Klobuchar: “These kinds of supply crises are exactly what happens in consolidated markets… and if we don’t address this problem, supply chain emergencies like this will continue to happen”
WASHINGTON - At today’s Senate Judiciary Competition Policy, Antitrust, and Consumer Rights Subcommittee titled “Baby Formula and Beyond: The Impact of Consolidation on Families and Consumers,” Chairwoman Amy Klobuchar (D-MN) highlighted how excessive market consolidation can impact the availability of essential goods like infant formula, hurting consumers and exacerbating supply shortages.
“We are here today because of the connection between two urgent crises: the first, an infant formula shortage that has devastated new parents across the country…the second, rising consolidation that is impacting actually all sectors of the economy,” said Klobuchar. “To prevent shortages like this from happening again, we need to get to the root of the problem. And, it’s not just baby formula…it’s many other areas where we have consolidation.”
“These kinds of supply crises are exactly what happens in consolidated markets…and if we don’t address this problem, supply chain emergencies like this will continue to happen,” Klobuchar continued.
Last month, Klobuchar joined seven of her colleagues in urging the U.S. Department of Agriculture (USDA) to tackle the high levels of corporate concentration within the infant formula marketplace. The same month, she also joined her colleagues in pressing Infant Nutrition Council of America (INCA), an association of the country’s four major infant formula manufacturers, to take action to increase infant formula and production, and prevent further supply chain disruptions.
Klobuchar has long led efforts to combat consolidation and bolster competition. In June 2021, Klobuchar and Senator Chuck Grassley’s bipartisan legislation to provide antitrust enforcers with more resources by updating merger filing fees passed the Senate. In February 2021, Klobuchar introduced her sweeping legislation to reinvigorate America’s antitrust laws and restore competition to American markets. The Competition and Antitrust Law Enforcement Reform Act will give federal enforcers the resources they need to do their jobs, strengthen prohibitions on anticompetitive conduct and mergers, and make additional reforms to improve enforcement.
Senator Lee, I appreciate our friendship and I also want to mention it’s Marc Lanoue’s birthday today, a longtime staff member who works so well with all of us, so thank you, Marc.
We are here today because of the connection between two urgent crises: the first, an infant formula shortage that has devastated new parents across the country – the second, rising consolidation that is impacting actually all sectors of the economy. Last month, the out-of-stock percentage of infant formula rose to 43 percent. As a mom, I know nothing can be more unsettling than wondering if your child has what they need, whether that is formula or prescription drugs or medical care. No parent should have to face that level of uncertainty. The administration has taken action to address the infant formula shortages. We know they have worked closely with infant formula manufacturers to increase production, expedited the importation of safe infant formula from abroad, and worked with large retailers to prevent formula hoarding, as well as with federal and state law enforcement to stop price gouging and other types of predatory conduct. But to be very clear, to prevent shortages like this from happening again, we need to get to the root of the problem. And it’s not just baby formula, it’s many other areas, as I know we will hear today, where we have consolidation.
The closure of a single company’s production plant — we all know something went very wrong there— but the closure of a single company’s production plant should not cause the collapse of our entire domestic supply of baby formula. But the reality is that just two companies control nearly 80 percent of infant and toddler formula sales last year. There are many things involved in that, we know that must be improved with the WIC program and other things. I get all that, but the bottom line is we’re at that 80 percent number. So, I see this as a crossroads. It’s time to decide: do we want to be a country where marketplaces are dominated by a few giants and where manufacturing is so consolidated that our supply chains are at risk? It’s like a game of whack-a-mole and remembering back when we had the Epipen issue and part of that was when those prices skyrocketed, part of that was because one of the other competitors was closed down and another one had a problem. And, then suddenly if you just have a few players in the market and you’re only left with one or two, guess what happens? You either have prices sky high or you have shortages. Do we want to be an economy, on the other hand, where competitive markets drive growth and innovation, where small, independent businesses thrive alongside larger corporations, an economy where supply chains are resilient enough to ensure that consumers have access to essential products? I think it’s an obvious choice. What is happening in the infant formula market shouldn’t be a surprise. These kinds of supply crises are exactly what happens in consolidated markets. And we have seen it time and again – - as I noted – in insulin, in meat supply, in pharmaceuticals. We’ve seen increasing consolidation in markets across our economy, in everything from cat food – where three companies now make up almost 90 percent of the dry cat food market – to caskets, where two companies now account for 82 percent of all sales. And if we don’t address this problem, supply chain emergencies like this will continue to happen. We’ve let this crisis of concentration fester and it's time to stop admiring the problem or complaining about it or throwing popcorn balls at CEOs, who may deserve it. But why don’t we just do something about it for a change?
As I’ve said repeatedly, the future of America’s success — both for families and our greater economy — depends on how we approach competition policy today. Our enforcement agencies have to have the resources to fully enforce America’s antitrust laws and I do appreciate the work that Senator Grassley and I did and others on this committee on the merger fees, to be able to put some more funding, that is currently in the conference committee for the USICA bill. And we plan to get that done this summer to make sure we get some more funding there. There’s also more things we can do in a budget. But we also have to look at the law. America has always rejuvenated our antitrust law. We believe in capitalism. We believe in free markets. And when new things happen, we tend to try and respond to them. It is why I introduced the Competition and Antitrust Law Enforcement Reform Act with Senators Leahy, Blumenthal, Booker and many others to reinvigorate antitrust enforcement and preserve competitive markets. The bill would update the Clayton Act to stop harmful consolidation, including by shifting the legal burden to the merging parties in big mergers to prove that the transaction doesn’t harm competition if it would significantly increase market concentration or would result in a dominant firm acquiring an actual or potential competitor. The bill would also make it easier for the government to challenge abuses of market power by very large companies. I also appreciate the work Senator Lee has several bills as well. We worked on one together that just went through. And so there is much work that needs to be done ahead.
These proposals would help reduce the excessive consolidation that threatens not only our economic growth but the resiliency of our supply chains. Of course, when it comes to infant formula, we also have to consider other potential policy solutions to address the lack of competition. I mentioned the importation of safe infant formula. Actually I did this with Senator Collins when we had a shortage of prescription drugs, that we allowed for safe importation from other countries and that was helpful. And I’ve been discussing these ideas with the administration. The Federal Trade Commission has also launched an inquiry into the causes, and I mentioned the WIC program and other things we can do to create more resiliency in how we handles this thing, as well as clearly the inspection issue and what went on there. That is all true and every time there is a crisis we do find those identifiable things we can work on. But we have to at some point step back and when we look at that our meat producers didn’t have places to bring their meat during the pandemic when one shut down. Or we look at the fact of the 90 percent market share that Google has right now and what that means, as Senator Lee knows, with the way the ad market is being handled and what that means for competitors out there simply trying to compete with the own products that these tech platforms now own all the time. What that means to Americans. Or we look at what happens with pharmaceuticals when the price shoots up because one goes out of business or buys the other one. These are real things happening right now. So while we can play whack-a-mole, and I suggest that we do because we want to make sure we’re taking on agendas three at a time, that cannot be the only solution. The only solution is clear, we have to make some sensible updates to our antitrust laws as well as make sure we are funding the enforcers whose job it is to make sure that they’re enforced.
And with that I turn it over to Senator Lee. Thank you.