News / GXO Wincanton deal could see supermarkets funded to invest in new 3PL

UK supermarkets could be given funding to invest in a 3PL as part of the competition remedies which would allow GXO to take over Wincanton.

The world’s largest pure-play contract logistics operator (PPCLO) GXO has put two alternative potential remedies in front of UK regulators to help get its acquisition of Wincanton over the line.

The Competition and Markets Authority (CMA) has been holding up the £960m deal over concerns it would lead to a substantial lessening of competition in the country’s supermarkets and grocery sector.

In response, GXO submitted two possible alternatives: the Divestment Remedy Proposal; and 3PL Sponsorship Remedy Proposal.

Noting that GXO had indicated the latter was its preference, the CMA explained the 3PL Sponsorship proposal had two aspects – a financial fund, “available to each customer currently serviced by either of the parties for the purposes of sponsoring the entry or expansion of a new 3PL to supply dedicated warehousing to UK grocery customers”; and contract term guarantees to existing customers and a commitment to offer new customers those same terms.

According to the publicly available detail in GXO’s submission, the company would offer “a financial fund to each of GXO’s and Wincanton’s grocery customers, strongly incentivising and enabling them to invest in helping a 3PL develop its operations to a point, within the next two years, where that grocery customer regards the 3PL as a credible provider of dedicated warehousing contract services”.

Meanwhile, the Divestment Remedy Proposal would see the sale of Wincanton’s grocery contract logistics operations “to a CMA-approved 3PL purchaser”, which “therefore removes – through a targeted customer disposal – the entire overlap between the parties in the provisional SLC customer cohort”.

The CMA did not comment directly on the proposals, although it did note more generally that its preferred approach to remedies “is to use enabling measures that ‘work with the grain of competition’, such as access remedies, and measures that remove obstacles to competition, rather than measures that control market outcomes, such as price caps”.

It added: “The latter measures tend to be onerous to operate and monitor, may create significant market distortions, and do not address the causes of an SLC.”

A GXO spokesperson told The Loadstar: “We are pleased that the CMA’s interim report found no competition concerns with the vast majority of the Wincanton business and we continue to work towards full clearance of the transaction.

“As required by the CMA process, we have in parallel filed a remedy proposal which addresses the CMA’s concerns which are limited to a handful of grocery customers.

“The proposal does not preclude unconditional clearance. If ultimately required, these would be effective and proportionate solutions to address the CMA’s area of concern.

“This a necessary procedural step to ensure we reach a favourable outcome for our customers, colleagues and investors.”

Comments on the deal can be submitted to the CMA until close of business on 18 March.