FTC Sues to Block Staples’ Acquisition of Office Depot
The U.S. Federal Trade Commission (FTC) reports that it’s filed an administrative complaint charging that Staples, Inc.’s proposed $6.3 billion acquisition of Office Depot, Inc. would violate U.S. antitrust laws by “significantly reducing competition nationwide in the market for ‘consumable’ office supplies sold to large business customers for their own use.”
Office Depot had announced in February 2015 that it would seek to acquire Staples for $6.3 billion.
In its complaint, the FTC says that Staples, which is based in Framingham, Massachusetts, is the world’s largest seller of office products and services, – and Office Depot, based in Boca Raton, Florida, are each other’s closest competitors in the sale of consumable office supplies 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.”
According to the complaint, many large business customers buy consumable office supplies for their own use under a contract. In addition to a wide range of office supplies at competitive prices, the vendor provides them with fast and reliable nationwide delivery, dedicated customer service, customized online catalogs, integration of procurement systems, and detailed utilization reports. That business-to-business market is distinct from the more competitive retail markets for office supplies sold to consumers.
Consumable office supplies include items such as pens, pencils, notepads, sticky notes, file folders, paper clips, and paper used for printers and copy machines.
The complaint alleges that, in competing for contracts, both Staples and Office Depot can provide the low prices, nationwide distribution, and combination of services and features that many large business customers require. The complaint further alleges that, by eliminating the competition between Staples and Office Depot, the transaction would lead to higher prices and reduced quality. The complaint also asserts that entry or expansion into the market – by other office-supplies vendors, manufacturers, wholesalers, or online retailers – would not be timely, likely, or sufficient to counteract the anti-competitive effects of the merger. Finally, the complaint asserts that purported efficiencies would not offset the likely competitive harm.
The FTC has authorized staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding.
Throughout its investigation, the FTC says its staff cooperated with staff of the antitrust agencies in Australia, Canada, and the European Union. The Canadian Competition Bureau has also filed an application to block the transaction with Canada’s Competition Tribunal earlier today.
The FTC Commission votes to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction in federal court were both 4-0. The administrative trial is scheduled to begin on May 10, 2016.