The UK’s Competition and Markets Authority (CMA) has decided not to launch an in-depth investigation into the infant formula market despite noting significant concerns over weak competition and rising prices. The decision follows a six-month study revealing a 25% price increase and market dominance by Danone and Nestlé.
The UK’s Competition and Markets Authority (CMA) has opted not to pursue a detailed market investigation into the infant formula sector, despite expressing “significant concerns” about weak price competition and market transparency. This decision follows a six-month study, which was launched in February 2024. The study focused on the UK’s infant formula and follow-on formula market, which is dominated by major players such as Danone and Nestlé.
Danone, a prominent French multinational, owns the Aptamil and Cow & Gate brands, while Swiss-based Nestlé controls the SMA brand. Both companies have significant influence in the market, with Danone and Nestlé together accounting for 85% of the UK’s baby formula supply.
Price Increase and Market Dominance
During its investigation, the CMA noted a 25% increase in infant formula prices in the UK between March 2021 and April 2023. The regulator found that the two dominant companies, Danone and Nestlé, hold substantial market share, raising concerns about the competitive dynamics in the sector.
Company Responses and Justifications
Danone and Nestlé have responded to the CMA’s findings by defending their pricing strategies. Both companies stated that they have attempted to absorb rising production costs and have not significantly increased prices to enhance their profit margins. They emphasized that the price increases were necessary to cover higher costs rather than to exploit market conditions.
Broader Context: Greedflation Concerns
The CMA’s scrutiny of the infant formula market is part of a broader concern about ‘greedflation,’ where rising prices are suspected of being used as an opportunity to boost profits. Critics argue that companies may be using macroeconomic pressures as a pretext for higher prices, potentially leading to unjustified profit increases.
Regulator’s Future Monitoring
While the CMA has decided against a formal investigation at this stage, it will continue to monitor the market and address any emerging issues. The regulator remains vigilant in ensuring that market practices remain fair and transparent.
