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Lax Antitrust Enforcement Imperils the Security of the Nation’s Supply Chains

By June 17, 2024Uncategorized

Baby Formula Shortages were widespread in 2022

There is an emerging school of thought that monopolies and oligopolies, which have been allowed to operate through lax antitrust enforcement, are incredibly harmful. Two new books, Barons: Money, Power, and the Corruption of America’s Food Industry and  The Everything War: Amazon’s Ruthless Quest to Own the World and Remake Corporate Power, make this argument. They harm democracy, lead to lower wages, and stifle job creation. The food oligopolies also hurt water quality, drive down the quality of life and property values in locales where they operate, and can have adverse health effects. It is now argued that lax antitrust also harms supply chain resiliency across numerous industries.

Schlosser was interviewed on National Public Radio about his article in the Atlantic, “Do We Really Want A Food Cartel?” “The free market rhetoric “has been cleverly used to thwart government oversight of corporate power, block antitrust enforcement – and eliminate free markets,” Schlosser averred. “When four firms control 40 percent or more of a market for products or services, true competition no longer exists.” Mega companies can signal to one another how much they want to pay suppliers.

The interviewer, Tom Mosley, brought up the infant formula shortage we saw in 2021. This shortage occurred when a dangerous pathogen was found in infant formula. The source of the contamination was Abbott Nutrition.

Schlosser pointed out that four companies control 97- 99% of the market share in the baby formula market. Abbot’s baby formula factory in Sturgis, Michigan, is bigger than 12 football fields. This factory had pretty consistent levels of contamination, with a dangerous pathogen that can kill 40% to 60% of the infants that are infected with it. There were illnesses tied to this factory, and the factory was shut down.

When that one factory was shut down, the United States lost about 20% of its capacity to make infant formula. For certain specialty formulas, 70% to 80% of the formula was made by this factory. Access to infant formula became difficult overnight. Parents had to scramble to find food for their infants. “This is an extraordinarily good symbol,” Schlosser emphasized, “of what happens when you have an overly concentrated monopoly or oligopoly-controlled food system. It’s not only wrong, it’s fragile.”

The FDA, which is supposed to ensure food safety, was slow to react to these reports. “Their food safety section has the same number of employees today as it had in 1978, and the United States has about 100 million more people. The FDA has been deliberately underfunded for decades,” Schlosser charged. “Industry groups have fought against any sort of tough enforcement of food safety laws.”

The FDA got a warning in October that there was potentially dangerous infant formula being produced at this plant. A whistleblower sent a 34-page memo outlining all the production quality problems. The FDA didn’t do anything about it. “They met with him, they dismissed his concerns, and this plant just kept on shipping out questionable product,” Schlosser averred.

This company was using very equipment that was over 60 years old. “There were water leaks. It had all kinds of incredible food safety lapses. But because of the concentrated power of these companies, they’re allowed to keep shipping it,” Schlosser said.

That company, Abbott Nutrition, remains one of the largest infant formula manufacturers. “Nobody from that company was sent to prison. Nobody was fired.” Yet this factory – a factory supplying one-fifth of the US’s baby formula – was being run “in completely unsanitary conditions. That’s what you get when you have unchecked corporate power,” Schlosser reiterated.

The US has shown a willingness to act when supply chain resilience issues arise because of consolidated foreign supply, like with the concentration of semiconductor plants in Taiwan. China has dropped hints that Taiwan could be invaded, and this supply of chips would be controlled by a nation that does not share our values.

In consequence, in August 2022, President Biden signed the CHIPS and Science Act into law. The act provided $280 billion in funding to boost semiconductor manufacturing in the United States. Since then, tens of billions in subsidies have been granted to foreign and US semiconductor firms willing to build domestic plants. In contrast, when a domestic industry becomes concentrated, it also gains political clout, making promoting resilience much more difficult.

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