Corporate supply contracts between suppliers and their largest customers were a major focus of the questions.FRAMINGHAM – For the third time, Staples is making a bid for Office Depot. In late summer, the FTC reportedly sought sworn statements from participants in the office supply business about the deal's impact on their business. "Office supply customers are willing to consider smaller competitors because office supplies are not really a core input of their business." and they do that among many different suppliers," Staples' chairman and CEO Ron Sargent said during his company's second-quarter earnings call on Aug. "If you look at all office supplies customers, they routinely split their purchase of the office supplies. Unhindered by any meaningful competition from Internet or general retailers in the market for national customers, the Staples-Office Depot combination would be able to unilaterally raise prices it charges those clients, the watchdog group argued.Īmazon is unlikely to operate an office supply business itself but will simply make its platform available to third-party vendors that don't have the wherewithal to negotiate deep discount deals with office product suppliers, he said.Įxecutives of the merging companies have countered that their large national customers divide their business among numerous suppliers and that there is no single source that their big clients rely on. The biggest threat to competition posed by the transaction, the AAI argued, is reducing the number of suppliers to large multiregional or national companies that purchase offices supplies on an enterprise-wide basis. The American Antitrust Institute, a consumer watchdog that favors strong competition enforcement, has argued that the FTC should go much further than Staples' offer and should consider blocking the transaction. Staples must accept FTC-ordered divestiture of assets that account for up to $1.25 billion of Office Depot's 2014 revenue in the U.S. Nevertheless, he said the FTC would have a hard time justifying a challenge to the deal.Īlthough the OfficeMax transaction was approved with no conditions, Staples has anticipated concern by the FTC and agreed to accept some conditions on the Office Depot buy if the commission insisted. With that target date nearing, investor trepidation over the merger's fate is understandable, said Andre Barlow, partner at antitrust firm Doyle, Barlow & Mazard. The companies agreed not to close the merger before 45 calendar days expire, which would be Oct. 28, the big box office retailers certified substantial compliance with the FTC regarding a second request for information received in March. Office Depot's shares are trading at a roughly 37% discount to Staples' offer. With an FTC ruling on the merger expected in only a few weeks, Office Depot shares still trade at a large discount to Staples' offer, a sign the market believes the deal still faces major hurdles winning commission approval. "Significant developments in the market for consumable office supplies have led us to approve a merger when we had blocked a similar merger 16 years ago," the FTC said at the time.īut no matter how cut-and-dry the FTC's reasons for letting big box office suppliers merge in the Internet age, the market has doubted that the commission will let Staples have its way. Report, discount clubs like Costco ( COST) - Get Costco Wholesale Corporation Report and even general retailers like Wal-Mart ( WMT) - Get Walmart Inc. Serious competition was now coming from online outlets like Amazon ( AMZN) - Get, Inc. No longer was the business dominated by specialty retailers with huge brick-and-mortar locations. 1, 2013, closing statement explaining the approval of the OfficeMax takeover with no conditions, the FTC found that since its successful challenge to Staples' 1997 attempt to buy Office Depot, the office supply business had changed dramatically.
That's because the commission, in approving the combination of Office Depot and OfficeMax only six months before, seemed to have provided a clear path for the merger of the only two remaining major retailers of office products.
Indeed, chances for winning Federal Trade Commission approval for the $6.3 billion combination of Staples and Office Depot ( ODP) - Get ODP Corporation Report look great, at least on paper.
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