In a draft decision, the Commerce Commission said that INC members should be granted authorisation to "restrict their advertising and marketing of infant formula for children under six months of age."
INC, which represents the likes of Fonterra, Nestlé, Abbott Nutrition, Heinz, and Nutricia, asked the Commerce Commission in November 2014 to provide it the power to enforce its Code of Practice for Marketing of Infant Formula (INC Code of Practice).
It said it feared its members, driven by the activities of non-members, would be "incentivised to increase their own marketing."
INC filed the application with the Commerce Commission under Section 58 of the New Zealand Commerce Act, which enables it to grant authorisation for restrictive trade practices.
In its draft decision, the Commerce Commission argued that "the reduction in competition is likely to be outweighed by the public benefits."
"In this instance, authorising the INC's Code of Practice is likely to have significant public health benefits," said Dr Mark Berry, chairman of the Commerce Commission.
"In particular, it is widely agreed that there are a variety of health benefits from breastfeeding, which could be adversely affected by the unrestricted marketing and advertising of infant formula."
"Moreover, authorising the INC's Code of Practice is unlikely to impact the price that consumers pay for infant formula," said Berry.
The draft decision is now open for comment. The window for submissions closes on March 24.
In its November 2014 application, INC said that granting it the authority to enforce its Code of Practice would give he New Zealand Ministry of Health more time to push through mandatory infant formula marketing legislation.
The World Health Organisation's (WHO) International Code of Marketing of Breast Milk Substitutes (WHO Code), devised in 1981 to protect and promote breastfeeding and restrict the marketing of breast milk substitutes, was adopted on a voluntary basis by New Zealand in 1983.
The New Zealand Ministry of Health is now, however, "committed to giving effect to the WHO Code," said INC in its application.
"The Ministry of Health states that implementing the WHO Code is an important part of creating an overall environment that enables mothers to make the best possible feeding choice, based on impartial information free of commercial influence, and to be fully supported in doing so," said INC in its application.
"However, for a period of time before the Ministry of Health is able to impose the restriction, it would be clear to all members of the Infant Nutrition Council that they would not, and could not, be bound by relevant restrictions in the INC Code of Practice."