REG - Competition and Mkts - CMA identifies multiple concerns in Vets market

Pets at HomeAnnouncement

12/03/2024 08:15

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RNS Number : 4267G  Competition and Markets Authority  12 March 2024

 CMA identifies multiple concerns in vets market

 

The CMA has today published its main concerns following an initial review into
the veterinary sector.

 

·    CMA provisionally decides it should launch a formal Market
Investigation.

·    Initial review prompts over 56,000 responses from public and vet
industry.

The review by the Competition and Markets Authority (CMA) highlights multiple
concerns in the market, including:

 

·    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.

·    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·    The regulatory framework is outdated and may no longer be fit for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 provisionally decided that it should launch a formal Market
Investigation focused on its provisional analysis of the issues in the sector
and is now consulting on this proposal.

 

A Market Investigation enables the CMA to investigate its concerns in full and
to intervene directly in markets if it finds that competition is not working
well. Along with compelling those under investigation to provide information,
it 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.

 

Sarah Cardell, Chief Executive of the CMA, 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.

 

"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 review

 

The CMA launched its review of the sector
(https://www.gov.uk/government/news/cma-launches-review-of-vet-sector) in
September 2023 and issued a Call For Information (CFI) as part of that. This
brought 56,000 responses - including 45,000 from the general public and 11,000
responses from those working in the vet industry which includes around a fifth
of UK vets and veterinary nurses. The CMA also engaged extensively with, and
secured feedback from, vet practices, industry bodies, charities, and others
to understand the issues in the provision of these services.

 

Although the call for information is not statistically representative of pet
owners or the vet industry, the level of response demonstrates how important
this issue is to millions of pet owners and those working in the sector.

 

The CMA's concerns

 

Based on the evidence gathered so far, the CMA has five key concerns that it
proposes to investigate further:

 

Consumers may not be given enough information to enable them to choose the
best veterinary practice or the right treatment for their needs.

 

·    Most vet practices do not display prices on their website - of those
practices checked, over 80% had no pricing information online, even for the
most basic services. Pet owners tend not to shop around between vet practices
and assume prices will be similar, although that is not always the case.

·    People are not always informed of the cost of treatment before
agreeing to it - around one fifth of respondents to the  CFI said that they
were not provided with any cost information before agreeing to tests, around
one in ten said they were not provided with cost information before their pet
had surgery, and around half said they were not informed about costs before
agreeing to out of hours treatment.

·    A company can own multiple vet practices in a local area without
making that clear - for example, only 4 out of 6 of the largest groups don't
change the name or branding when they take over an independently owned vet
practice. This means pet owners are not always comparing competitors when
choosing a vet practice.

Concentrated local markets, in part driven by sector consolidation, may be
leading to weak competition in some areas.

 

Market concentration measures how many competitors operate in a particular
market - the fewer firms operating in a market, the more concentrated it is.

 

·    In 2013, around 10% of vet practices belonged to large groups, but
that share is now almost 60%, and many of the large groups have expressed an
intention to continue expanding their business through acquisition of
independently owned practices.

·    To illustrate this another way, 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, Pets at Home and VetPartners).

·    This may reduce the number of business models in locations where most
or all of the first opinion practices are owned by one large corporate group,
giving less choice to consumers because they tend to choose practices close to
home.

 

Large integrated groups may have incentives to act in ways which reduce choice
and weaken competition.

 

Given the significant and ongoing growth of large corporate groups, the CMA is
concerned that:

 

·    The large, integrated corporate groups (especially those whose
business models include significant investment in advanced equipment) may
concentrate on providing more sophisticated, higher cost treatments, meaning
that consumers are less able to access simpler, lower cost treatments even if
they would prefer that option.

·    To varying extents, the large vet groups have also bought businesses
which offer related services such as specialised referral centres, out of
hours care, diagnostic labs and/or 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.

 

Pet owners might be overpaying for medicines or prescriptions.

 

·    Vets must use signs in reception or treatment rooms to tell customers
that they can get a prescription for medicine and buy it elsewhere, but the
CMA is concerned that these may not be effective. While it can be convenient
to buy a medicine directly from the vet as part of a consultation, around 25%
of pet owners did not know that getting a prescription filled elsewhere was an
option - meaning they are missing out on potential savings, even with the
prescription fee.

·    Some vet practices may make up to a quarter of their income selling
medicines - so there may be little incentive to make pet owners aware of
alternatives.

·    The current regulatory regime may contribute to concerns by
restricting veterinary practices' ability to source cheaper medicines online.

The regulatory framework is outdated and may no longer be fit for purpose.

·    The main regulation in the industry dates from 1966, before non-vets
were able to own vet practices. It relates to individual practitioners, not
practice owners or vet practices as businesses. This means that the statutory
regulator, the RCVS, has limited leverage over the commercial and
consumer-facing aspects of veterinary businesses, for example how prices are
communicated or whether there is transparency about ownership of vet practices
or related services.

·    The RCVS has put in place a Practice Standards Scheme which applies
to the vet practice rather than individual vets. Only 69% of eligible
practices have signed up to this voluntary scheme, meaning that almost a third
of the market has not committed to this approach.

·    The provisional view is that outcomes for consumers could be improved
if regulatory requirements and/or elements of best practice could be monitored
or enforced more effectively.

Next steps

 

The CMA has launched a four-week consultation to seek views from the sector on
the proposal to launch a market investigation. The consultation closes on 11
April 2023 at which point it will consider the responses received and a
decision will be made on how to proceed.

 

For further information visit the Veterinary services case page
(https://www.gov.uk/cma-cases/veterinary-services-market-for-pets-review) .
This includes the consultation document
(https://www.gov.uk/government/consultations/consultation-on-the-proposal-to-make-a-market-investigation-reference-into-veterinary-services-for-household-pets-in-the-uk)
which sets out more details and statistics on today's update.

 

Notes to editors:

 

1.   Under section 131 of the Enterprise Act 2002, the CMA may make a market
investigation reference
(https://www.gov.uk/government/publications/market-studies-and-market-investigations-supplemental-guidance-on-the-cmas-approach)
 to its Chair for the constitution of a Market Reference Group where it has
reasonable grounds for suspecting that any feature, or combination of
features, of a market in the United Kingdom (UK) for goods or services,
prevents, restricts or distorts competition in connection with the supply or
acquisition of any goods or services in the UK or a part of the UK.

2.   In a market investigation, a Market Reference Group is the independent
panel that is required to decide whether there is a prevention, restriction,
or distortion of competition. If it does identify such an adverse effect on
competition, then it will consider what, if any, appropriate action should be
taken to address this.

3.   Due to the self-selecting nature of the call for information, the
56,000 responses received are not statistically representative of the UK.

4.   The 6 largest veterinary groups are: CVS, IVC, Linnaeus, Medivet, Pets
at Home and VetPartners

5.   The CMA's decision to consult on a market investigation is based on a
range of evidence: a call for information on the CMA's website which attracted
around 56,000 responses; qualitative market research with pet owners as well
as broad engagement across the sector, including with all six large corporate
suppliers of veterinary services,  a number of independent veterinary
practices, industry regulators, industry bodies, government agencies, the
animal charity sector, and pet insurance companies.

6.   The CMA would like to hear from those who may be substantially impacted
by its proposal to conduct a market investigation by 11 April 2024,
particularly if they have views on any of the following:

a.   Whether consumers are given enough information to enable them to choose
the best veterinary practice or the right treatment for their needs;

b.   Whether concentrated local markets may be leading to weak competition
in some areas;

c.   Whether large integrated groups may have incentives to act in ways
which reduce choice and weaken competition;

d.   Whether pet owners might be overpaying for medicines or prescriptions.

e.   Whether the regulatory framework remains fit for purpose.

7.   For more information visit the CMA's vets
(https://www.gov.uk/government/consultations/consultation-on-the-proposal-to-make-a-market-investigation-reference-into-veterinary-services-for-household-pets-in-the-uk)
(https://www.gov.uk/government/consultations/consultation-on-the-proposal-to-make-a-market-investigation-reference-into-veterinary-services-for-household-pets-in-the-uk)
consultation page
(https://www.gov.uk/government/consultations/consultation-on-the-proposal-to-make-a-market-investigation-reference-into-veterinary-services-for-household-pets-in-the-uk)
.

8.   The figures on making pricing available on websites is based on the
CMA's review of over 2368 websites in total: 1399 websites for practices
belonging to the large corporate groups and 969 websites belonging to
independent practices.

9.   All media enquiries should be directed to the CMA press office by email
on press@cma.gov.uk (mailto:press@cma.gov.uk) , or by phone on 020 3738
6460.

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