Infant formula price gouging finally being targeted by California, other states

Reports have emerged from across the country of cans of formula being offered for sale at double, triple or even quadruple the price they sold for in February.

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Teresa Murray
Consumer Watchdog

Author: Teresa Murray

Consumer Watchdog

 

Started on staff: 2020
B.A., Kent State University

Teresa directs the Consumer Watchdog office, which looks out for consumers' health, safety and financial security. Previously, she worked as a journalist and columnist covering consumer issues and personal finance for two decades for Ohio's largest daily newspaper. She's earned dozens of state and national journalism awards, including Best Columnist in Ohio, Best Business Writer in Ohio, and National Headliner Award for coverage of the 2008-09 financial crisis. Among the accomplishments she’s most proud of: A journalism public service award for exposing improper billing practices by Verizon that affected at least 15 million customers nationwide. Her work caused Verizon to reach an $80 million settlement with the FCC, the largest ever imposed at that time. Teresa and her husband live in Greater Cleveland and have two sons. She enjoys biking, house projects and music, and serves on her church missions team and stewardship board.

Three months after the infant formula shortage started brewing, officials in California and other states finally have started cracking down on price gouging. 

California Gov. Gavin Newsom last week issued an executive order that prohibits infant formula from being sold in California at a price more than 10 percent higher than what it sold for on Feb. 17. There are a few limited exceptions. Feb. 17 was the day the Food and Drug Administration announced the initial recall by Abbott after complaints of infants who had contracted Cronobacter sakazakii or Salmonella Newport and had consumed formula from Abbott.

It took only a few weeks for infant formula shortages – and price gouging – to start. 

The Abbott plant in Michigan that closed in February supplied as much as 40 percent of the nation’s powdered formula. The shutdown, not surprisingly, has led to devastating shortages and parents desperate enough to feed their babies that they may be willing to pay exorbitant prices.

Reports have emerged from across the country of cans of formula being offered for sale at double, triple or even quadruple the price they sold for in February. Most of the excessive pricing is occurring on online marketplaces, which are difficult for authorities to monitor or regulate for various reasons, including because cans of formula available for sale are likely sold in hours or even minutes.

The pricing restriction in California lasts until at least Aug. 31, 2022. The infant formula shortages are expected to last at least until July but it could be longer, particularly because the Abbott plant at the center of this had to close again this past week because of storms and flooding.

Sellers in California are allowed to offer infant formula at prices exceeding 10 percent of their price on Feb. 17 only if the increase stems directly from costs passed along by the supplier, or if the seller’s price on Feb. 17 was a reduced sale price.

California’s order also gives the California Department of Justice, the state attorney general’s office, district attorneys and local law enforcement authorities more tools to combat price gouging and take action against suspected violators.

Consumers in California are encouraged to file complaints online or by calling (800) 952-5225.

Other states that recently enacted new crackdowns on price gouging of infant formula include Oregon, Colorado, Kentucky and New Jersey. The definition of price gouging and the dates involved may vary in different states. Nearly 40 states have some sort of price gouging law, but most target a specific category of products, such as fuel or emergency supplies needed for storm cleanup, and don't directly include infant formula.

Even states without price gouging laws are jumping on board to combat unfair prices. New Mexico’s attorney general office, for example, said on May 31 it’s investigating shortages and excessive pricing. New Mexico doesn’t have a specific law addressing price gouging but does have a law prohibiting “unfair or deceptive trade practices and unconscionable trade practices.”

To report suspected price gouging in any state, find your state in our guide. https://uspirg.org/feature/usf/how-identify-and-report-price-gouging
Teresa Murray
Consumer Watchdog

Author: Teresa Murray

Consumer Watchdog

 

Started on staff: 2020
B.A., Kent State University

Teresa directs the Consumer Watchdog office, which looks out for consumers' health, safety and financial security. Previously, she worked as a journalist and columnist covering consumer issues and personal finance for two decades for Ohio's largest daily newspaper. She's earned dozens of state and national journalism awards, including Best Columnist in Ohio, Best Business Writer in Ohio, and National Headliner Award for coverage of the 2008-09 financial crisis. Among the accomplishments she’s most proud of: A journalism public service award for exposing improper billing practices by Verizon that affected at least 15 million customers nationwide. Her work caused Verizon to reach an $80 million settlement with the FCC, the largest ever imposed at that time. Teresa and her husband live in Greater Cleveland and have two sons. She enjoys biking, house projects and music, and serves on her church missions team and stewardship board.