiry to identify the factors that contributed to the shortage or hampered our ability to respond to it,” said FTC Chairwoman Lina Khan. “Learning from this experience can help determine how we can minimize the risk of similar shortages in the markets for other life-sustaining products.”

The shortage has forced parents to search frantically for food for their babies, often finding supplies online that are being resold at exorbitant prices. Cracking down on unfair resale practices is an objective of the FTC’s investigation. Khan referenced instances of “bots” automatically buying up supplies and reselling them at astronomical prices.

"While reselling these products is not illegal and may serve a useful function, using 'bots' or other automated tools to divert large amounts of supply of life-sustaining products from ordinary retailers and then prey on desperate families may constitute an unfair practice under the FTC Act," Khan said.

The agency will examine how well retailers have worked with manufacturers to secure supplies in stores, what role the FDA’s red tape had in exacerbating the shortage, and how it came to be that just a handful of companies came to control about 90% of the formula industry. As part of its investigation, the FTC will examine mergers and acquisitions in the formula market “to better understand current concentration, how it came to be, and how that should inform future merger review.”

There were rumblings of a formula shortage as far back as summer 2021, and it became more acute as the year went on. In January, about 23% of infant formula was out of stock. That rate rose to 43% by the end of the first week in May. The shortage was driven in part by the closure earlier this year of an Abbott Nutrition manufacturing plant in Michigan and a recall of some of its formula after several babies became severely ill from a bacterial contamination. Pandemic-driven supply chain problems have also hampered companies’ ability to source raw materials and distribute the finished product all over the United States.

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“Over the last few years, Americans have repeatedly experienced cycles of supply chain disruptions, shortages, stockpiling of remaining supplies, and reseller profiteering and price gouging,” Khan said. “The FTC will do everything within its power to ensure the markets for other life-sustaining and vital products are competitive and resilient, protecting the ability of Americans to access critical goods even amid disruptions.”