CMA Recommends Ending Ban on Baby Formula Price Promotions

A government watchdog has suggested that a ban on baby milk price promotions should be lifted to prevent parents from “paying over the odds” for formula. The interim report on baby milk formula from the Competition and Markets Authority (CMA) indicated that the market needed significant reform to assist parents struggling with affordability. Recommendations included the government providing NHS-branded baby milk and removing branding from baby milk products in hospitals. The report stopped short of recommending price controls but stated they remain a possibility, adding that parents have been “shouldering the costs” of price increases in the market for years. CMA chief executive Sarah Cardell stated, “We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby.” Just three companies—Danone, which manufactures Aptamil and Cow & Gate; Nestle, which manufactures SMA; and Kendamil—control over 90% of the UK market. The report found that prices for baby formula in the UK have increased by between 18% and 36%, depending on the brand, over the two years from December 2021 to December 2023. The report also found that parents could achieve savings of up to £500 over a baby’s first year of life by switching to a lower-priced brand. Maxine Palmer from the parenting charity NCT commented, “Companies are exploiting new parents who rely on formula milk to feed their babies.” She added, “With skyrocketing prices, lack of accountability, regulations and guidance in place for formula milk providers, parents are torn between the ‘best’ product to feed their baby and the essential costs of living.” The market is currently regulated to prohibit promotions, such as loyalty points or discounts, in the same way as tobacco and lottery tickets. This measure aims to encourage breastfeeding, which the NHS states is healthier for children. However, the CMA expressed concern that this prevents firms from competing on price, with an “unintended consequence” of “consumers paying higher prices.” The authority indicated that “permitting prices and price reductions to be publicised” would encourage price competition. It found there was “little pressure” on firms “to shelter customers from increases in manufacturing costs, which have largely been passed on quickly and in full.” Despite these regulations, Asda began allowing loyalty points to be used to purchase baby milk from January. Iceland has also voiced opposition to the rule. The rules also mandate that all brands of baby milk formula, including supermarket own brands, must not differ too much in terms of core ingredients. However, the CMA is concerned that the words companies use to make their products stand out, such as “advanced,” make it difficult to judge their quality. It stated that this “risks diluting the important public health message that all infant formula meets nutritional needs” regardless of brand or product. Danielle O’Leary, a mother who spoke to the BBC in London, said “the price has really increased from when I had my oldest to now.” She continued, “When my oldest was younger, it wasn’t so bad. But now, it’s gone up so much.” The CMA has also put forward several other recommendations and suggestions to improve the market for parents. Price controls such as caps are “not currently recommended,” but the CMA did state they could “bring down prices directly” if enforced. It is understood that the CMA avoided recommending price caps due to concerns about potential shortages. Baby formula maker HiPP Organic UK expressed reassurance that price caps were not being recommended, stating that “these are unlikely to support families and maintain a sustainable industry.” The CMA began its probe after becoming concerned about surging baby milk prices and expects to publish its final report in February next year. Danone stated it “agrees with the CMA that there should be a focus on the information parents receive in healthcare settings, and in particular on the differences between infant formulas.” Nestle indicated it would “continue to work constructively with the CMA as they further explore market outcomes.” Kendamil asserted that its product is “the only British-made baby milk… driving reduced pricing.”