The Staples-Office Depot Merger Is Dead

Image courtesy of Mike Mozart and frankieleon

The opinion issued today by U.S. District Court judge Emmet Sullivan doesn’t actually say that the country’s biggest office supply chain, Staples, can’t acquire the #2 office supply chain, Office Depot. As the Federal Trade Commission requested, the judge granted a preliminary injunction stopping the merger. That prevents the companies from merging until the FTC is done with their administrative antitrust case, but representatives of the two companies previously said that they would break the engagement if the FTC prevailed.

In hearings a few weeks ago, the two office supply stores didn’t even bother to put up a defense, claiming that the FTC’s case was weak and the judge should simply let Staples go ahead and acquire Office Depot already.

The FTC’s antitrust case didn’t have much to do with the concerns of regular consumers: we, after all, can go buy our pens and notebooks and printer cartridges in warehouse or discount stores, or order them up from Amazon. Their concern was with the companies’ commercial business keeping big and small companies and wholesalers in paper clips and office furniture. That’s different from selling office supplies to consumers, since it requires bidding on contracts and generating invoices.

There are no effective national competitors in that sector, the FTC argued, since most suppliers are regional. While Amazon has been developing business-to-business sales, their operation is tiny in comparison. Could it compete with a merged Staples and Office Depot someday? Sure, an Amazon executive explained in testimony that wasn’t made public, but they aren’t prepared to do so now. The companies proposed selling a portion of their commercial office supplies business to a competitor that would like to have more of a national presence, but that divestment offer didn’t do much to convince the FTC or the judge.

Judge Sullivan ultimately decided that a merger of Staples and Office Depot wouldn’t be good for the customers who actually matter, writing, “there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large Business-to-Business customers.” While the merger would have affected retail consumers, ultimately we weren’t all that important.

Judge’s Order [PDF]