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FTC Files Antitrust Charges Against 3 Largest Makers of Infant Formula

June 12, 1992 GMT

WASHINGTON (AP) _ The nation’s largest infant formula manufacturer faces major price-fixing charges, while its top two competitors have agreed to donate 54 million servings to the poor to settle similar but lesser complaints.

Abbott Laboratories, which makes Similac and Isomil, was charged Thursday with bid-rigging and conspiracy in a civil lawsuit and an administrative complaint filed by the Federal Trade Commission.

In part, the case involves sales to the government’s nutrition subsidy program for poor women, infants and children, or WIC.

Kevin J. Arquit, director of the FTC’s Bureau of Competition, said the agency ″will be asking the federal court to order Abbott to pay back to the federal government the millions of dollars that were lost as a result of that price-fixing.″

He would not say exactly how much the government is seeking.

To settle lesser charges against them, Mead Johnson & Co. and American Home Products Corp. agreed to give the government 3.6 million pounds of powdered infant formula. That’s enough for 54 million individual servings, and worth $25 million wholesale, Arquit said. Mead Johnson will provide the bulk of the formula powder, 3.1 million pounds.

Federal civil suits against those two companies were also filed Thursday, but a federal judge approved the settlement agreement that was filed simultaneously.

The three companies control nearly 90 percent of the $1.5 billion infant formula industry, with Abbott representing about 50 percent, Mead Johnson about 30 percent and American Home Products about 8 percent, the FTC said.

Duane L. Burnham, Abbott’s chairman and chief executive, said his company had ″competed responsibly, aggressively and completely within the law. We will continue to vigorously defend this position.″

Mead Johnson Nutritional Group President Donald G. Harris and American Home Products spokesman John Skule also denied any wrongdoing, saying they settled the cases only because that cost less than protracted litigation.

Harris said infant formula is ″a highly competitive market, always has been and I assume, always will be.″

But Sen. Howard Metzenbaum, D-Ohio, whose hearings on the subject two years ago launched the FTC investigation, disagreed.

″I don’t believe we will ever know just how much the infant formula conspiracy cost consumers, American taxpayers and poor women and children who couldn’t get into the WIC program,″ Metzenbaum said.

Among the FTC’s actions:

-A civil antitrust lawsuit accuses Abbott, whose Ross Laboratories in Columbus, Ohio, makes the infant formula, of bid-rigging in 1990 in connection with a contract to provide formula to more than 40,000 infants in Puerto Rico. The contract was through the WIC program.

A separate administrative complaint accuses Abbott of conspiring with other companies to refrain from advertising directly to consumers, something the FTC said led to a lack of competition and untold higher costs to consumers who pay for their own formula.

-The negotiated settlement with Mead Johnson, the Evansville, Ind., corporation that makes Enfamil and Prosobee, concludes several civil antitrust charges.

One accused the company of engaging in unfair competition by sending open letters to the WIC programs in Nevada, Montana, Oklahoma and Arizona that stated bids, when the states had requested sealed bids. The FTC said Mead Johnson knew or should have known the competitors would learn the letters’ contents, resulting in slackened competition.

Another charge was that Mead Johnson, a wholly-owned subsidiary of Bristol- Myers Squibb Co., shared information with its competitors regarding plans for mass media advertising.

A third charge alleged that it signaled its competitors during the Puerto Rico bidding.

-The negotiated settlement with American Home Products ends the FTC’s civil antitrust accusation that the company signaled its competitors during the Puerto Rico bidding. The company’s pharmaceutical division, Wyeth-Ayerst Laboratories in Radnor, Pa., makes SMA and Nursoy brands.

The pending Abbott charges include conspiracy, but the negotiated settlements with the other two accuse them only of unilateral actions.