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Parents and carers are “are paying more than they need to” for baby formula due to weak price competition, a UK watchdog has warned.
The Competition and Markets Authority (CMA) said it has “significant concerns” over the current regulatory framework and the behaviour of the market but has decided against a more thorough investigation into the sector.
In February, the competition regulator launched a market study into baby and toddler formula supply after it found that prices had soared by 25% in the past two years.
The CMA has identified significant concerns that the combined effect of the current regulatory framework, the behaviour of manufacturers and suppliers and the needs and reactions of people buying formula, are resulting in poor market outcomes
Competition and Markets Authority
It had also previously raised concerns that the market was highly concentrated, with just two companies accounting for 85% of sales.
On Friday, it said six months of its study found that the current market is not working appropriately in order for customers to get the best value.
“Based on the evidence we have reviewed to date, we are concerned that many parents and carers are paying more than they need to for infant formula,” the CMA said.
“Price competition appears to be weak, and we have heard concerns that manufacturers are able to raise brand awareness and influence infant formula brand choices.”
It highlighted that strict advertising rules, which limit how brands can market their products, have meant that price reductions could not be promoted and have contributed to weaker competition on price.
Read More SponsoredThe CMA said it will release an interim report into its study in October with plans for further Government engagement.
The regulator said: “The CMA has identified significant concerns that the combined effect of the current regulatory framework, the behaviour of manufacturers and suppliers and the needs and reactions of people buying formula, are resulting in poor market outcomes.
“The CMA considers these concerns will be best addressed by progressing with our market study and developing recommendations to governments to improve these market outcomes rather than moving to a more extensive market investigation.”
