Competition watchdog launches probe into vet sector

Pets at Home, the Cheshire-based pet care group, said it is “incredibly disappointed” that competition watchdog, the Competition and Markets Authority (CMA) is to launch a formal investigation into the veterinary sector.

The body launched a review of the sector last September and said it has found multiple concerns, following an ‘unprecedented’ 56,000 responses from the public and the vet industry, including 45,000 from the general public and 11,000 responses from those working in the vet industry.

Sarah Cardell, CMA chief executive, said: “We launched our review of the veterinary sector last September because this is a critical market for the UK’s 16 million pet owners.

“The unprecedented response we received from the public and veterinary professionals shows the strength of feeling on this issue is high and why we were right to look into this.

“We have heard concerns from those working in the sector about the pressures they face, including acute staff shortages, and the impact this has on individual professionals. But our review has identified multiple concerns with the market that we think should be investigated further.”

She added: “These include pet owners finding it difficult to access basic information like price lists and prescription costs – and potentially overpaying for medicines. We are also concerned about weak competition in some areas, driven in part by sector consolidation, and the incentives for large corporate groups to act in ways which may reduce competition and choice.

“Given these strong indications of potential concern, it is time to put our work on a formal footing. We have provisionally decided to launch a market investigation because that’s the quickest route to enable us to take direct action, if needed.”

The CMA has identified five key concerns as part of its investigation.

• Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.
• Concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas. Since 2013 1,500 of the 5,000 vet practices in the UK have been acquired by the six large corporate groups – CVS, IVC, Linnaeus, Medivet, Cheshire-based Pets at Home and VetPartners.
• Large corporate groups may have incentives to act in ways which reduce choice and weaken competition.
• Pet owners might be overpaying for medicines or prescriptions.
• The regulatory framework is outdated and may no longer be fit for purpose.

The CMA has now launched a four-week consultation to seek views from the sector on the proposal to launch a Market Investigation.

A spokesperson for Handforth-based Pets at Home, which operates 448 locations around the UK, said: “We are incredibly disappointed the CMA’s findings today do not fully reflect our unique business model of locally-owned vet practices.

“Whilst our brand is national, our veterinary practices are led by individual entrepreneurial vets who have clinical and operational freedom.

“They choose all pricing, products and services to ensure the best care for clients and their much loved pets in their local area, which promotes competition in the market and helps to keep prices low.”

They added: “We have been working closely with the CMA on their areas of concern and will continue to do so as their inquiry progresses to ensure the distinctiveness of our model is fully recognised.

“We expect no impact on our growth strategy or ambitions where the strength of our consumer proposition is demonstrated by the high-quality growth the business is seeing.”

Pets at Home shares were trading almost three per cent down in mid-morning trading.

Russ Mould

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Pet owners are happy to splash the cash on their beloved furry friends, yet the competition watchdog is worried that they’re paying far too much for medicines or prescriptions.

“These concerns have got so serious that the CMA is now launching a formal investigation. The implication is that veterinarians have been exploiting their customer base either through overcharging or not giving enough information so customers can choose from a range of treatments priced at different levels. The watchdog also implies that some vet practices are too dominant in parts of the country and that is hurting competition.

“The biggest vet group on the UK stock market is CVS and, understandably, its share price has crashed on the news that the watchdog is stepping up its probe. Pets at Home is also exposed, though its vet practices are only one part of a broader group which includes selling pet food and accessories.”

He added: “The vet industry has been struggling with a lack of qualified workers, which has led to existing staff having to work longer hours, the recruitment of more staff from overseas or locums which has pushed up costs, or fewer appointments which has impacted takings for certain vet centres. This shake-up in the sector might have led some vets to push hard on prices to make up for any disruption to how their practices are run.

“If the CMA finds the industry guilty of poor practices around pricing and disclosure, vet companies face a significant downgrade to earnings forecasts. Worst case scenario, it might even render some smaller vet practices as far less economical and potentially lead to closures.”