How concentrated is UK vet practice ownership?
In a blog post a couple of days ago we re-visited our earlier analysis of ownership concentration in UK vet care to take account of the CMA’s findings on CVS’s acquisition of The Vet. (The CMA has competition-related concerns in five of the eight local markets where The Vet has practices.)
We concluded, subject to various caveats, that extending the CMA’s methodology from CVS / The Vet to our earlier analysis approximately doubles the number of local authority areas where the CMA might be expected to have concerns about ownership concentration. That is, using this approach, the CMA might have concerns about concentration in the ownership of vet practices in 40-50% of all local authority areas across the UK.
We have now looked more closely at the approximately 3,500 vet practices in the UK’s urban areas. In CVS / The Vet, the CMA suggests that the geographic market for these practices is a 9-12 minute drivetime around each practice. Using an 12-minute drivetime, we find that there are around 1,800 local markets in urban areas where a single vet business has a market share that exceeds 30% (i.e. around 50% of all urban vet markets), and there are around 1,050 local markets in urban areas where a single vet business has a market share of 50% or more (i.e. around 30% of all urban vet markets).
To put these figures in context, it appears that ownership concentration in local vet markets is greater than in some of the other markets investigated by the CMA, such as funeral directors and care homes, but not others, such as crematoria. (By way of a rough comparison, the CMA has previously found that approximately 7% of local markets for funeral directors, 13% of local markets for care homes, 27% of local markets for larger grocery stores, 37% of local markets for private hospitals, and 80% of local markets for crematoria are highly concentrated.)
All else being equal, the more local markets that exhibit highly concentrated ownership, the more the CMA is likely to be concerned about the effectiveness of these markets for consumers. In our view, the level of ownership concentration in local vet care markets that is implied by the CMA’s decision on CVS / The Vet appears to significantly increase the likelihood of a CMA initiated investigation into the vet care market.
Whether any such investigation, in turn, leads to any significant interventions by the CMA will depend not just on measures of market concentration, but also on the presence of any other factors that might restrict, prevent or distort competition. For example, in funerals, even where market concentration in funeral directors is quite low, the CMA has recommended a series of interventions stemming from other factors, such as consumers’ difficulty in engaging in the decision-making process around a choice of funeral director when at a particularly vulnerable period in their lives.
We will return to the possible shape of a CMA market investigation in another blog in the coming days.
Finally, some additional information and caveats on the market share estimates set out above.
- First, in identifying markets with concentrated ownership, our focus has been on the large corporate vet businesses. There may be additional markets where smaller vet care businesses have market shares of more than 30% or more than 50%.
- Second, our market share estimates are based on the number of vet practices a business owns in each local market. In CVS / The Vet, however, the CMA measured market shares based on the number of full-time equivalent (FTE) vets employed by each business in a local market. This appears to have boosted CVS’s post-acquisition market shares significantly, and to the extent this pattern is replicated elsewhere, then more local markets will exceed the 30% and 50% thresholds set out above.
- Finally, the data we have used on vet practice ownership is approximately two years old. As a result, our estimates will also be affected by more recent practice acquisitions, sales and closures.
As always, Aldwych Partners is happy to discuss our analysis. Please get in touch if we can help on this or other matters.