GXO faces regulatory showdown as UK CMA challenges Wincanton acquisition

The UK’s Competition and Markets Authority (CMA) has raised significant concerns over GXO Logistics‘ acquisition of Wincanton, warning that the deal could lead to reduced competition in the contract logistics sector. In an interim report, the regulator expressed doubts about whether sufficient competition would remain in the dedicated warehousing services market for UK grocery retailers if the merger proceeds unconditionally.

GXO, a Connecticut-based global leader in contract logistics services, announced its intention to acquire Wincanton, one of the UK’s largest supply chain providers, in February 2024. The deal was completed in April 2024, but an interim enforcement order remains in place, preventing integration until the CMA completes its review. The ongoing investigation is now in its Phase 2 stage, where regulators are conducting an in-depth analysis of the potential competitive impacts of the acquisition.

How Could the GXO-Wincanton Merger Affect UK Grocery Logistics?

One of the CMA’s primary concerns is that the consolidation of GXO and Wincanton would significantly reduce the number of viable third-party logistics providers for supermarket chains. Currently, GXO and Wincanton are two of the three major suppliers of dedicated warehousing services to UK grocers, with DHL being the only remaining competitor of comparable scale.

The CMA’s inquiry group stated that while supermarkets could explore other logistics options, such as expanding in-house warehousing, these alternatives may not be sufficient to counteract the reduction in competition. The report suggests that if GXO gains control over a larger share of the UK’s contract logistics sector, the limited competition could drive up costs for grocery retailers, potentially affecting pricing and supply chain efficiency.

Richard Feasey, Chair of the CMA’s independent inquiry group, highlighted the importance of contract logistics in ensuring a stable and efficient food supply chain. He warned that the merger could weaken competition, raising costs for supermarkets that depend on dedicated warehousing services to stock shelves and manage supply chain operations.

Why Is the CMA Conducting an In-Depth Investigation?

The CMA initiated its Phase 2 investigation in November 2024 after GXO failed to propose acceptable remedies to mitigate regulatory concerns. The watchdog’s decision to escalate the probe was driven by the potential for a substantial lessening of competition in the logistics market, particularly in dedicated warehousing services for grocery retailers.

Phase 2 investigations involve a detailed market assessment by a specialist panel, which examines how a merger might impact pricing, service quality, and competition within the affected industry. The CMA is specifically analyzing whether the deal could create significant barriers for smaller logistics providers looking to expand, ultimately leading to fewer choices and higher costs for businesses relying on third-party contract logistics services.

The regulator is also reviewing other areas of contract logistics services, including shared warehousing and transport services, but has not identified significant competition concerns in those segments. However, its primary focus remains on the risk that GXO’s increased market share in dedicated warehousing services could give the company excessive pricing power over UK grocery retailers.

GXO Disputes CMA Findings, Defends Merger Benefits

GXO has strongly contested the CMA’s preliminary findings, arguing that the watchdog’s concerns are exaggerated and that the merger will not lead to higher costs for grocery retailers. The company stated that the CMA’s focus on dedicated warehousing services is disproportionate, as it accounts for less than 10% of Wincanton’s total revenue, which exceeded £1.4 billion in 2024.

In its response, GXO emphasized that UK supermarkets possess substantial bargaining power and have the ability to develop their own dedicated warehousing services or work with other logistics providers beyond Wincanton and DHL. The company also argued that the combination of GXO and Wincanton would generate efficiencies that ultimately benefit UK businesses and consumers, reducing overall logistics costs and enhancing supply chain resilience.

GXO further stated that there is “no cost impact to UK customers or consumers from the transaction being approved in full” and reiterated its commitment to securing unconditional clearance from the CMA. The company plans to present its case at a formal hearing in March and expects a final decision by the end of April 2025.

What Are the Broader Implications for the UK Logistics Industry?

The CMA’s scrutiny of the GXO-Wincanton merger comes at a time when consolidation in the contract logistics sector is accelerating, driven by rising demand for warehousing and supply chain efficiency. Industry analysts have noted that this case could set a precedent for future mergers in the logistics industry, particularly in sectors where a small number of dominant players control critical supply chain infrastructure.

Logistics consultant Richard Evans pointed out that while consolidation can enhance efficiency, it also risks reducing market competition, which could have long-term consequences for businesses reliant on third-party logistics services. He emphasized that allowing GXO to acquire Wincanton without conditions could create a dominant force in the market, making it more difficult for smaller logistics providers to compete.

The CMA’s decision is also significant in the context of ongoing supply chain challenges in the UK. Businesses across various industries continue to face logistics disruptions due to post-pandemic shifts, Brexit-related trade complexities, and geopolitical uncertainties affecting global supply chains. Ensuring a competitive logistics market is therefore critical to maintaining supply chain stability for retailers, manufacturers, and consumers.

What Happens Next in the CMA’s Review Process?

The CMA has invited interested parties to submit feedback on its interim findings by March 12, 2025. Following this consultation period, the regulator will conduct further analysis before issuing a final decision on whether the merger should be approved, blocked, or subjected to conditions to preserve competition.

While GXO remains optimistic that the deal will receive full clearance, the CMA’s concerns suggest that regulatory intervention is possible. Potential outcomes could include requiring divestitures, imposing behavioral conditions to prevent anti-competitive practices, or in a worst-case scenario for GXO, blocking the merger altogether.

With the UK logistics market undergoing rapid transformation, the final verdict on the GXO-Wincanton deal will be closely watched by industry stakeholders, businesses reliant on contract logistics services, and regulators assessing future mergers in the sector.