An initial Phase 1 investigation by the Competition and Markets Authority (CMA) has found that GXO’s purchase of Wincanton could reduce competition in the mainstream contract logistics services market and lead to business customers facing higher prices.
Contract logistics services include distribution, transport, warehousing and other supply chain services. GXO is the world’s largest contract logistics services company, and Wincanton is a British supplier of these services. Both companies supply mainstream contract logistics services to business customers in both retail (such as groceries, fashion and apparel) and non-retail (such as manufacturing and construction) sectors.
GXO announced their deal to acquire rival Wincanton in February. The transaction was then completed in April, although an interim enforcement order (IEO) is in place to prevent the two organisations from integrating while the competition regulator conducts its merger review.
In a statement issued on Friday, the CMA said its investigation had found that GXO and Wincanton compete closely, particularly for contracts with large retail customers. Although GXO will continue to face competition from other contract logistics providers, the regulator noted that many of these are significantly smaller or focus on specific industries or types of logistics services (such as transport). Although some businesses have the option to bring services in-house if contract logistics suppliers do not offer good value, the CMA highlighted that the ability to do this varies by customer.
This has led to concerns that the deal could raise costs for businesses that rely on contract logistics suppliers to move goods around the UK and for other supply chain activities.
GXO has been given five working days to submit proposals to address the CMA’s concerns. The regulator warned that if suitable proposals are not submitted, it will carry out an in-depth Phase 2 investigation.
Naomi Burgoyne, Senior Director of Mergers at the CMA, commented: “Contract logistics services are critical for the flow of goods around the country, reducing delays and ensuring that products reach their destinations efficiently and reliably. These services are essential for millions of people who rely on timely deliveries or being able to buy products off the shelf.
“This market is worth £16bn in the UK, and we’re concerned that this merger could reduce competition, resulting in higher costs being passed down to consumers. We consider that these competition concerns warrant an in-depth Phase 2 investigation, unless GXO offers solutions which address them.”
In response to the findings, a GXO spokesperson said: “We are reviewing the decision and will continue to engage constructively and collaboratively with the CMA to secure a positive outcome.
“We strongly believe that the transaction will deliver meaningful benefits for contract logistics customers in the UK, Europe and globally, and will support the UK government’s objective to drive economic growth by creating a more efficient and effective supply chain.
“The UK logistics market is highly competitive, and competition will remain robust for years to come. We remain confident in obtaining regulatory clearance and look forward to beginning to integrate our two great businesses.”
