Staples, Office Depot To Contest FTC’s Challenge Of Office Depot Acquisition

Staples and Office Depot are contesting the Federal Trade Commission (FTC) challenge that Staples’ proposed $6.3 billion acquisition of Office Depot would violate antitrust laws by significantly reducing competition nationwide in the market for “consumable” office supplies sold to large business customers for their own use. Staples participates in the promotional products industry as distributor Staples Promotional Products (UPIC: AMER0016).

According to the FTC’s complaint, many large business customers buy consumable office supplies for their own use under a contract. That business-to-business market is distinct from the more competitive retail markets for office supplies sold to consumers. The complaint alleges that eliminating the competition between Staples and Office Depot would lead to higher prices and reduced quality in the B2B market, and that entry or expansion into the market by new parties would not be sufficient or timely enough to counterbalance the merger.

Staples and Office Depot will contest the decision in court, stating that the FTC’s decision is based on a flawed analysis and misunderstanding of the intense competitive landscape in which the companies compete. The companies have noted that the FTC’s decision to contest the merger contradicts its own unanimous ruling in the Office Depot-OfficeMax merger in 2013, in which the commission declared the market highly competitive. At the time, the FTC ruled that Staples and Office Depot face “strong competition” from “a host” of competitors.

“This merger creates an unparalleled opportunity to better serve customers of Staples and Office Depot,” says Ron Sargent, chairman and chief executive officer of Staples. “The combined company would generate significant savings, and we’re committed to investing savings in lower prices for all customers. We’ll also use the savings to continue to invest in our people, technology and customer service.”

Roland Smith, chairman and chief executive officer of Office Depot, adds, “The combination of Staples and Office Depot is based on creating an organization able to compete in a vibrant market with strong regional players and powerful new national entrants. We are confident that this transaction is consistent with the 2013 FTC statement in the Office Depot-Office Max merger and intend to pursue legal options in order to complete this transaction.”

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