CMA suggests NHS-branded formula to tackle soaring infant formula prices

Britain's competition watchdog has concluded that the infant formula market is broken, and it is now suggesting an unusual remedy: the government could simply make its own baby formula and sell it under the NHS brand.

The Competition and Markets Authority released its interim findings this week after investigating why parents have been paying so much for a product that should be straightforward. The numbers tell the story. Two companies—Danone and Nestlé—control 85 percent of all infant formula sales in the UK. Over the past two years, manufacturers raised prices by 25 percent. They did this while the country was in the grip of a cost-of-living crisis, and while doing so, they actually widened their profit margins. The market, in other words, was working perfectly—but only for the companies selling the formula, not for the families buying it.

What the CMA found beneath these numbers is a psychological trap that manufacturers have learned to exploit. Parents, understandably desperate to give their children the best start, have come to believe that higher price means higher quality. They will pay more because they think more expensive formula is better for their baby. Manufacturers know this. They price accordingly. The result is that even when cheaper options exist on supermarket shelves, parents often don't buy them. They choose the premium brands instead, convinced they are making the right choice for their child. Sarah Cardell, the CMA's chief executive, put it plainly: many parents making these decisions are in vulnerable circumstances and lack clear information to guide them. They are being taken advantage of.

The CMA's interim report sets out a range of potential fixes, from the straightforward to the more aggressive. The watchdog recommends extending advertising bans on infant formula to follow-on formula, and even suggests the government could prohibit brand-related advertising altogether. These measures aim to level the information landscape so parents aren't swayed by marketing into thinking one product is inherently superior to another.

But the CMA is skeptical that information alone will work. Parents' attachment to the idea that they must buy the most expensive option runs deep. So the watchdog has proposed what it calls "backstop" measures—more direct government intervention if the gentler approaches fail. One option is for the government to procure infant formula from a third-party manufacturer at a competitive price and sell it under an established brand like the NHS, or to create an entirely new government brand for the market. The idea is simple: introduce a genuinely cheap option that parents can trust because it comes from the government, not a corporation. This would give parents real choice and might also pressure other manufacturers to lower their prices just to compete.

Another backstop option is for the government to impose a price cap or profit-margin cap on retailers, similar to what Greece did earlier this year. Richard Walker, the boss of Iceland supermarkets, has already called for such a cap, describing the current market as a form of parental "exploitation." The CMA acknowledges that without direct intervention, the behavioral patterns that keep prices high may persist for years. Parents will keep buying expensive formula because they believe it is best, and manufacturers will keep raising prices because they can.

The CMA launched this investigation last November, and its final report is due in early 2025. What happens next depends partly on whether the government is willing to take the step of becoming a formula manufacturer itself, or whether it prefers to regulate prices directly. Either way, the watchdog has made clear that the current market is not serving families well, and that waiting for competition to fix itself is not a realistic option.