Fast Facts: The Baby Formula Shortage
Five Fast Facts About the Baby Formula Shortage:
It’s not as much of a shortage, as it is getting the formula where it needs to be, creating massive regional shortages
The baby formula industry is limited to 4 companies that supply 90% of the formula. This almost-monopoly is not by chance or coincidence, but supported by the USDA
The USDA and WIC: WIC is the Women, Infant & Children branch of welfare through the USDA. WIC recipients make up more than half of the baby formula market. By state, the USDA provides women on WIC rebates for formula. Mothers are only allowed to purchase the formula with a WIC contract in their state to use the rebate. This creates the WIC monopoly where no one can finically compete with companies that have WIC contracts. It’s basically impossible for smaller brands to compete with a USDA-WIC brand.
The WIC contracts also make baby formula overpriced for purchasers, not on WIC. Baby formula is marked up 35-40% for mothers not on WIC in order to pay for the WIC contracts. While you'd think non-WIC mothers have the freedom to choose formula, the only formula on the shelves is... you guessed it, provided by the four WIC companies.
The reason the US can’t import baby formula from Canada or Europe is not that our formula is better regulated (a common misstatement) but in order for the USDA to protect the domestic companies from foreign competition. The tax import European formula is 17%. The US allows for baby formula to contain high-fructose corn syrup (often without a label), which is banned in Europe. In order to protect the monopoly of American companies, the US discourages importation from companies not bidding for WIC contracts.
The American regulatory bodies (USDA, FDA) have been broken for decades, this doesn’t happen overnight. It is an example of what happens with government regulatory bodies are good at regulating citizens instead of regulating producers. Today it’s baby formula, but tomorrow it could be any number of things tied up in USDA politics.