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CMA “Treading Carefully” in Market Study into Infant Formula, Schmidt Says

February 26, 2024

Partner John Schmidt, who leads the firm’s UK Competition team in London, was quoted in the ICLG article, “UK watchdog launches probe into baby formula market.” The article discusses the UK Competition and Markets Authority’s (CMA) recent announcement that it would conduct a market study into the supply of infant formula in the UK, in which the CMA noted that the price of formula has risen by a quarter in just two years. The CMA aims to investigate the factors affecting the infant formula market, such as consumer behavior, the regulatory framework, and barriers to entry and expansion for new entrants.

Placing the CMA’s study in the context of its past investigations into the pricing of essential products, Schmidt told ICLG that the CMA has “renewed its focus on pricing issues” over the past few years by looking at “excessive price rises in pharmaceuticals” and at Covid-related price rises. The CMA is “keeping its eye more generally on groceries prices in view of the cost of living crisis,” Schmidt added, but its track record on concluding cases has been mixed. “In the pharma space it has won some cases and lost some significant others. The Covid cases were quietly concluded without enforcement action,” he said.

“With infant formula, the CMA is treading carefully. It has opened a market study, not a direct enforcement case,” Schmidt continued. Warning of the potential of future collective proceedings, Schmidt said that CMA cases “increasingly trigger consumer class actions against the companies involved” and that this “is a possibility here too and could happen in parallel to the CMA’s market study.” The legal test for any claimant “would be the same as for the CMA and they would also need to be able to establish and evidence the amount of any loss,” he concluded. Interestingly, only today the CMA announced a follow up investigation into information sharing amongst UK housebuilders a clear reminder that market studies can lead to enforcement actions.

Read the full article.