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The U.S. Federal Trade Commission has intervened in the merger of two veterinary-care chains, one of which operates in Canada, over concerns that the firms violated antitrust laws.

The consumer protection agency said this week that JAB Consumer Partners’ US$1.1-billion acquisition of rival SAGE Veterinary Partners would allow the combined entity to form local monopolies in some cities in Texas and California. Those monopolies would allow the company to have total control of pricing and availability of services in those markets.

The FTC ordered JAB to sell off clinics in three regions of Texas and California and put restrictions on the company’s ability to buy clinics in those markets for 10 years.

JAB Consumer Partners, an international private-equity firm headquartered in Luxembourg with US$55-billion in assets under management, owns the National Veterinary Associates (NVA) chain of clinics, which is one of the three main corporate players in Canada with more than 100 locations.

JAB’s latest acquisition is part of a growing wave of international concentration of medical services under corporate ownership. Private-equity-backed firms buy up independent practices and consolidate them into chains to extract profits. As in the case of NVA, most acquired offices retain their old branding so that patients may not know that ownership has changed hands.

In a statement accompanying the order, FTC chair Lina Khan said this business model was problematic because business considerations could influence medical decisions.

“A focus on short-term profits in the health care context can incentivize practices that may reduce quality of care, increase costs for patients and payors, and generate appalling patient outcomes,” Ms. Khan said in the statement also signed by two other commissioners.

An NVA Canada spokesperson referred questions to the U.S. branch, which did not respond to questions by deadline.

The FTC’s actions follow two interventions in recent months by the British competition regulator, which raised concerns about two separate mergers among veterinary chains in that jurisdiction. The British regulator said it was acting based on complaints of higher prices and declining services among the chains’ clients. The regulator also cited statistics showing that the share of corporate ownership of veterinary clinics had risen to 55 per cent in 2021, up from 11 per cent in 2013.

Canada’s Competition Bureau said that, for confidentiality reasons, it could not say whether it is conducting any investigations in Canada’s veterinary sector.

Paul Pion, a leading independent veterinarian in California and the co-founder of the Veterinary Information Network, said corporate ownership of veterinary clinics began to really take off in the low-interest-rate environment that followed the 2008 recession.

The appetite among consolidators to buy clinics grew even stronger during the pandemic, as demand for pet services grew and private-equity investors looked for fragmented industries generating steady revenue. As well, rock-bottom interest rates made it easier for consolidators to take on large debts to fuel their acquisitions.

The competition among corporations also led to bidding wars for clinics, so that their valuations grew from a few times annual earnings to much more than that, pricing independent practitioners out of ownership.

The same trends have played out in Canada, where industry figures have told The Globe that some practices have been sold for more than 20 times earnings this year.

Dr. Pion said froth may begin to come out of the markets as interest rates go up. He pointed to recent comments from the executives of two Australia veterinary chains, who said they were slowing acquisitions because the costs had become too high.

“It’s all happened through boom years,” Dr. Pion said. “It’ll be interesting to see if the high demand for veterinary medicine, if we get into a recession, goes down. What’s the reaction of the corporates? Will they start trying to sell, close, cut corners?”

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