GXO’s acquisition of Wincanton could reduce competition in contract logistics and raise costs for businesses in the sector, according to an investigation by the competition and markets authority (CMA).

The CMA said its phase 1 investigation found GXO Logistics’ completed purchase of Wincanton could reduce competition in the supply of mainstream contract logistics in the UK.

It said both companies compete closely, particularly for contracts with large retail customers, and although GXO would continue to face competition from other contract logistics providers, many of these were significantly smaller or focused on specific industries or types of logistics services.

In a statement explaining its findings, the CMA said: “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.

“GXO has five working days to submit proposals to address the CMA’s concerns,” it added.

“If suitable proposals are not submitted, the CMA will progress to an in-depth Phase 2 investigation.”

GXO, the world’s largest contract logistics services company, announced its deal to acquire Wincanton in February this year and it was completed in April.

However, an interim enforcement order is currently in place to prevent the two organisations integrating while the CMA conducts its merger review.

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 £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, 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,” the spokesperson added.

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