The Competition and Markets Authority (CMA) has found that GXO’s purchase of logistics company Wincanton may reduce competition in the supply of warehousing services to UK supermarkets.
This comes as GXO Logistics announced the planned purchase of Wincanton in April 2024. The merger was halted while the CMA completed a review, with the independent inquiry group’s initial assessment finding that GXO’s purchase of Wincanton is “likely to reduce competition in the supply of dedicated warehousing services to grocery customers in the UK”.
In its assessment, the CMA highlighted that GXO and Wincanton are currently two of the three suppliers of dedicated warehousing services used by grocers in the UK. The group considered that some alternatives would remain for supermarket customers following the transaction, in particular they could switch to the third supplier, DHL, and some could switch some of their activities to their own in-house warehouses.
The inquiry group’s initial assessment, however, is that these remaining alternatives would not be sufficient to prevent fees rising and that the deal could raise costs for grocers that rely on dedicated warehousing services as part of their logistics.
Richard Feasey, chair of the independent inquiry group, said: “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.
“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.”
GXO and Wincanton merger a “pro-growth combination”
A spokesperson for GXO said: “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.
“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 £1.4 billion and does not accurately reflect the totality of evidence presented. 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.“
According to the GXO spokesperson the case for unconditional clearance was “strong”. GXO will present its response to the CMA at its hearing in March, while continuing to work towards clearance of the transaction by the end of April.
