FTC stymies Staples-Office Depot merger

The Federal Trade Commission has blocked a long-planned merger between stationery retail giants Staples and Office Depot on grounds the deal would diminish competition.

In an announcement overnight the FTC says the $6.3 billion deal would violate antitrust laws by significantly reducing competition in the nationwide market for consumable office supplies sold to large business customers.

“The commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” said FTC chairwoman Edith Ramirez.

“The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers.”

It’s almost 20 years since a Staples-Office Depot merger was last attempted – at that time the FTC blocked the deal on the grounds the two retailers’ footprints overlapped and a merger would reduce choice for customers.

The latest merger – more than a year in planning already – will now go to court with an administrative trial scheduled for May 10.  

In a statement, the two companies said they will demonstrate that the FTC’s decision is based on a flawed analysis and misunderstanding of the intense competitive landscape in which Staples and Office Depot compete.

“This merger creates an unparalleled opportunity to better serve customers of Staples and Office Depot,” said Ron Sargent, Staples chairman and CEO.

“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 CEO of Office Depot, added: “The combination of Staples and Office Depot is based on creating an organisation 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.”

Staples and Office Depot said they intend to show that the FTC underestimates the disruptive effect of new competitors in the digital economy and ignores the vigorous competition Staples faces from numerous competitors, including office products dealers, manufacturers selling office supplies direct to business customers, dealers in adjacent categories, cooperatives of regional players, Internet resellers, big-box chains and club stores.

Even though Staples and Office Depot disagree with the FTC’s interpretation of the competitive landscape, the companies had proposed divesting more than $500 million in commercial business in an effort to complete the transaction.

“This combination is good for customers. It’s good for shareholders, and it’s good for both companies,” said Sargent.

“We intend to complete this transaction and to provide our customers with the lower prices and better service that they deserve.”

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