WORLDTECHUS Regulator Sues to Halt Covetrus’s $3.5 Billion Purchase of Rival MWI
The US Federal Trade Commission has sued to block veterinary supplies distributor Covetrus from buying rival MWI in a deal valued at $3.5 billion. The agency contends that the combination would bring together the two largest suppliers in two key markets, leaving veterinary clinics and pet owners to bear higher costs.
Largest suppliers would be joined
The Federal Trade Commission’s complaint says the transaction would unite the two biggest suppliers in the markets for distribution to veterinary clinics and to large corporate accounts.
Covetrus and MWI provide veterinarians with pharmaceuticals, vaccines, so-called white goods such as gloves, gauze and syringes, surgical supplies and thousands of other products, along with the services that go with them. Their customers run from independent practices staffed by a single veterinarian to large corporate groups with hundreds of clinic locations across the United States.
Rivalry that currently benefits clinics
According to the complaint, both companies operate national networks of distribution centres that allow them to deliver goods quickly, and both offer discounts and rebates that smaller competitors cannot match. The complaint alleges the two firms compete hard on prices and service terms for clinics throughout the country.
The complaint cites Covetrus lowering its own prices and offering rebates through its VetSuite program in response to MWI’s aggressive pricing. The FTC says this rivalry has grown more intense in recent years with the arrival of Vetcove, an online platform that lets veterinarians compare prices and use one distributor’s terms when negotiating with the other. The complaint further alleges that years of head-to-head competition have developed into an all-out price war between the two companies.
Regulator warns of higher costs
The FTC alleges that the combined firm would raise costs for veterinary clinics, lower service quality and push up prices for pet owners. Daniel Guarnera, Director of the FTC’s Bureau of Competition, said that veterinarians and millions of American pet owners gain when distributors compete on lower prices and better service, and that the deal would reduce competition in a market that is already concentrated.
Guarnera added that the two companies are locked in fierce head-to-head competition and that Covetrus wants to remove its closest competitor instead of competing for veterinary clinic customers.
Open questions
- Will the court grant the FTC’s request to block the acquisition?
- Will the companies respond to the complaint with changes to the deal?