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Rising formula-milk prices: Govt to rein in misleading ads, give parents more choices

SINGAPORE — Following a year-long inquiry prompted by public concerns over rising formula-milk prices, the Republic’s competition watchdog has found that significant barriers to entry in the industry have pushed up prices here to among the highest in the world.

SINGAPORE — Following a year-long inquiry prompted by public concerns over rising formula-milk prices, the Republic’s competition watchdog has found that significant barriers to entry in the industry have pushed up prices here to among the highest in the world.

To tackle the problem, wide-ranging measures will be implemented by various government agencies to rein in misleading advertising, give consumers more choices and enhance public education on the nutritional content and requirements of formula milk. Tie-ups and sponsorships involving major brands and hospitals could also be reviewed.

For example, the Agri-Food and Veterinary Authority (AVA) will tweak import requirements to allow more suppliers into the market and encourage price competition.

Existing guidelines from the Sale of Infant Foods Ethics Committee Singapore, which prohibit the sale of formula milk online for infants younger than six months old, will be relooked.

The authorities will also tighten scrutiny on labelling and advertising of formula milk, with a review of regulations expected to be completed by year end. Meanwhile, public education efforts will be stepped up with the launch of a five-year campaign. 

In response to TODAY’s queries, Dr Astrid Yeo, group director of AVA’s regulatory administration group, said labels on formula milk for infants under one year old would be prohibited from making nutritional and health claims, and idealised images would be banned. Industry players would be given a one-year grace period to amend the labels after the new legislation has been passed.

On Monday, Senior Minister of State (Trade and Industry) Koh Poh Koon told Parliament that regardless of price, all formula milk sold here met food regulations and nutritional needs of infants.

The Health Promotion Board (HPB) will launch a public education campaign on the nutritional needs of children later this year, emphasising, among other things, that all infant formula milk sold here meet the country’s safety standards and nutritional requirements, and provide enough nutrition for infants to grow healthily.  

“Without better information, parents may rely on claims made by (milk formula) companies, or be misled into using price as a proxy for the quality of the product,” said the authorities.

Hospitals, as an important touchpoint for parents, will have to play their part to encourage breastfeeding, said the Ministry of Health (MOH), which will work with industry players to provide more affordable infant formula brands in hospitals.

Between October 2015 and last August, the Competition Commission of Singapore (CCS) conducted a market inquiry on formula milk products. The report was finalised in December last year. The findings, which were contained in an 87-page report, were made public on Wednesday (May 10).

Among other things, they showed that, in response to consumer behaviour, formula milk companies invested heavily in marketing as well as research and development. These drove up manufacturing costs, which were passed on to consumers. Hence prices went up by more than twice over the past nine years. 

Consumers believe in brand loyalty and prefer premium products, thus prompting manufacturers to engage in non-price competition for greater market share. Government agencies are assuring parents that “comprehensive steps” will be taken to address their concerns over the rising prices.

“With support from the public and private hospitals, these measures will enable parents to make more-informed decisions, and encourage more competition in the formula milk market through our government regulations,” the MOH, HPB and AVA said in a joint statement.

On the changes to import regulations, Dr Yeo said the AVA would streamline procedures to bring in more sources of formula milk, while ensuring food safety.

“An example would be moving upstream to obtain documentary proof/certification of food safety and quality directly from the governments (that is, country of origin),” she said. Currently, the onus is on importers to obtain and submit these documents to AVA.

The CCS had also considered other options to ease the pinch on parents. While government subsidies — often requested by consumers — would boost purchasing power, they are likely to backfire on consumers, with manufacturers raising wholesale prices and pushing up retail prices further. Manufacturers would end up taking the lion’s share of the subsidies, instead of consumers, the CCS said. 

A more impactful and practical solution would be general subsidies for child-raising, although these would be less salient in tackling rising costs of formula milk. The commission noted that this was a policy consideration for government agencies to mull over. 

Other suggestions included price regulation but the CCS pointed out that setting a price ceiling, for instance, would be difficult to implement, given that manufacturers often switch packaging sizes and formulation.

Regulating prices could also affect competitiveness by distorting the market or resulting in price fixing. “A likely outcome is that sellers are motivated to cluster their prices around the recommended levels, irrespective of their individual business profiles such as costs, service standards and target customers,” said the commission. 

Turning to extensive restrictions on advertising and marketing, the commission felt that clamping down in this area was not likely to spur price competition or lower prices immediately.

Demand for formula milk is inelastic, since there is no substitute apart from breast milk, and manufacturers could turn to advertising for other products or through other channels to skirt around the new restrictions.

Such moves could also lead to potential new entrants finding it more difficult enter the market. 

Other countries have chosen to self-regulate in this area, the commission noted. In Australia, for example, manufacturers and importers have voluntarily abided by a self-regulatory code, which prohibits advertising and promotion of formula for infants up to one year old directly to the public. 

Likening marketing and advertising to a double-edged sword, the CCS said that consumers could walk away with useful information about products but these messages could also increase brand loyalty and the market power of manufacturers. Extending restrictions on advertising and marketing would require further study, the commission concluded.

Parent Jasmine Lim, 31, felt that the review of online sales of infant formula could help parents save costs, given that online shopping tends to be cheaper than buying from brick-and-mortar stores.  “Parents will be given more choices in terms of brand variety because some brands aren’t carried in Singapore,” added another parent, Ms Jasmine Koh, 30. 

Online delivery is also more convenient, said Ms Rachel Khan, 28, who buys formula milk online for her 10-month-old daughter from a local supermarket’s website or an e-commerce website. “They deliver to my house, so I don’t have to drag six tins of milk powder back each time. It’s generally the same price (as in stores) but there can be discount codes or credit card promotions sometimes,” she said.

Ms Lim, who has a 23-month-old son, also applauded the government’s move to work with industry players to introduce more affordable infant formula brands in hospital. 

“We depend a lot on hospitals to endorse brands for babies. If the hospitals can bring in other brands to introduce to mothers, we might feel more assured to buy it,” she said.

MEASURES TAKEN BY AVA, HPB, MOH

AVA 
Tighten regulations on labelling and advertising for formula milk to bar nutrition and health claims and idealised images
Streamline import requirements and procedures to bring in more suppliers and brands
Extend coverage of Sale of Infant Foods Ethics Committee, Singapore Code of Ethics from infants below six months old to infants below 12 months old
Review Code of Ethics in line with International best practices

HPB
Start five-year campaign on nutritional needs of children

MOH
Encourage all private hospitals to achieve the international Baby-Friendly Hospital Initiative certification to promote breastfeeding
Work with industry players to make available more affordable infant formula brands in hospital

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