Mead Johnson Announces Infant Formula Price-Fix Suit Settlement
EVANSVILLE, Ind. (AP) _ Mead Johnson & Co. on Thursday offered a $38.76 million settlement to wholesalers and retailers who filed a federal class-action lawsuit alleging infant formula price fixing by the company.
The Evansville-based subsidiary of Bristol-Myers Squibb Co., said that if the settlement is accepted, the company would take a $46 million pre-tax charge against its second-quarter earnings to cover costs of the settlement.
As a term of the settlement proposal, however, the nutritional products division of Bristol-Myers Squibb denies any liability in the case, said Gerald R. Elliott, Mead Johnson’s public affairs director.
″A lot of us wanted to see this through because we felt the company did nothing wrong and felt litigation would prove that,″ Elliott said.
″But you balance that against the fact we cooperated for two years with the (Federal Trade Commission) investigation, had all those pretrial proceedings, the energy expended, the people and resources used. It was in the best interest of the company and everyone else to put this behind us.″
Louis C. Webb Jr., an analyst who follows Bristol-Myers Squibb for the Milwaukee-based investment firm of Robert W. Baird, said the company would feel no ill effects from the settlement.
″From an investment standpoint, you’ll see nothing - no impact at all,″ Webb said. ″My basic statement is that it’s a one-time charge and won’t have much to do with anything.″
But related antitrust litigation is still pending against Mead Johnson in state and federal courts related to its Enfamil and ProSobee infant formula product lines.
Mead Johnson said in a news release it vigorously denies all the charges in those cases and plans to continue fighting them in court.
Two other formula makers, American Home Products Corp., and Abbott Laboratories, were named in the FTC’s civil suit. Only Mead Johnson and American Home Products negotiated a settlement last month.
The three companies together control nearly 90 percent of the $1.5 billion infant formula industry. Abbott alone claims 50 percent, followed by Mead Johnson with 30 percent and American Home Products at 8 percent.
Claims against the three formula makers followed a two-year investigation of alleged bid-rigging and collusion to drive up prices.
The class-action suit was brought in Tallahassee, Fla., on behalf of retailers and wholesalers who had bought Enfamil and ProSobee from Mead Johnson since 1980. The litigation alleged violations of antitrust laws in marketing and pricing of infant formula.
Terms of Thursday’s agreement require the plaintiffs to release all claims against the company.
″They all agree to it or we withdraw the offer and go on with the litigation,″ said Elliott.