Staples, Office Depot Merger Blocked Again

The Federal Trade Commission filed an administrative complaint Monday to block a $6.3 billion merger between Staples and Office Depot, arguing that the deal would significantly reduce competition in the 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 Edith Ramirez, FTC chairwoman, in a media release. “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 businesses buy consumable office supplies such as pens, pencils, notepads, sticky notes, file folders and paper clips for their own use under a contract. In competing for contracts, the complaint states “both Staples and Office Depot can provide the low prices, nationwide distribution and combination of services and features that many large business customers require … By eliminating the competition between Staples and Office Depot, the transaction would lead to higher prices and reduced quality.” The FTC voted 4-0 to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction in federal court. The administrative trial is scheduled for May 10, 2016. In an open letter to customers Monday, Staples and Office Depot stated that they plan to fight to complete this transaction, claiming “the government’s challenge, if successful, will hurt customers of both companies and jeopardize our ability to compete in a rapidly evolving marketplace.”The office supply chains also noted that the proposed merger would create an unparalleled opportunity to better serve consumers. “The combined company would generate significant savings from synergies, and we’re committed to investing these savings to enable lower prices for all customers. We will also use the savings to continue to invest in our people, technology and customer service,” the companies stated in the letter. When Staples entered into a agreement to fully acquire channel rival Office Depot in February, it was never clear that the deal would pass. The companies tried to join forces nearly 20 years ago, but were blocked by anti-trust regulators. However, the two office supply chains were hoping that the growth of competition in the form of mass merchants such as Walmart and online purveyors such as Amazon.com had changed the market enough to allow them to merge. Office Depot and OfficeMax were allowed to merge in 2013.

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