[Federal Register Volume 87, Number 150 (Friday, August 5, 2022)]
[Notices]
[Pages 48026-48028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16790]
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FEDERAL TRADE COMMISSION
[File No. 211 0174]
JAB Consumer Partners/Ethos Veterinary Health; Analysis of
Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Proposed Consent Orders to Aid Public Comment
describes both the allegations in the complaint and the terms of the
consent orders--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before September 6, 2022.
ADDRESSES: Interested parties may file comments online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``JAB/Ethos
Veterinary Health; File No. 211 0174'' on your comment and file your
comment online at https://www.regulations.gov by following the
instructions on the web-based form. If you prefer to file your comment
on paper, please mail your comment to the following address: Federal
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW,
Suite CC-5610 (Annex D), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Mike Barnett (202-326-2362), Bureau of
Competition, Federal Trade Commission, 400 7th Street SW, Washington,
DC 20024.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis of Agreement Containing Consent Orders to Aid Public
Comment describes the terms of the consent agreement and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC website at
this web address: https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before September 6,
2022. Write ``JAB/Ethos Veterinary Health; File No. 211 0174'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the https://www.regulations.gov website.
Due to protective actions in response to the COVID-19 pandemic and
the agency's heightened security screening, postal mail addressed to
the Commission will be delayed. We strongly encourage you to submit
your comments online through the https://www.regulations.gov website.
If you prefer to file your comment on paper, write ``JAB/Ethos
Veterinary Health; File No. 211 0174'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex D), Washington, DC 20580.
Because your comment will be placed on the publicly accessible
website at https://www.regulations.gov, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include sensitive
personal information, such as your or anyone else's Social Security
number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure your comment does not include
sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including competitively sensitive information such
as costs, sales statistics, inventories, formulas, patterns, devices,
manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request and
must
[[Page 48027]]
identify the specific portions of the comment to be withheld from the
public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on https://www.regulations.gov--as legally required by FTC
Rule 4.9(b)--we cannot redact or remove your comment from that website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website at https://www.ftc.gov to read this document
and the news release describing this matter. The FTC Act and other laws
the Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments it receives on
or before September 6, 2022. For information on the Commission's
privacy policy, including routine uses permitted by the Privacy Act,
see https://www.ftc.gov/site-information/privacy-policy.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') with JAB Consumer Partners SCA SICAR (``JAB''), the owner
of Compassion-First Pet Hospitals and NVA Parent Inc. (collectively,
``Compassion-First/NVA''), and VIPW, LLC and Ethos Veterinary Partners
LLC, owners of Ethos Veterinary Health LLC (``Ethos''), which is
designed to remedy the anticompetitive effects that would result from
Compassion First/NVA's proposed acquisition of Ethos.
Pursuant to a Stock Purchase Agreement and Plan of Merger dated
August 13, 2021, Compassion-First/NVA proposes to acquire Ethos for
approximately $1.65 billion (the ``Acquisition''). Both parties provide
specialty and emergency veterinary services in clinics located in the
United States. The Commission alleges in its Complaint that the
Acquisition, if consummated, would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. 45, by lessening competition in
the markets for certain specialty and emergency veterinary services in
four different localities in the United States. The Consent Agreement,
which contains the proposed Decision and Order (``D&O'') and Order to
Maintain Assets, will remedy the alleged violations by preserving the
competition that would otherwise be eliminated by the Acquisition.
Specifically, under the terms of the D&O, Compassion-First/NVA is
required to divest clinics to United Veterinary Care, LLC (``UVC'') and
Veritas Veterinary Partners (``Veritas''), operators of specialty and
emergency veterinary clinics elsewhere in the country. In order to
protect robust future competition in markets trending towards increased
consolidation, including due to acquisitions by JAB that may or may not
be reportable under the Hart-Scott-Rodino Premerger Notification Act
(``HSR''), the D&O provides for (1) a statewide prior approval by the
parties in California, Colorado, Virginia, Maryland, and throughout the
District of Columbia for acquisitions proximate to existing and future
Compassion-First/NVA emergency and specialty clinics, and (2) a
nationwide prior notice for proposed acquisitions proximate to existing
and future Compassion-First/NVA emergency and specialty clinics.
The Consent Agreement with the proposed D&O and the Order to
Maintain Assets has been placed on the public record for thirty days
for receipt of comments from interested persons. Comments received
during this period will become part of the public record. After thirty
days, the Commission will review the D&O as well as any comments
received and decide whether it should withdraw the D&O, modify it, or
make it final. The Commission is issuing the Order to Maintain Assets
when the Consent Agreement is placed on the public record.
II. The Relevant Markets and Market Structures
The relevant lines of commerce in which to analyze the Acquisition
are individual specialty veterinary services and emergency veterinary
services. Specialty veterinary services are required in cases where a
general practitioner veterinarian does not have the expertise or
equipment necessary to treat the sick or injured animal. General
practitioner veterinarians commonly refer such cases to specialists--
typically doctors of veterinary medicine who are board-certified in the
relevant specialty. Individual veterinary specialties include internal
medicine, neurology, medical oncology, critical care, ophthalmology,
surgery, radiology, cardiology, dermatology, and anesthesiology.
Emergency veterinary services are those used in acute situations where
a general practice veterinarian is not available or, in some cases, not
trained or equipped to treat the patient's medical problem.
The relevant areas for the provision of specialty and emergency
veterinary services are local in nature, delineated by the distance and
time that pet owners travel to receive treatment. The distance and time
customers travel for specialty services are highly dependent on local
factors, such as the proximity of a clinic offering the required
specialty service, appointment availability, population density,
demographics, traffic patterns, or specific local geographic
impediments like large bodies of water or other geographic impediments.
The Acquisition is likely to result in consumer harm in markets for
the provision of the following services in the following localities:
a. medical oncology veterinary specialty services in and around
Richmond, Virginia;
b. medical oncology veterinary specialty services in and around the
Washington, DC Metro Area;
c. internal medicine, neurology, medical oncology, critical care,
surgery, radiology, cardiology, dermatology, and anesthesiology
veterinary specialty services and emergency veterinary services in and
around Denver, Colorado; and
d. internal medicine, neurology, medical oncology, critical care,
ophthalmology, and surgery veterinary specialty services and emergency
veterinary services in and around San Francisco, California.
All of these relevant markets are currently highly concentrated,
and the Acquisition would substantially increase concentration in each
market. In one case, the combined firm would be the only provider
following the transaction. In other markets, the combined firm would be
one of only a few alternatives for consumers.
There has been a growing trend towards consolidation in the
emergency and specialty veterinary services markets across the United
States in recent years by large chains including Respondent Compassion-
First/NVA. Respondent Compassion-First/NVA itself has grown principally
through large acquisitions that were reported to federal antitrust
authorities pursuant to the Hart-Scott-Rodino Act. The Commission
determined that it had reason to believe that previous reportable
transactions were illegal as originally structured and therefore
ordered divestitures in various local relevant markets to remedy the
anticompetitive effects that would have occurred absent each remedy.
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To protect robust future competition in markets trending towards
increased consolidation, each most recent Commission order has included
prior approval and/or notice provisions for acquisitions proximate to
existing and future Compassion-First/NVA emergency and specialty
clinics. The prior notice provision from the 2020 Compassion-First/NVA
order has already had a beneficial effect in preventing acquisitions
that may have substantially lessened competition. NVA filed a prior
notice for a subsequent acquisition following the issuance of that
order, and, after FTC staff raised concern about potential
anticompetitive concerns about the deal, NVA abandoned the acquisition.
III. Entry
Entry into the relevant markets would not be timely, likely, or
sufficient in magnitude, character, and scope to deter or counteract
the anticompetitive effects of the Acquisition. For de novo entrants,
obtaining financing to build a new specialty or emergency veterinary
facility and acquiring or leasing necessary equipment can be expensive
and time consuming. The investment is risky for specialists that do not
have established practices and bases of referrals in the area. Further,
to become a licensed veterinary specialist requires extensive education
and training, significantly beyond that required to become a general
practitioner veterinarian. Consequently, veterinary specialists are
often in short supply, and recruiting them to move to a new area
frequently takes more than two years, making timely expansion by
existing specialty clinics particularly difficult.
IV. Effects of the Acquisition
The Acquisition, if consummated, may substantially lessen
competition in each of the relevant markets by eliminating close, head-
to-head competition between Compassion-First/NVA and Ethos for the
provision of specialty and emergency veterinary services. In one
market, the Acquisition will result in a merger to monopoly. The
Acquisition increases the likelihood that Compassion-First/NVA will
unilaterally exercise market power and cause customers to pay higher
prices for, or receive lower quality, relevant services.
V. The Proposed Decision and Order
The proposed D&O remedies the Acquisition's anticompetitive effects
in each market by requiring the parties to divest five facilities \1\
to UVC and Veritas. The divestitures will preserve competition between
the divested clinics and the combined firm's clinics. UVC and Veritas
are qualified acquirers of the divested assets with experience
acquiring, integrating, and operating specialty and emergency
veterinary clinics. Neither UVC nor Veritas currently operate or have
plans to operate any specialty and emergency veterinary clinics in the
relevant markets.
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\1\ The divested clinics include (1) The Oncology Service-
Richmond in Richmond, Virginia (divested to UVC); (2) The Oncology
Service-Springfield and The Oncology Service-Leesburg in the DC
Metro area (divested to UVC); (3) Wheat Ridge Animal Hospital in the
Denver, Colorado area (divested to Veritas); and (4) Pet Emergency +
Specialty Center of Marin near San Francisco (divested to Veritas).
The divestitures include all expansion or relocation efforts related
to these facilities. The divestitures include all assets, including
equipment and intellectual property, necessary to compete
effectively in each relevant market.
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The D&O requires the divestiture of all regulatory permits and
approvals, confidential business information, including customer
information, and other assets associated with providing specialty and
emergency veterinary care at the divested clinics. To ensure the
divestiture is successful, the D&O also requires Compassion-First/NVA
and Ethos to secure all third-party consents, assignments, releases,
and waivers necessary to conduct business at the divested clinics.
The D&O also requires Compassion-First/NVA and Ethos to provide
reasonable financial incentives to certain employees to encourage them
to stay in their current positions. Such incentives may include
guaranteed retention bonuses for specialty veterinarians at divestiture
clinics. These incentives will encourage veterinarians to continue
working at the divestiture clinics, which will ensure that UVC and
Veritas are able to continue operating the clinics in a competitive
manner.
Finally, the D&O contains other provisions to ensure that the
divestitures are successful. For example, Compassion-First/NVA will be
required to provide transitional services for a period of up to one
year to ensure UVC and Veritas continue to operate the divested clinics
effectively as it implements its own quality care, billing, and supply
systems.
Additionally, because of the growing trend towards consolidation in
specialty and emergency veterinary services markets across the country,
as well as the likelihood of future acquisitions by Compassion-First/
NVA in these markets, many of which may be non-HSR reportable, the D&O
includes (1) a statewide prior approval by the parties in California,
Colorado, Virginia, Maryland, and throughout the District of Columbia
for acquisitions proximate to existing and future NVA emergency and
specialty clinics, and (2) a nationwide prior notice for proposed
acquisitions proximate to existing and future Compassion-First/NVA
emergency and specialty clinics. These provisions are effective for ten
years. UVC and Veritas will also be required to obtain prior approval
from the Commission before transferring any of the divested assets to
any buyer for a full ten years after UVC and Veritas each acquire the
respective divestiture assets, except in the case of a sale of all or
substantially all of UVC's or Veritas's businesses.
The Commission will appoint Dr. Michael Cavanaugh, DVM, to act as
an independent Monitor to oversee the Respondents' compliance with the
requirements of the Order, and to keep the Commission informed about
the status of the transfer of the divested clinics to UVC and Veritas.
The D&O requires Compassion-First/NVA and Ethos to divest the clinics
no later than ten business days after the consummation of the
Acquisition.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement. It is not intended to constitute an official
interpretation of the Consent Agreement or to modify its terms in any
way.
By direction of the Commission.
Joel Christie,
Acting Secretary.
[FR Doc. 2022-16790 Filed 8-4-22; 8:45 am]
BILLING CODE 6750-01-P