FRAMINGHAM, MA—Citing what they see as "a flawed analysis and misunderstanding of the intense competitive landscape" in which they operate, Staples Inc. and Office Depot Inc. said Monday they would contest the Federal Trade Commission's move to block their merger. The FTC's 4-0 vote to file an administrative complaint challenging the merger on antitrust grounds marked the second time in two decades the commission had opposed a union between the two office-supply superstores.
"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," says FTC chairwoman Edith Ramirez. "The FTC's complaint alleges that Staples and Office Depot are often the top two bidders for large business customers." A merger would, among other results, effectively prevent other office supplies vendors, manufacturers, wholesalers or online retailers from expanding or entering the market, according to the FTC's complaint.
Countering the FTC complaint, Staples and Office Depot say 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. In particular, the FTC ruled that Staples and Office Depot faced "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 CEO of Staples, the world's largest office-supply retailer. "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." Adds Roland Smith, Sargent's counterpart at Office Depot, "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."
Framingham, MA-based Staples and Boca Raton, FL-based Office Depot said they intend to show that the FTC underestimates the disruptive effect of new competitors in the digital economy and ignores the competition Staples faces from numerous competitors. These include 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.
The FTC said Monday it would go to federal court to obtain a temporary restraining order and a preliminary injunction that would prevent Staples and Office Depot from consummating the merger and maintain the status quo pending the administrative proceeding. The administrative trial is scheduled to begin on May 10, 2016. An equivalent regulatory body in Canada, the Canadian Competition Bureau, similarly filed an application Monday to block the merger in that country. European regulators have not yet weighed in on the planned merger.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
