Baby formula price cap could be considered by ministers, regulator says

The government could consider introducing a price cap on baby formula with the aim of cutting costs for parents, the Competition and Markets Authority (CMA) has said.

Parents are left “paying over the odds” for formula milk due to concerns around regulation in the market, the watchdog has said in an interim report into the issue.

It has issued a series of recommendations for improvements in the sector – but is not directly advising a price cap – ahead of its final report being published in February 2025.

Alongside specific recommendations, the CMA has also set out “more significant backstop interventions that governments could, in principle, make” in a bid to reduce prices, namely price controls and public provision.

But it stressed “these are not actively recommended at this stage” and are “unlikely to form part of our final recommendations”.

If the government wanted to consider the “backstop” options, the watchdog would explore their impacts further in the final report, the CMA said.

This could see regulations setting a maximum price or profit margin cap on baby formula products.

It comes after the body began investigating the formula market in February after prices rose by 25 per cent over two years.

Advertising limits have seen manufacturers focus on indirect methods such as promoting follow-on formulas and growing-up milks as alternatives, in a bid to build brands, they said.

Their report outlines “provisional thinking” on measures to take action, which are: improving information, supply and price promotion in health and retail settings; clarifying, monitoring and enforcing the existing regulations, and strengthening labelling and advertising rules.

Regulations include strict rules on advertising and labelling infant formula, but the CMA has warned that some aspects have had “unintended consequences” and contributed to higher costs.

Just three firms account for more than 90 per cent of baby formula supply, the CMA found, with evidence suggesting parents could save up to £300 to £500 a year with a lower-priced brand. 

Firms can’t promote infant formula via offers or deals, so as not to discourage breastfeeding, and given “limited incentives” to compete on price, rising manufacturing costs have “largely been passed on quickly and in full” to customers, the CMA said.

Sarah Cardell, CMA chief executive, said: “This is a very important and unique market. 

“We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby.”

She added: “We have identified options for change, but now want to work closely with governments in all parts of the UK, as well as other stakeholders, as we develop our final recommendations. 

“Importantly, any changes must continue to support regulation that ensures all formula gives babies the nutrition they need to thrive – as well as supporting governments’ aims on breastfeeding.

“We’ll now be consulting on our provisional findings and the options we’ve put forward to get important insight from government and stakeholders – all of which will feed into our final recommendations early next year.”