Firm’s ‘anticompetitive acquisition’ of veterinary clinics prompts FTC actions

The Federal Trade Commission is requiring the private equity firm JAB Consumer Partners to divest veterinary clinics in six locations as a condition of its proposed $1.1 billion acquisition of clinic operator Sage Veterinary Partners and another $1.65 billion acquisition of the parent company of veterinary clinic owner Ethos Veterinary Health.

The FTC ordered the divestitures on June 13 and June 29, respectively, after expressing concern that ownership would become too concentrated in certain markets. Additionally, the commission ordered JAB to obtain prior approval from the FTC before acquiring a specialty or emergency veterinary clinic within 25 miles of any JAB-owned clinic in California, Colorado, the District of Columbia, Maryland, Texas, and Virginia for 10 years.

The company must also notify the FTC in writing 30 days before acquiring any specialty or emergency veterinary clinic within 25 miles of a clinic owned by JAB anywhere else in the United States that otherwise is not required to be reported under the Hart-Scott-Rodino Act.

“Private equity firms increasingly engage in roll up strategies that allow them to accrue market power off the Commission’s radar,” said Holly Vedova, director of the FTC Bureau of Competition, in a press statement. “The prior notice and approval provisions will ensure the Commission has full visibility into future consolidation and the ability to address it.”

JAB is the parent company of two firms that operate chains of veterinary clinics providing general, specialty, and emergency care: Compassion-First Pet Hospitals and NVA.

When the acquisition of Sage Veterinary Partners was announced in June 2021, Sage owned and operated 16 veterinary clinics offering specialty and emergency care in Texas, California, Washington, and Alaska.

The FTC complaint alleges that the initial acquisition of Sage Veterinary Partners was likely to be anticompetitive in three of the following geographic markets for various types of veterinary care in Texas and California:

• In and around Austin, Texas, for internal medicine, neurology, medical oncology, critical care, and surgery veterinary specialty services, as well as emergency veterinary services.
• In and around San Francisco for internal medicine, neurology, ophthalmology, and surgery veterinary specialty services, as well as emergency veterinary services.
• In and between Oakland, Berkeley, and Concord in California for internal medicine, medical oncology, and surgery veterinary specialty services, as well as emergency veterinary services.

JAB’s acquisition of Ethos Veterinary Health was announced in August 2021. Ethos owns and operates specialty and emergency veterinary clinics in nine states. The FTC complaint alleges that this acquisition was likely to be anticompetitive in four of the following geographic markets for various types of veterinary care:

• In and around Richmond, Virginia, for medical oncology veterinary specialty services.
• In and around the Washington, D.C., metropolitan area for medical oncology veterinary specialty services.
• In and around Denver for internal medicine, neurology, medical oncology, critical care, surgery, radiology, cardiology, dermatology, and anesthesiology veterinary specialty services and emergency veterinary services.
• In and around San Francisco for internal medicine, neurology, medical oncology, critical care, ophthalmology, and surgery veterinary specialty services and emergency veterinary services.

According to the FTC, all of these markets are highly concentrated, and the acquisitions would substantially increase concentration in each market, leaving the combined firm as the only provider in some markets and one of only two or a few providers in other markets.

The proposed order also requires divestiture buyers United Veterinary Care and Veritas Veterinary Partners, to which JAB must sell 11 clinics, “to obtain prior approval from the FTC before transferring any of the divested assets to any buyer for 10 years after acquiring the divestiture assets, except in the case of a sale of all or substantially all of the company’s business,” according to FTC press releases.