Background
The Competition and Markets Authority (CMA) launched an initial review of the veterinary sector in September 2023, in response to concerns that pet owners may not be getting a good deal or receiving the information they need to make good choices. The CMA issued a call for information, inviting both those in the veterinary sector and pet owners to share their thoughts on the market for pets. This received an unprecedented amount of responses – including 45,000 from the public and 11,000 from those working in the vet industry.
The outcome of the review highlighted five key concerns:
- Consumers may not be provided with enough information to choose the best veterinary practice or right treatment for their needs. For example, over 80% of vet practices had no pricing information online, even for basic services;
- Concentrated local markets, partly driven by sector consolidation, may be leading to weak competition some areas. Since 2013, 1,500 of the 5,000 vet practices in the UK have been acquired by the 6 largest corporate groups;
- Large groups may have incentives to act in ways which reduce choice and weaken competition;
- Pet owners may be overpaying for medicines and prescriptions; and
- The regulatory framework is outdated and may no longer be fit for purpose.
In March 2024 the CMA therefore launched a four-week consultation to seek views from interested parties on making a market investigation reference (MIR).
Following the conclusion of this consultation and having considered responses to it, the CMA has now announced in May 2024 that it has decided to refer the supply of veterinary services for household pets in the United Kingdom for a market investigation.
What is a market investigation?
A market investigation is a detailed examination of whether there is ‘an adverse effect on competition’, and is the quickest route to take direct action if the CMA finds competition is not working well.
Through a market investigation, the CMA can use formal powers to gather additional evidence, to investigate concerns in more depth, and shape any remedies.
For example, the CMA expects to:
- Explore what information is currently available to consumers and what they would find useful when choosing between vet practices or treatment options;
- Investigate further the extent to which consumers face limited choice of provider in certain local areas;
- Examine profitability in the sector and whether it is consistent with the levels the CMA might expect in a competitive market;
- Assess whether there is an ability and incentive to limit consumer choice, in particular when vet practices are part of large integrated groups; and
- Explore whether the regulatory regime is not enabling the market to function as well as it could, such as whether it contributes to consumers overpaying for medicine.
How can the CMA tackle any concerns it identifies?
A market investigation allows the CMA to take a number of steps to address its concerns, including imposing legally enforceable remedies which would apply to the whole veterinary sector.
Remedies that could be available to the CMA at the end of the investigation include:
- Mandating that information is provided to help give consumers more choice over the treatments available and the providers they use (e.g. on pricing, treatment options available);
- Mandating that such information is provided in a form that could support the development of customer comparison tools;
- Imposing maximum prices (e.g. for prescription fees);
- Targeted structural remedies (e.g. divestment of certain businesses or parts of businesses); and
- Making recommendations to government concerning changes to the regulatory framework.
As an example of how a market investigation can lead to real and important changes to a market, the CMA previously intervened in the UK groceries retailing market link and through its market investigation it took measures to improve competition in local areas and to address its concerns about relationships between retailers and their suppliers. Interestingly, the CMA found that large retailers had not breached the law although some practices could harm competition and as a result of this the law was changed to remove the previous exemption which had existed for restrictive clauses in land agreements.
Next steps
The statutory timetable for market investigations is 18 months, with the potential for an additional 6 months for putting remedies in place. Although this is a lengthy process, the CMA considers that it would be the quickest way to address its concerns, thanks to its ability to impose enforceable remedies directly at the end of the investigation. The focus of the first few months will be gathering additional evidence from stakeholders and conducting analysis.
Based on the evidence gathered throughout this process, the CMA may also open an investigation against specific businesses in veterinary sector if it has reasonable grounds to suspect that these businesses may have infringed competition law. This is a separate CMA enforcement power under the Competition Act 1998, targeting specific businesses or parties (rather than the sector overall). Businesses should bear this in mind if they feel that there has been some wrongdoing, and consider whether potentially they should come forward in order to take advantage of any leniency by the CMA.
The CMA will also consider if there are any other steps which can be taken in parallel to the market investigation to protect consumers, such as publishing advice. The CMA is additionally encouraging veterinary businesses to consider how they could act immediately to improve the way the market works, such as via improving the quality and transparency of information provided to consumers.
If you have been approached by the CMA to provide evidence, or operate a business in the veterinary sector and are concerned about how the market investigation may impact you, please get in touch with us. We would be happy to assist you with submitting responses to requests for information, advise you on any concerns you may have, and can guide you more generally through the market investigation process.
Additionally, if you have any questions about anticompetitive practices or competition law more broadly, please contact one of the authors.
