Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC, Canada Competition Bureau challenge Staples, Office Depot deal, (Dec 7, 2015)

By Greg Hammond, J.D.

Both the FTC and the Canada Competition Bureau are challenging Staples, Inc.’s proposed $6.3 billion acquisition of Office Depot, Inc. The two companies purportedly represent the largest sellers of office products and services and are each other’s closest competitors in the United States and Canada.

Staples announced the proposed acquisition in February 2015, claiming that the deal would generate a minimum of $1 billion of annualized cost synergies by the third full fiscal year after the deal closes. The FTC, however, filed an administrative complaint, claiming that the deal would significantly reduce competition across the United States in the market for “consumable” office supplies sold to large business customers for their own use.

Similarly, the Canada Competition Bureau filed an application with the Competition Tribunal, claiming that that the transaction would likely substantially lessen competition in the office products delivery business in Canada. If the deal were to close, Staples would account for more than 80 percent of sales of various office products in Canada, according to the Competition Bureau.

“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,” stated FTC Chairwoman Edith Ramirez. The FTC is consequently seeking a temporary restraining order and preliminary injunction to prevent the acquisition from moving forward pending the administrative proceeding.

John Pecman, Canada’s Commissioner of Competition, announced that there is currently no viable and effective remedy offer and that the Competition Bureau is therefore “seeking to block the merger to protect competition for Canadian businesses and organizations.”

Office Depot, Staples response. Office Depot and Staples released a joint statement, claiming that the companies will contest the FTC’s attempt to block the proposed deal. “This merger creates an unparalleled opportunity to better serve customers of Staples and Office Depot,” commented chairman and CEO of Staples, Ron Sargent. “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.”

Office Depot Chairman and CEO Roland Smith added, “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.”

EC investigation. The proposed merger is also under investigation by the European Commission, which has concerns that the takeover could lead to increased prices and less choice for consumers in the European Economic Area.

Companies: Staples, Inc.; Office Depot, Inc.

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