A ban on baby milk price promotions should be overturned to stop parents “paying over the odds” for formula, a government watchdog has suggested.

The Competition and Markets Authority’s (CMA) interim report on baby milk formula said the market needed a shake-up to help parents struggling to afford it.

Recommendations included the government issuing NHS-branded baby milk and removing branding from baby milk in hospitals.

It stopped short of recommending price controls, but said they remain a possibility, adding parents have been “shouldering the costs” of price increases in the market for years.

“We’re concerned that companies don’t compete strongly on price and many parents – who may be choosing infant formula in vulnerable circumstances and without clear information – opt for more expensive products, equating higher costs with better quality for their baby,” said CMA chief executive Sarah Cardell.

Just three companies – Danone, which makes Aptamil and Cow & Gate, and Nestle, which makes SMA, and Kendamil – control more than 90% of the UK market.

Prices for baby formula in the UK have jumped between 18% and 36%, depending on the brand, over the two years between December 2021 and December 2023, the report found.

Parents could make a saving of up to £500 over a baby’s first year of life by switching to a lower priced brand, the report found.

The market is currently regulated so that promotions, such as a loyalty points or discounts, are banned in the same way they are for tobacco and lottery tickets.

This is to encourage breastfeeding, which the NHS says is healthier for children, but the CMA said it was concerned this stopped firms competing on price, with an “unintended consequence” of this meaning “consumers paying higher prices”.

It said “permitting prices and price reductions to be publicised”, would encourage price competition.

It found there was “little pressure” on firms “to shelter customers from increases in manufacturing costs, which have largely been passed on quickly and in full”.

Despite these regulations, Asda started allowing loyalty points to be used to buy baby milk from January. Iceland has also spoken out against the rule.

The rules also require all brands of baby milk formula, including supermarket own brands, not to differ too much in terms of core ingredients.

However, the CMA is worried the words companies use to make their products stand out, such as “advanced”, make it hard to judge their quality.

It said this “risks diluting the important public health message that all infant formula meets nutritional needs” regardless of brand or product.

The CMA has also made several other recommendations and suggestions:

• Companies should clearly separate their baby milk brands from their follow-on milk brands, for babies after six months, because it is worried “brand reputation plays an outsized role in decision-making”
• The government could buy formula from a third-party and sell it at a lower price under NHS branding
• Existing rules should be strengthened so that they also apply online
• Parents should have access to “clear, accurate, and impartial information, including on nutritional sufficiency, at the point of sale”
• The NHS should also do more to provide information in a “timely” manner, such as the fact that follow-on milk is not necessary
• Standardised formula packaging should be used in hospitals to stop people associating a particular brand with the authority of a hospital

Price controls such as caps are “not currently recommended”, but the CMA did say they could “bring down prices directly” if enforced.

Baby formula maker HiPP Organic UK said it was reassured that price caps were not being recommended as “these are unlikely to support families and maintain a sustainable industry”.

The CMA began its probe after it became concerned about surging baby milk prices and expects to publish its final report in February next year.

A spokesperson for Danone said it “agrees with the CMA that there should be a focus on the information parents receive in healthcare settings, and in particular on the differences between infant formulas”.

A Nestle spokesperson said it would “continue to work constructively with the CMA as they further explore market outcomes”.