Watchdog turns spotlight on vet sector competition
◆ The CMA is planning an investigation amid fears market consolidation is adversely affecting consumers, says Alan Davis
Buy-and-build investors in the veterinary market could be impacted by a proposal by the UK’S competition watchdog to launch an in-depth investigation into the sector due to concerns over poor competition and limited consumer choice.
The Competition and Markets Authority (CMA) announced provisional plans for a formal market investigation following an initial review of the UK vet sector in September 2023 that highlighted multiple issues in a market that is becoming dominated by several large groups.
The 2023 review found that the increasingly concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.
As a result, consumers may not be given enough information, such as price lists, to enable them to choose the best veterinary practice or the right treatment for their needs, and pet owners are potentially overpaying for medicines or prescriptions. Another concern unveiled by the review relates to the regulatory framework, which was described as “outdated and may no longer be fit for purpose” by the regulator.
Statistics provided by the CMA shows that in 2013 only 10 per cent of the vet practices in the UK were owned by large groups, but that share has now increased to almost 60 per cent. Since 2013, around 1,500 of the 5,000 vet practices have been acquired by six large corporate groups, three of which are private equity-owned.
The regulator has expressed particular concerns over the continuing consolidation, as many of the large groups have expressed an intention to continue expanding their business through acquisition of independently owned practices, and businesses which offer related services such as specialised referral centres, out of hours care, diagnostic labs and crematoria.
“These large groups may have the incentive and ability to keep the provision of these related services within the group, potentially leading to reduced choice, higher prices, lower quality and exit of independent competitors,” said the CMA.
A market investigation gives the CMA the ability to impose a range of legally enforceable remedies, which could include mandating the provision of certain information to consumers, imposing maximum prescription fees and even ordering the sale or disposal of a business or assets, if it finds that competition is not working well.
If it proceeds with its proposal, the CMA is nevertheless also likely to take into account the positive impact that corporate groups bring to consumers. These benefits include cutting-edge animal hospitals, accessible first opinion practices, and advancements in animal health innovation.
Under section 131 of the Enterprise Act 2002, the CMA may make a Market Investigation Reference (MIR) where it has reasonable grounds for suspecting that one or more features of a market in the UK raises significant competition concerns.
Usually, the CMA first conducts a market study to identify where such competition concerns exist but, as in the present case, it may also consult on whether it should proceed directly to an in-depth market investigation in order to resolve the potential competition concerns more quickly. The CMA is publicly consulting on its proposal until 11 April.