GXO Logistics’ (GXO) purchase of Wincanton Plc could reduce competition in the logistics sector and raise prices for consumers, the UK’s watchdog has warned.
An initial probe by the Competition and Markets Authority (CMA) into the US firm’s £762m takeover of Wiltshire-based firm Wincanton earlier this year has now indicated 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.
This would hit consumers in turn, inflating prices in the retail sector, and the CMA has given GXO five working days to submit proposals to address concerns. If suitable proposals are not submitted, the CMA will progress to an in-depth phase two investigation.
GXO completed its acquisition of Wincanton in April this year and announced at the time that the two firms would continue to be run independently until the CMA had completed its review, as is customary.
GXO said at the time that the combination of its global reach and transformative technology with Wincanton’s footprint and proven expertise in the UK and Ireland would provide a wider range of services to new and existing customers across geographies.
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.
The CMA’s phase one investigation however 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, many of these are significantly smaller, or focus on specific industries or types of logistics services, such as transport.
The watchdog added that although some businesses have the option to bring services in-house if contract logistics suppliers do not offer good value, the ability to do this varies by customer.
Naomi Burgoyne, senior director of mergers at the CMA, said: “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.”
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.”
