CMA investigation into UK vet market could have big implications for investors

The Competition and Markets Authority (CMA) has 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 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 Another concern unveiled by the review relates to the regulatory framework, which was described as “outdated and may no longer be fit for purpose” by the regulator.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% of the vet practices in the UK were owned by large groups, but that share has increased to almost 60% now. Since 2013, around 1,500 of the 5,000 vet practices has 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 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 in a statement.

Competition law expert Tadeusz Gielas of Pinsent Masons said that one key implication of the CMA’s proposed formal investigation will be for buy-and-build investors operating in the veterinary sector, and another will be from a consumer protection perspective.

A market investigation gives the CMA access to a wide range of legally enforceable remedies, such as mandating the provision of certain information to consumers, imposing maximum prescription fees and ordering the sale or disposal of a business or assets, if it finds that competition is not working well.

“It’s also another example of the CMA seeking to tackle cost of living pressures, and seeking to leapfrog straight to an in-depth market investigation following the use of its ‘general review function’ under the Enterprise Act,” said Gielas.

Commercial law expert Nicole Livesey of Pinsent Masons added that, should it proceed with its proposal, the CMA “should recognise 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 2002 Enterprise Act, the CMA may make a market investigation reference (MIR), and subsequently launch a formal market investigation, where it has reasonable grounds for suspecting that one or more feature of one or more markets in the UK raises significant competition concerns.

Usually the CMA first conducts a statutory market study to identify where such competition concerns exist, but it may also directly proceed to a public consultation on whether it should make a MIR and forego the year-long market study procedure, as it has in the present case, allowing it to open an in-depth market investigation more quickly. This way, said CMA chief executive Sarah Cardell, is "the quickest route to enable us to take direct action, if needed".

The CMA is publicly consulting on its proposal until 11 April. Once the consultation has closed, it will consider the responses and make a decision on how to proceed.