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Formula Maker Agrees to Pay $8 Million

May 25, 1993|From Bloomberg Business News

TALLAHASSEE, Fla. — Abbott Laboratories agreed Monday to pay Florida $8 million to settle allegations of a conspiracy to drive up the price of infant formula sold in the state.

Abbott, which didn't admit any wrongdoing, had been accused of colluding with two other makers of formula to fix prices and prohibit competitive marketing.

Florida, in its January, 1991, suit in federal court in Tallahassee, also had accused Abbott of rigging bids for contracts to provide formula under the federal Special Supplemental Food Program for Women, Infants and Children.

"We've already seen," Florida Attorney General Bob Butterworth said, "a stabilization of infant formula prices since the state's complaint was filed."

Abbott, which makes nearly half the infant formula sold in the United States, said the settlement wouldn't affect its earnings.

Duane Burnham, Abbott's chairman and chief executive, said the company "continues to compete responsibly, aggressively and completely within the law." Its products include Similac and Isomil brands.

Abbott, based in Abbott Park, Ill., still faces court actions on charges filed by the Federal Trade Commission and the states of California, Texas and Alabama in connection with its infant formula sales practices.

The company, which had revenue of $7.9 billion last year, said the resolution of these cases would not have a material effect on its finances.

The settlement Monday came five months after two other formula makers, Bristol-Myers Squibb Co. and American Home Products Corp., agreed to pay Florida a total of $5 million to settle similar allegations.

The three companies supply about 95% of all infant formula products sold in the United States.

Florida had alleged that the companies conspired to give cash grants, free formula and other baby products to hospitals and physicians in order to influence them to endorse a particular brand.

By preventing direct marketing to consumers, the companies caused price increases for infant formula that exceeded those for dairy products and other groceries, the Florida complaint said.

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