The Competition and Markets Authority (CMA) has launched a market study into the supply of baby formula in the UK.
The CMA investigation, which was launched today, came off the back of a November study which found manufacturers raised prices by 25 per cent over two years, increasing profit margins during the cost-of-living crisis.
Its findings included that three-quarters of branded suppliers in products such as baby formula have hiked their prices faster than their costs have gone up, contributing to higher food price inflation by increasing unit profitability.
The baby formula market is dominated by two major players, leaving room for companies to hike prices further than would normally be possible.
The new investigation will seek to obtain evidence on consumer behaviour, the role of regulation in the market and features of the formula market such as barriers to entry.
Through officially launching a market study, the regulator will now be able to use its compulsory information-gathering powers and give formal recommendations to the government.
It is planned to end with a final report being published in September, and will then consider what action could be taken to address any problems found, such as pushing the government to regulate how formula can be marketed, or information given to parents about formula brands.
Sarah Cardell, chief exec of the CMA, said: “Infant formula is a key part of the weekly shop for many parents across the UK, who rely on these products to ensure their baby gets all the essential nutrients they need.
“Whilst it’s a positive sign that prices of some products have fallen since our update last November, the cost of infant milk remains at historically high levels. We’re concerned that parents don’t always have the right information to make informed choices and that suppliers may not have strong incentives to offer infant formula at competitive prices.
“We are determined to ensure this market is working well for the many new parents who depend on infant formula and it’s essential that any changes we propose are based on evidence and a strong understanding of the market. That’s why we’ve now decided to take forward our work on infant formula as a market study, using our formal legal powers.”