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Government Investigating Alleged Baby Formula Price Fixing Precede NEW YORK

December 31, 1990

WASHINGTON (AP) _ Federal authorities subpoenaed the records of the nation’s biggest baby formula manufacturers after state welfare officials and consumer advocates made allegations of price fixing, representatives of one of the companies and a professional association said today.

Officers of Wyeth-Ayerst Laboratories and the American Academy of Pediatrics said their records were subpoenaed several weeks ago and they either had responded or were doing so.

Debbie Feinstein, assistant to the director of the Federal Trade Commission’s Bureau of Competition, said the bureau began the investigation late in May, at about the time its director, Kevin J. Arquit, testified before a Senate subcommittee on the issue.

Ms. Feinstein said she could not confirm that subpoenas had been issued. ″This is a top-priority, front-burner investigation,″ Arquit told The New York Times.

He said authorities have not concluded that price fixing occurred. The companies denied the allegations.

The Times reported that records were subpoenaed from: Ross Laboratories, a division of Abbott Laboratories; the Mead-Johnson Nutritional Group, a division of Bristol-Myers Squibb Co.; Wyeth-Ayerst Laboratories, a division of the American Home Products Corp.; the Carnation Co., a subsidiary of Nestle S.A.; and the Gerber Products Co. The American Academy of Pediatrics was also subpoenaed, it said.

Ross, Mead-Johnson and Wyeth-Ayerst account for about 95 percent of all baby formula marketed in the United States, while Carnation and Gerber account for about 5 percent, the newspaper said. The domestic market is worth about $1.3 billion a year, it said.

Wyeth-Ayerst spokeswoman Audrey Ashby said the company received the FTC subpoena in September and has begun turning over the requested documents.

″We set prices independently and compete vigorously and independently in all aspects of the infant formula business,″ Ms. Ashby said. She said she had no further information on the investigation.

Efforts to get comment from other companies were not immediately successful. There was no answer this morning at Bristol-Myers Squibb, and a woman answering the telephone at Gerber Products Co. in Fremont, Mich., said all corporate offices are closed until Wednesday.

In Washington, Antoinette Parisi Eaton, president of the American Academy of Pediatrics, confirmed that records of the academy, mainly its policy statements in opposition to infant formula advertising, had been subpoenaed. She said the academy responded to the subpoena about six weeks ago.

″Our position has been that we are speaking out and have an obligation to speak out in the best interests of the public health of infants in this country,″ Ms. Eaton said. ″Our concern is that breast feeding will be reduced by infant formula advertising. Breast feeding rates in this country are already going down.″

Ms. Feinstein said, ″We are not taking a position on whether or not advertising is good or bad or infant formula is good or bad, but the things we have heard are that infant formula is a very concentrated industry and one of the reasons it might be hard for people to enter is because there is not any advertising.″

At a hearing held by the antitrust subcommittee of the Senate Judiciary Committee in May, Democratic Sens. Howard Metzenbaum of Ohio and Patrick Leahy of Vermont charged that three companies used nearly total control of the infant formula market to keep prices high and rebates to state-run programs for poor children low. The companies named were Mead Johnson, Ross Laboratories and Wyeth Laboratories. Industry officials said their prices were fair.

Infant formula is a major ingredient in food packages given to low-income families who qualify for the Special Supplemental Food Program for Women, Infants and Children. The program serves about 4.4 million people a month and accounts for one-third of the infant formula sold in the United States.

The program’s funds are limited and higher costs mean fewer people benefit, Arquit said.

Dennis H. Bach of Iowa, who heads the National Association of WIC directors, said baby formula prices ″have seemed to go up in lock step over the last 10 years.″

Betsy Clarke, director of the WIC program in Oregon, said prices have tripled during the past 15 years, with different companies raising prices by the same amounts within days of each other.

Current retail prices range from $1.80 to $2.30 for a 13-ounce can of concentrated formula.

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