Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: AAI applauds FTC decision to challenge Staples/Office Depot merger, (Dec 9, 2015)
Organizations Mentioned:American Antitrust Institute | Staples, Inc.
By Michael Menzhuber, J.D., LL.M.
The American Antitrust Institute (AAI) has commended the FTC for its decision to challenge Staples, Inc.’s proposed $6.3 billion acquisition of Office Depot, Inc. The companies represent the two remaining office supply superstores in the United States, the AAI said in an announcement yesterday.
The FTC’s complaint was consistent with the analysis of an AAI white paper, which concluded that Staples and Office Depot dominated the market for large contract customers and that many of the large business customers have no viable alternatives. The white paper urged scrutiny of the competitive impact of the transaction on national and multi-regional businesses that buy office supplies through negotiated long-term contracts.
According to the AAI, the case bears many similarities to the landmark Sysco-US Foods case, in which the FTC successfully enjoined the proposed combination of the national broadline foodservice distributors. In siding with the FTC, the federal district court in Washington, D.C. cited the merged firm’s ability and incentive to “profitably target a subset of customers for price increases” as an appropriate basis for enjoining the merger.
The AAI has been chronicling the side effects of increasing concentration across a range of industries and the difficulties it has posed for merger enforcement, including in crafting remedies. Like the Sysco-US Foods deal, the Staples-Office Depot deal is in a market already so concentrated that the parties apparently struggled to identify viable buyers for purposes of crafting a divestiture remedy, the AAI noted.
AAI President Diana Moss referred to problems with divestiture remedies in the recent mergers of Safeway-Albertsons and Hertz-Dollar/Thrifty as growing evidence of the difficulty of fixing mergers in markets with only a few competitors. "Trying to use divestitures to facilitate entry or to prop up a smaller rival is risky and almost doomed to failure,” Moss said.
The American Antitrust Institute is an independent and nonprofit education, research, and advocacy organization devoted to advancing the role of competition in the economy, protecting consumers, and sustaining the vitality of the antitrust laws.
News: AcquisitionsMergers Antitrust FederalTradeCommissionNews