The CMA’s investigation 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). 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…..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 £16 billion 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
- GXO announced their deal to acquire Wincanton in February 2024. The deal was then completed in April 2024, although an interim enforcement order (IEO) is in place to prevent the two organisations integrating while the CMA conducts its merger review.
- CLS encompass a range of B2B and B2C supply chain-related services, which enable businesses to supply goods to customers and consumers. These services include transport and distribution, warehousing and additional value-added services.
- CLS in the retail market includes the provision of services to customers whose products are consumer-facing such as groceries or fashion and apparel. This includes products that are ordered online, products that sell quickly and have a short shelf life due to high consumer demand or perishability (known as Fast Moving Consumer Goods), and products that require temperature-controlled logistic services (including certain food and drink products). CLS in the non-retail market involves the provision of services to customers whose products or services are not consumer-facing, such as automotive, construction, energy and manufacturing businesses.
- The CMA found that customers often prioritise reputation, reliability and track record when choosing CLS providers. Despite there being other alternatives in the CLS market, GXO and Wincanton (alongside DHL) are regarded as leading suppliers of mainstream CLS services, particularly for grocery retail customers
cma decis to refer to phase2:
1.CMA has found that the acquisition by GXO Logistics, Inc. (GXO) of Wincanton plc (Wincanton) gives rise to a realistic prospect of a substantial lessening of competition (SLC) as a result of horizontal unilateral effects in the supply of mainstream contract logistics services (CLS) in the UK.
2. On 29 April 2024, GXO acquired Wincanton. The CMA refers to this acquisition as the Merger. GXO and Wincanton are together referred to as the Parties and, for statements relating to the future, the Merged Entity.
3. As the CMA has found that the Merger gives rise to a realistic prospect of an SLC, the Parties have until 8 November 2024 to offer undertakings in lieu of a reference (UILs) to the CMA that will remedy the competition concerns identified. If no such undertaking is offered, or the CMA decides that any undertaking offered is insufficient to remedy its concerns to the phase 1 standard, then the CMA will refer the Merger for an in-depth phase 2 investigation pursuant to sections 22(1) and 34ZA(2) of the Enterprise Act 2002 (the Act).
Who are the businesses and what products/services do they provide?
4. GXO and Wincanton both provide CLS including distribution and transport, warehousing, order fulfilment and other supply chain services to various types of customers.
5. The services that the CMA looked at in detail were the supply of mainstream CLS in the UK, comprising CLS to retail customers (eg fashion or groceries) and non-retail customers (eg public or chemicals) as this is the main overlap between the
Parties’ CLS activities.
The CMA believes that the Merger raises significant competition concerns as a result of horizontal unilateral effects in the supply of mainstream CLS. In particular:
(a) the Merger would materially increase the level of concentration in the market, with the Merged Entity and its two largest rivals accounting for a significant proportion of supply. The Merged Entity would become the largest mainstream CLS provider with a share of supply of [20-30]%, followed by DHL ([10-20]%), Culina ([10-20]%) and a tail of much smaller providers (all <5%)
(b) The Parties (along with DHL, and to a lesser extent, Culina) compete closely in the supply of mainstream CLS, particularly for larger retail customers with complex requirements (such as omni-channel retailers and those active in the groceries and fast-moving consumer goods sectors). A range of evidence, including tender data, customer evidence and internal documents suggests that these customers may have limited credible options and that both Parties are currently strong alternatives.
(c) Although there is a long tail of other mainstream CLS suppliers, many of these are very small, or specialise in supplying particular types of logisticsservice (eg transport) or particular industries (eg fashion and apparel). While the CMA has seen evidence that some of these suppliers constrain the Parties for particular types of opportunity, the evidence reviewed by the CMA at phase 1 does not suggest that individually or cumulatively they exert a sufficient constraint across the mainstream CLS market to prevent competition concerns from arising
(d) While a significant proportion of logistics are done by customers themselves (self-supply) the ability of customers to self-supply would impose only a weak competitive constraint on the Merged Entity as self-supply is not viable for a significant set of customers