A major logistics deal that saw US giant GXO buy British company Wincanton earlier this year “could raise prices for business customers”, a CMA investigation found.
The Competition & Markets Authority found in its first stages of investigating the £760m takeover deal that it could reduce competition in the mainstream contract logistics services market.
US-based warehousing firm GXO Logistics bought Wincanton, which has for decades been the leading supply chain partner for Britain’s grocery industry, for £762m in April.
The watchdog launched an investigation into the deal in early September, and an interim enforcement order is in place to prevent the two companies from merging while the CMA conducts its review.
The CMA said the two companies competed closely in the logistics, transport and warehousing sectors – particularly for contracts with big grocery, fashion and apparel retailers – and that the merger could lead to reduced market competition and therefore result in higher costs being ultimately passed down to consumers.
A statement on Friday said: “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).
“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.
“The CMA is therefore concerned 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.”
A GXO spokesperson said in response to the findings: “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.”
GXO now has a week to submit proposals to address the CMA’s concerns.
Naomi Burgoyne, senior director of mergers at the CMA, added: “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.”
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