On 12 March 2024, the UK Competition and Markets Authority (CMA) provisionally decided to refer the veterinary sector for a formal market investigation.  The CMA has identified a range of competition concerns, including the effects of recent consolidation in the sector.

The CMA’s concerns

The CMA began an initial review of the veterinary sector in September 2023 to seek views on a number sector-wide issues that had come to its attention in the context of merger investigations.  Having carried out an initial review, the CMA has reached a provisional decision to open a formal market investigation.  The CMA highlights, in particular, the decreasing numbers of independent veterinary practices and the “rapid, significant, and ongoing growth of a few large, corporate suppliers”.  According to the CMA, 60% of veterinary practices are now owned by these “large corporate groups”, compared with 10% in 2013, partly as a result of “roll-up” acquisitions.  The CMA has identified six large corporate groups (CVS, Independent Vetcare, Linnaeus, Medivet, Pets at Home, VetPartners) owning veterinary practices, including three that are owned by private equity firms.  

In the CMA’s view, consolidation in the sector may have contributed to weaker competition and adverse outcomes for consumers.  Its five main areas of concern are:

• Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.  The CMA noted a lack of transparency on pricing information and whether particular veterinary practices are independent or owned by corporate groups.  There may be negative effects on competition if consumers are unable to make informed choices between different practices and treatment options.

• Concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.  The CMA has identified a number of local areas where a majority of veterinary practices are owned by a small number of large groups.  The CMA has identified 1,134 postcode areas (out of a total of 2,831) where consumers may be affected by a lack of local competition.

• Large integrated groups may have incentives to act in ways which reduce choice and weaken competition.  The CMA is considering whether practices owned by corporate groups may be steering consumers towards higher cost treatments or to other services provided by the same group.
  • Concentrating on providing higher cost treatment options.  Corporate groups that have invested in sophisticated equipment may focus on providing higher cost treatments, even if consumers would prefer lower cost options.
  • Keeping referrals, diagnostics, out-of-hours and cremation services within the group.  A number of groups have also acquired businesses in related markets, such as specialist treatment referral centres, diagnostic laboratories, crematoria and out-of-hours suppliers.  The CMA noted that some groups operate a “hub and spoke” business model, in which several branch practices (spokes) refer customers to additional services at a larger practice (the hub).  This may have led to reduced choice and higher prices for consumers, as well as reducing market access for independent competitors.

• Pet owners may be overpaying for medicines or prescriptions.  The CMA is concerned that veterinary practices are steering consumers to buy medicines from them directly, rather than using third-party retailers, where the prices are often lower.  Because consumers are not made aware of cheaper alternatives, corporate groups that purchase medicines at low wholesale prices may not face sufficient competitive pressure to pass on these cost savings. 

• The regulatory framework is outdated and no longer fit for purpose.  The industry’s statutory regulator, the Royal College of Veterinary Surgeons, primarily regulates individual veterinary practitioners.  In the CMA’s view, it may not be equipped to regulate “the commercial and consumer-facing aspects of veterinary businesses” in its current form.

Potential remedies

As part of its assessment of whether to make a market investigation reference, the CMA has identified a range of potential remedies that would be available should it proceed with the market investigation.

For example, the CMA could require veterinary practices to provide more information to consumers to help them make informed choices about the treatments and providers available.  This could include information on pricing, ownership of veterinary practices and the range of treatment options and providers of related services.  Practices could also be obliged to provide this information in a form that could be used in digital comparison tools.

To remedy concerns over pricing, the CMA could consider imposing maximum prices, for example for prescription fees.  Veterinary practices could also be required to send registered customers annual “wake-up” letters prompting them to reconsider their choice of practice.

The CMA will also consider whether to order targeted structural remedies, such as divestments of certain businesses or parts of businesses akin to the divestment remedies it has accepted in recent Phase 1 merger review cases.  In the last two years, the CMA has accepted divestment remedies in four completed mergers in the veterinary sector that it had called in for review.[1]  In three of these cases the acquirer was controlled by one or more private equity firms.  The CMA cleared the acquisition of Goddard Veterinary Group by VetPartners, subject to the divestment of eight sites in the local areas in which it had identified competition concerns, along with all associated core assets.  It also required the divestment of eight independent veterinary businesses acquired by Independent Vetcare Limited and 11 veterinary businesses acquired by the Medivet Group. 

Finally, the CMA could make recommendations to the government to make changes to the regulatory framework.

Wider enforcement approach

The CMA’s scrutiny of veterinary services reflects its ongoing focus on consumer-facing markets and being seen to address cost-of-living pressures, in response to its 2023 Strategic Steer from Government, in which the CMA was encouraged to “focus on achieving outcomes that help individual consumers and businesses to meet cost of living challenges” and to “prioritise action that addresses cost of living challenges – the CMA should prioritise proportionate interventions which will deliver better value for businesses and individual consumers.”  The Government has encouraged the CMA to use its full range of tools to achieve these benefits for consumers, including market studies and investigations.  Since the beginning of 2023, in addition to the veterinary market, the CMA has begun reviews of the markets for housebuilding and infant formula, as well as studies in the digital and technology sectors.

Next steps

The CMA is currently seeking views from stakeholders on its proposed market investigation.  The deadline for this consultation is 11 April 2024.  If the CMA opens a market investigation, it will have 18 months to investigate the market in more detail and decide what, if any, remedies are required.

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[1] ME/6967/21 Completed acquisition by CVS Group plc of Quality Pet Care Ltd (trading as The Vet), Decision on acceptance of undertakings in lieu of reference, 6 July 2022; ME/6967/21 Completed Acquisition by VetPartners Limited of Goddard Holdco Limited, Decision on acceptance of undertakings in lieu of reference, 12 September 2022; ME/7026-7033/22 Completed acquisitions by Independent Vetcare Limited (IVC) of multiple independent veterinary businesses, Decisions on acceptance of undertakings in lieu of reference, 17 August 2023; ME/7022/22, ME/7048-7051/23, ME/7053/23, ME/7055-7060/23 Completed acquisitions by Medivet Group Limited of multiple independent veterinary businesses, Decision on acceptance of undertakings in lieu of reference, 19 September 2023.