As Americans Face Infant Formula Crisis, Warren, Booker, Porter, Sanders Raise Concerns with DOJ About Bid by Private Equity Firm to Take Over Enfamil Manufacturer
Reckitt Benckiser Group is the Second Largest Infant Formula Manufacturer in the Country
Sale to Private Equity Firm with a History of Profiteering From Public Health Crises Could Cause “Operational Disruption” and Saddle the Company with Debt in an Already Failing Market
Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Cory Booker (D-N.J.), and Bernie Sanders (I-Vt.) and U.S. Representative Katie Porter (D-Calif.) sent a letter to Jonathan Kanter, Assistant Attorney General for the Department of Justice Antitrust Division, expressing skepticism regarding a bid from a private equity firm to acquire the Enfamil infant formula manufacturing arm of Reckitt Benckiser Group and how such a transaction, amid the nation’s ongoing infant formula shortage, could harm competition or prolong this crisis. The lawmakers also assert that any private equity-backed deal involving firms with checkered acquisition histories that are likely to hollow out their targets could weaken long-term competition and advise Mr. Kanter to use his authority under the Clayton Act to oppose such transactions when appropriate.
“If private equity investors take over a key infant formula manufacturer with the intent to further consolidate and merge operations when the market is already failing families and their children, matters will be even worse for consumers… It is understood that Reckitt Benckiser’s sale would guarantee ‘operational disruption’ and likely weaken the company with massive debt at a time when their success is essential to families across the country,” wrote the lawmakers.
Just four companies control nearly 90% of the infant formula market, severely weakening the resiliency of this supply chain. In May 2022, following the closure of Abbot’s Sturgis, Michigan plant, national out-of-stock rates for infant formula exceeded 70 percent, threatening the health and safety of millions of infants, children, and adults, while President Biden warned that it would take months before infant formula manufacturing was back to normal. Because of the closure of the Sturgis facility, Reckitt Benckiser temporarily controls up to 55% of the U.S. market for infant formula.
Amid this crisis, Reckitt Benckiser is pushing ahead with the proposed sale of its infant nutrition unit, and private equity firm Clayton Dubilier & Rice (CDR) submitted a non-binding bid to purchase the unit. The lawmakers raised concerns about CDR’s history of saddling its acquisitions with debt and profiting from a public health crisis when one of its subsidiaries exported “large shipments” of personal protective gear and respirator equipment out of the U.S. at the beginning of the pandemic.
“We encourage your division to give serious weight to the fragility of this particular market and the urgent need for strong, competing firms if Reckitt Benckiser and CDR move forward with a deal. If CDR’s history suggests that its acquisition of Enfamil would endanger the manufacturing arm’s ability to compete going forward or threaten the supply of infant formula during this period of crisis, your division should sue to block the deal immediately without considering any remedies,” concluded the lawmakers.
As American families struggle with the shortage of essential formula for babies, children, and adults, Senator Warren has worked to find a solution to the crisis and ensure those responsible are held accountable:
- On May 19, 2022, Senators Warren, Bob Casey (D-Pa.) Sherrod Brown (D-Ohio), Tammy Duckworth (D-Ill.), and Kirsten Gillibrand (D-N.Y.) introduced the Protect Infants from Formula Shortages Act, legislation that would safeguard the availability of infant formula and other essential sources of nutrition by requiring manufacturers to notify the Food and Drug Administration of potential supply disruptions and give the FDA additional tools to proactively work with manufacturers to help prevent or mitigate potential shortages.
- On May 17, 2022, Senator Warren and the Massachusetts delegation sent a letter to Abbott Laboratories requesting information on the company’s plans to replenish its Similac baby formula in Massachusetts.
- On May 13, 2022, Senator Warren joined colleagues in a letter to the Infant Nutrition Council of America to push for member organizations to step up manufacturing and end the shortage.
- On May 13, 2022, Senator Warren joined colleagues in a letter to the Department of Agriculture urging the agency to address extremely high levels of corporate consolidation in the infant formula marketplace.
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