The pet-care sector has seen a massive growth in India, particularly during the pandemic. The sector is estimated to touch INR 10,000 crore by 2025[1], with the number of pets increasing at a rate of 11% per annum[2]. Healthcare services, nutrition, drugs, and pet-grooming form the core of the overall pet care sector.
Alongside growth, the pet care sector has witnessed a noticeable increase in competition with the entrance of several established as well as nascent players. Large organisations (like Emami) view investment in the pet-care sector as a favorable avenue for corporate diversification[3]. Owing to the specialised nature of the sector, the market trend appears to be one of strategic collaborations between large industry players and smaller organisations with niche focus areas. There are also collaborations between smaller organisations which aim to increase their reach and market share in the pet care sector – an example is the recent acquisition of Capt Zack (specializing in pet accessories) by Wiggles (specializing in pet food).
In this two-part blog, we evaluate the legal landscape surrounding this sector by summarising some of the relevant legal considerations that a market player in this space may need to be mindful of. Part I of the blog, introduces the key legal compliances along with a short analysis on industry practices and legal developments. Part II will delve into the pharmaceutical and healthcare regulatory aspects that play a key role in the pet care ecosystem.
Entering the Pet – Care Sector
Today, the term ‘pet-care’ implies a multitude of avenues. It includes the pet-food sector (both perishable and non-perishable), pet-grooming, drugs, veterinary services, and other pet-care services. The following is a short elaboration on the entry options to be kept in mind by any industry player: –
A. Form of Establishment & Registrations
When incorporating a legal entity in India, the available options include sole proprietorships, limited liability partnerships, and private or public companies. However, a private company under the Companies Act, 2013 may be considered the more suitable option by industry players, given the ease of operations and investments. The same involves making requisite filings with the Registrar of Companies of the respective jurisdiction in which the establishment is sought to be incorporated. It is also noteworthy that an industry player willing to enter the pet-care sector can do so by seeking registration under Section 8[4] of the Companies Act, 2013, so long as the establishment is motivated by charitable rather than profit-making objectives[5]. The form of establishment is usually dependent on the nature of business and long-term objectives attached to such business.
In addition to the above, some of the key registrations required in the pet care sector are:
1. Pet Shops & Other Pet-Care Services: As per Rule 2(k) of the Prevention of Cruelty to Animals (Pet Shop) Rules, 2018 (“Pet Shop Rules”), a ‘pet shop’ means a shop, place or premises where pet animals are traded, sold or housed, including online platforms. However, pet shops typically act as retail outlets for pet food, pet products and pet care services as well. If an industry player wants to set up a pet shop, regardless of the nature, they would need to obtain a certificate of registration from the respective State Animal Welfare Board and comply with the provisions of the Pet Shop Rules[6]. There are multiple parameters which an establishment needs to fulfill in order to obtain registration, including providing for minimum space requirements[7], and submitting an application to the respective State Animal Welfare Board in the specified format[8], etc.
Further, since most of these establishments are engaged in the retail sale of pet products and rendering pet care services like pet grooming, etc., they would need to obtain relevant registration under the respective State’s Shops & Establishments Act (“S&E Act”) as a ‘commercial establishment’ (“CE”). For example, under the Delhi Shops & Establishments Act, 1954, the term ‘CE’ includes inter alia, any premises where any business, trade or profession are carried out or undertaken[9].
2. Pet Food Sector: The Bureau of Indian Standards (“BIS”) had introduced the Indian Standard 11968: 2019 titled Pet food for dogs and cats –Specification (“Standard”) as a first attempt at defining a uniform standard for pet food manufacturing by bringing the same under the purview of the Food Safety and Standards Act, 2006. The Standard also lays down certain labelling requirements wherein a distinction between ‘complete pet food’ and ‘complementary pet food’ is made. Compliance with the Standard is currently voluntary but may help improve marketability of products. Once made mandatory, industry players would need to follow the various requirements laid down in the Standard to obtain the BIS’s Standard Mark.
Industry players may also have to consider the Pet Food Products of Animal Origin (Import into India) Order, 2008 (“Order”) issued by the Department of Animal Husbandry, Dairy and Fisheries (“Department”). The Order prescribes certain basic requirements including the restriction on importing any pet food product of animal origin without valid sanitary permits from the Department[10]. The Order also sought to increase accessibility of pet food products by stating that the labelling should be done in a local or regional language. The Department, in supersession of the Order, also laid down the veterinary health certificate requirements for dog and cat food products (“Certificate Requirements”)[11]. The Certificate Requirements obligate the manufacturer to indicate on the packaging that the veterinary health certificate has been obtained. The other aspects of the Order and Standard will be elaborated upon in Part II of this blog.
3. Veterinary Services: If an establishment wants to venture into the veterinary healthcare services, then it must comply with the provisions of the Indian Veterinary Council Act, 1984 (“Veterinary Act”). The Veterinary Act lays down the minimum qualification standards for veterinary practitioners and lists the recognised veterinary education institutions in India. To engage in veterinary practice, an establishment is required to submit an application to the State Veterinary Council and obtain the relevant certificate of registration. Entities operating in the sector and wishing to engage veterinary practitioners must adhere to these requirements.
Additionally, as per the Prevention of Cruelty to Animals Act, 1960, industry players may need to obtain approvals pertaining to safety of the establishment from the State Animal Welfare Boards. Further, any entity engaged in manufacturing of pet care products including pet food, would need to abide by the requirements laid down under the Legal Metrology Act, 2009 (“LM Act”). The LM Act and associated rules place certain obligations on the manufacturer and importer of products, including obtaining a certificate of registration as a manufacturer, packer, and importer. The same is supplemented by the LM (Packaged Commodities) Rules, 2011, which specifies the information that must be included on the label of a packaged product from both a wholesale[12] and a retail perspective[13].
B. From the Judiciary’s Lens
Over the years, the Indian judiciary has evaluated certain legalities surrounding this sector. In this section, we evaluate a few key decisions.
In a 2010 decision, i.e., Maharashtra State Veterinary Council, Nagpur v. State of Maharashtra and Others[14], the Bombay High Court analysed the statutory distinction[15] between major veterinary services such as surgery and veterinary medicine, and ‘minor veterinary services’ such as vaccination, castration, and dressing of wounds. The court clarified that the latter may be performed by individuals who are not qualified to be veterinary practitioners under the Veterinary Act (i.e., non-graduate practitioners of veterinary science). To draw the said distinction, reliance was placed on the decision of the Supreme Court in Udai Singh Dagar v. Union of India[16]. Through this decision, the Supreme Court held that after the Veterinary Act came into force, individuals practicing under the respective State legislations (in this case the Maharashtra Veterinary Practitioners Act, 1971) could not be considered as registered veterinary practitioners. This decision introduced uniformity in performance of veterinary services. The Bombay High Court vide its 2010 decision elaborated on the compliances to be followed when engaging non-graduate practitioners for ‘minor veterinary services’.
However, the said distinction remains a grey area and both professionals and clinics should be mindful of it as subsequent notifications and court decisions may give rise to differing requirements.
Further, the pet care sector has witnessed instances of intellectual property disputes. An example is the case of Mars Incorporated v. Kumar Krishna Mukerjee[17],wherein the Delhi High Court injuncted Mr. Kumar Krishna Mukerjee, the defendant, from infringing the trademark registered in the name of the plaintiff. It is worth noting that a proper injunction was passed by the Court even though the defendant had neither commenced manufacturing nor sale of goods and thereby not having any market standing per se. Therefore, before industry players use or propose to use any intellectual property, it is imperative to seek legal advice so that adequate due diligence can be undertaken and liability prevented.
c. The Online Shift
In today’s digital age, most establishments have shifted online for marketing and selling their products. Several entities also act as aggregators connecting pet-care service providers with pet owners. Such B2C models providing online services to consumers have become increasingly popular. Any entity engaged in providing such services would have to abide by the Consumer Protection (E-Commerce) Rules, 2020 (“E-Commerce Rules”). Further, inventory-based e-commerce entities will have to be mindful of liabilities under the Consumer Protection Act, 2019 for providing accurate information, disclosures, etc.
Additionally, industry players must consider the requirements under the LM Act and associated rules while advertising their products on online marketplaces.
D. CONCLUDING REMARKS
The Indian pet care sector presently suffers from the ‘last mile connectivity’ problem, with access largely restricted to Tier I cities. The markets in Tier II and Tier III cities are yet to be tapped to their full potential. Many companies (which are part of the FMCG sector or otherwise) are now lining up to venture into this market space.
The shift in consumer mindset from ‘pet ownership’ to ‘pet parenting’ has opened up countless opportunities for market players in this space. Pet food holds the majority market share, closely followed by grooming, veterinary services, relocation services, etc. Indeed, the sector’s growth prospects appear promising. That said, this growth will inevitably be complemented by increased legal obligations related to expansion of businesses and synergies, restructurings, acquisitions and investments, documenting services arrangements/contracts, regulatory registrations and compliances.
To be continued in Part II.
For further information, please contact:
Sreetama Senr, Partner, Cyril Amarchand Mangaldas
sreetama.sen@cyrilshroff.com
[1] India’s pet care industry grows after Covid pandemic; Nestle, Emami join sector, LiveMint, dated July 31, 2022, available at – https://www.livemint.com/news/india/indias-pet-care-industry-grows-after-covid-pandemic-nestle-emami-join-sector-11659261412145.html, (last accessed June 12, 2023).
[2] India’s Pet Care Boom Draws New Investors, BQ Prime, Sesa Sen, dated August 03, 2022, available at – https://www.bqprime.com/business/indias-pet-care-boom-draws-new-investors, (last accessed June 12, 2023).
[3] Emami acquires 30% stake in pet-care startup Cannis Lupus Services, LiveMint, Writankar Mukherjee, dated July 21, 2022, available at – https://economictimes.indiatimes.com/industry/cons-products/fmcg/emami-acquires-30-stake-in-pet-care-startup-cannis-lupus-services/articleshow/93031946.cms?from=mdr, (last accessed June 12, 2023).
[4] Section 8, Companies Act 2013:
“8. Formulation of companies with charitable objects, etc.— (1) Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company— (a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object; (b) intends to apply its profits, if any, or other income in promoting its objects; and (c) intends to prohibit the payment of any dividend to its members,…”
[5] Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority, 2022 SCC OnLine SC 1461 (The Supreme Court held that an animal welfare organisation would be one which is performing functions of general public utility (as under Section 8 of the Companies Act, 2013) but would not include an such an organization intended for profit purposes).
[6] Rule 3, Pet Shop Rules.
[7] Rule 6, Pet Shop Rules.
[8] Rule 4; Form I, Pet Shop Rules.
[9] Section 2(5), The Delhi S&E Act, 1954.
[10] Paragraph 3, Order.
[11] Ministries of Fisheries, Animal Husbandry and Dairying, Department of Animal Husbandry and Dairying, Notification No. S.O. 3926(E), dated September 22, 2021, available at – https://egazette.nic.in/WriteReadData/2021/229892.pdf.
[12] Rule 18, LM (Packed Commodities) Rules 2011.
[13] Rule 6, LM (Packed Commodities) Rules 2011.
[14] Maharashtra State Veterinary Council, Nagpur v. State of Maharashtra and Others, 2010 SCC OnLine Bom 1887.
[15] Section 30, Indian Veterinary Council Act, 1984.
[16] Udai Singh Dagar v. Union of India, 2007 (7) SCALE 278.
[17] Mars Incorporated v. Kumar Krishna Mukerjee, 2002 SCC Online Del 1218.
