The Competition and Markets Authority (CMA) has published the findings from its initial assessment of GXO’s £762m purchase of logistics rival Wincanton, in which it warns that the deal could reduce competition in the supply of dedicated warehousing services to supermarkets in the UK.
American firm GXO announced its deal to acquire Wincanton in February 2024. The transaction was completed in April 2024, although an interim enforcement order was put in place to prevent the two firms from integrating while the CMA conducted its merger review.
In its interim report, the competition regulator noted that GXO and Wincanton are currently two of the three suppliers of dedicated warehousing services used by grocers in the UK. The inquiry accepted that some alternatives would remain for supermarket customers following the transaction. These included switching to the third supplier, DHL, or moving some activities to their own in-house warehouses.
However, the CMA’s assessment found that these remaining alternatives would not be sufficient to prevent fees from rising and that the deal could raise costs for grocers that rely on dedicated warehousing services as part of their logistics.
“Contract logistics services play a critical role in ensuring that supermarket shelves are fully stocked for customers in the UK every day of the year. Our initial view is that this merger could raise the costs of these services and reduce choice for supermarkets who rely on these services for moving goods across the country,” said Richard Feasey, Chair of the independent inquiry group.
“We want to ensure competition in this market is working as well as it can to manage costs for supermarkets and grocers, and ensure products continue to reach supermarket shelves efficiently.”
The CMA has invited any interested parties to respond to the provisional findings by 12 March. Without concessions from GXO, the regular could potentially unwind the deal.
Responding to the CMA’s report, GXO said: “The CMA has found no competition concerns with the vast majority of the Wincanton business. Its focus is limited to a very small group of large and sophisticated companies, which will represent less than 10% of Wincanton revenue. This assessment is disproportionate for a business whose total revenue in 2024 exceeded £1.4bn and does not accurately reflect the totality of evidence presented.
“We disagree with the CMA’s initial assessment that GXO’s acquisition of Wincanton is likely to reduce competition in the supply of dedicated warehousing services to UK grocers. These companies have substantial pricing power, demonstrated ability to do this work themselves and the choice of a wide range of logistics players that are more than capable of servicing their needs.
“GXO and Wincanton are a pro-growth combination that will deliver efficiencies for UK businesses, reduce the overall cost to serve UK consumers and help make the logistics sector more effective and resilient. Further, there is no cost impact to UK customers or consumers from the transaction being approved in full.
“GXO has a long legacy of outstanding performance for customers in the UK and we believe the case for unconditional clearance is strong. We will present our response to the CMA at our upcoming hearing in March and continue to work towards full clearance of the transaction by the end of April.”
NAM Implications:
- The key issue is:
- If the deal is allowed to proceed…
- …what will happen re shelf prices rising, despite assurances?
- i.e. What guarantees will be put in place…
