Shares of Pets at Home and CVS Group experienced significant declines on Thursday, following the announcement by the Competition and Markets Authority (CMA) that it would launch an investigation into the £2 billion (£1 = $1.2460) veterinary services market for household pets. Pets at Home shares fell by 9%, while CVS Group's stock dropped around 29%.
The CMA stated it will examine how effectively the market is serving pet owners and whether they are receiving necessary information to secure appropriate treatment for their pets. Key areas of interest include pricing transparency, the process of arranging and selling prescriptions and medication, selection of veterinary surgeries, and the availability of out-of-hours and emergency services.
Sarah Cardell, CMA chief executive, underscored the importance of clear information and pricing for pet owners, especially given the recent consolidation in the veterinary industry. "When a pet is unwell, they often need urgent treatment, which means that pet owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time," she said.
CVS Group responded to the review by pointing out the ongoing shortage of vets in the UK and rising employment costs as significant factors influencing their pricing structures.
The CMA expressed concern about large groups owning hundreds of practices potentially reducing competition. It plans to investigate whether veterinary bills have outpaced inflation rates. An update on this review is expected in early 2024.
Russ Mould, investment director at AJ Bell, commented on the impact of this news on share prices: "News that the competition authorities are looking into rising costs and potentially anti-competitive practices in the industry has set the cat among the pigeons when it comes to share prices of CVS and Pets at Home." He added that while this could be an overreaction, the review process might exert pressure on both stocks for a considerable time.
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