Amazon is deploying its lobbying power on America’s baby formula crisis, seeing an opportunity to extend its reach into a $2 billion-a-year market.
Between April and June, the company’s senior officials and in-house lobbyists held discussions about infant formula with lawmakers on Capitol Hill and officials from the federal government — the first time it’s reported doing so, according to its most recent federal lobbying report. Amazon lobbyists also discussed online purchasing restrictions for federal nutrition benefits — which are used to buy at least half of the country’s formula and billions of dollars worth of other groceries — with officials across the White House, FDA and other parts of the federal government, people familiar with those conversations say. Monument Advocacy, an outside firm representing Amazon, reported lobbying policymakers in the House, Senate and USDA on federal nutrition programs, as well.
Amazon’s foray into formula lobbying shows how the e-commerce giant stands to benefit from the industry shake-up that the ongoing formula shortages have triggered, particularly the potential to draw a larger share of the billions in federal dollars that go to programs designed to help close to 50 million lower-income Americans. That could allow Amazon to compete more directly with Walmart.com, its biggest e-commerce rival. The two companies have spent years jockeying for more access to the federal nutrition programs, especially since Amazon acquired grocery store chain Whole Foods in 2017.
“Formula is the perfect product for Amazon,” said Austin Frerick, deputy director of the Thurmond Arnold Project at Yale University, an antitrust law program. Among other things, he noted that it’s non-perishable and valuable for attracting return customers — something the company, which currently controls just over 2 percent of the U.S. grocery market, could use. “I think they want a bigger food play and more of your food dollar,” Frerick added. “Because that’s what Walmart has. You can buy your DVDs, books and TVs on Amazon but on your deodorant, you’ll go to Walmart.”
Amazon, however, must confront deepening distrust in Washington, where there is widespread concern about its alleged anti-competitive behaviors, and among food safety experts, who cite the challenges of policing third-party vendors on its platform.
“Historically, Amazon has been slow in removing recalled food products from across its platform, which creates a significant risk for consumers,” said Brian Ronholm, former deputy undersecretary of food safety at USDA during the Obama administration.
“We have developed industry-leading tools to prevent unsafe or non-compliant products from being listed in our stores, and remove products that do not meet our standards,” an Amazon spokesperson said in a statement. “We have clear policies on infant formula, and require sellers of infant formula to submit documentation that reflects compliance with applicable regulations and requirements. When we learn of a product recall, we immediately remove all impacted products from our store and notify customers directly via email.”
The infant formula shortage that erupted into public consciousness this spring shone a light on the small handful of manufacturers that control more than 90 percent of the U.S. formula market — and the way that strict government regulations have helped them maintain that dominance. And it has prompted the federal government to reexamine many of those restrictions, including limits on using federal nutrition benefits to purchase formula online, as well as food safety regulations that for decades have prevented most foreign formula from entering the U.S. market.
That could give online platforms like Amazon, which is already a major infant formula retailer, the opportunity to sell a wider range of formula products to a bigger slice of American consumers. Instacart, which delivers baby formula among other grocery products, also disclosed lobbying on baby formula issues in its most recent federal disclosure, reporting that it met with officials at USDA, the White House and the Centers for Medicare and Medicaid Services. The company also listed federal nutrition programs as lobbying topics.
Amazon, which is among the top lobbying spenders in Washington, is certainly weighing in with its perspective.
As the formula shortages spiraled into a political crisis for President Joe Biden in May, Food and Drug Administration Commissioner Robert Califf met with Douglas Herrington, a senior Amazon executive who has since taken over as CEO of WorldWide Amazon stores, Califf’s public schedule shows.
FDA spokesperson Janell Goodwin said the meeting was one of many Califf and Deputy Commissioner for Food Policy and Response Frank Yiannas have held with retailers, manufacturers and stakeholders “to discuss the infant formula supply as part of FDA’s all-hands-on deck approach to responding to the infant formula supply chain perturbation.”
Other Amazon officials and in-house lobbyists also met with FDA and White House officials during the formula crisis this spring. According to two people familiar with the conversation, the company’s representatives encouraged the federal government to tap Amazon’s massive distribution networks to speed the delivery of formula to desperate consumers. The White House and FDA ultimately prioritized brick-and-mortar stores over Amazon.com for distribution.
Amazon officials were left with the impression the White House didn’t want to appear as if it was prioritizing the online retail giant, according to a person familiar with the conversations. The company has had at times contentious relations with the Biden administration and progressive Democrats in Congress. One White House official, who was not authorized to speak publicly, said the reason was more simple. “They can’t take WIC,” the official said, referencing the federal nutrition program for low-income moms and babies, which is used to purchase roughly half of all infant formula consumed in the country.
That’s because as of now, WIC benefits cannot be used to purchase food online — restrictions that have proved to be a major headache for the administration as it tries to address the formula crisis. The federal government has been working to change that in recent years, including efforts to modernize the 1980’s-era payment system for WIC as well as the Supplemental Nutrition Assistance Program, known as SNAP, which provides federal food assistance to more than 40 million Americans.
In 2019, the Biden administration launched a pilot program allowing SNAP recipients to use their benefits on Amazon.com as well as Walmart.com. Now they are in the early stages of weighing similar changes to WIC, potentially opening up another pot of billions of dollars. Altogether, the USDA budget for nutrition, which covers WIC and SNAP, totals more than $130 billion per year. Federal officials and congressional aides say the online modernization of federal nutrition programs is the next major regulatory and legislative fight facing the food sector.
Two people familiar with the conversations between Amazon and White House officials confirm they discussed expanding SNAP’s online access.
“We routinely meet with a wide range of stakeholders, including industry, as part of our commitment to hear all ideas and explore all options to better address the needs of the American people,” said White House assistant press secretary Abdullah Hasan.
Amazon officials argue their expansion into food markets and federal nutrition programs have provided U.S. consumers more access to products. But some lawmakers, nutrition advocates and food safety experts warn its expansion comes with downsides — including concerns about internet and other access challenges in disadvantaged rural and urban areas.
“Amazon talks about itself as being a response for underserved rural communities, but that also is sometimes fantasy because there are many, many rural communities to which they don't distribute,” said one consultant who works on nutrition and farm issues in D.C. “And if one thing goes amiss in their supply chain, suddenly you've got millions of people who are not getting the basics they need.”
Lawmakers, including House Education and Labor Chair Bobby Scott (D-Va.), have meanwhile expressed concerns about price gouging by third-party sellers on Amazon and other online platforms during the formula crisis, pressing the FTC to crack down.
“We continuously compare the prices submitted by our selling partners with current and historic prices inside and outside our store to determine if prices are fair,” the Amazon spokesperson said in a statement. “If we identify a price that violates our policy, we remove the offer and take appropriate action with the seller.”
Amazon has also become a more general target for those on the left concerned about industry consolidation and the dominance of a handful of tech companies online — a group that includes several senior Biden administration officials. The president, himself, sparred with Amazon founder Jeff Bezos on Twitter this spring over tax policy and inflation. Despite those sometimes tense relations, some Biden administration officials suggested Amazon will continue to be a major player as the federal government tries to bring more federal nutrition programs online.
“I'm sure they do stand to gain,” a second White House official, who was not authorized to speak publicly about the matter, said of Amazon. “But really what's the tradeoff here, if it means that a low-income mother can have better or easier options?”
Daniel Lippman contributed to this report.
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By: Meredith Lee and Marcia Brown
Title: Amazon sees opening in baby formula industry shake-up
Sourced From: www.politico.com/news/2022/08/06/amazon-baby-formula-shortage-00050167
Published Date: Sat, 06 Aug 2022 06:00:00 EST
