Pets at Home Group, CVS Group and several other veterinary companies have raised issues over the methods the Competition & Markets Authority will use to assess profitability as part of its probe of the market.
Pets at Home said that it has significant concerns about the reliability of the proposed economic profitability analysis in relation to first opinion practices (FOP) in a response to a working paper provided by the CMA.
The analysis should be undertaken over a long period, “given the time it takes to establish a successful practice,” the company said.
In addition, profitability analysis should be conducted within the local market in question to understand the performance within that local market, rather than across markets at some aggregate level, it added.
The CMA is investigating the vets for pets market after an initial review expressed various competition worries, from the cost of medicines to market concentration and the regulatory framework.
“There is a diversity of business models across the UK, even within the FOP segment of the market, that make robust comparisons challenging, e.g. many FOPs are owner-operated, which make them more difficult to compare against large corporate groups,” Pets at Home said.
Separately, CVS said that its acquisitions are complementary to its existing operations and that it hasn’t tried to gain market power in specific local areas or to raise prices. In addition, it said that it doesn’t see higher profits in the UK than in other countries where it operates.
“There is no systematic difference in expected profitability between greenfield sites and acquisitions,” CVS said in its response to the CMA.
Other vet companies have also been critical of the CMA’s approach.
IVC Evidensia urged the CMA to discuss its profitability analysis with the company.
“If the CMA is to provide any meaningful estimates of profitability, it needs to rapidly adopt a revised methodology in order to address the significant data and methodological challenges particular to the vet sector,” IVC Evidensia said in its submission.
Medivet said that the CMA has a “flawed” approach toward its proposed profitability analysis of independent vets.
