Why Didn’t Staples And Office Depot Bother With A Defense Against The FTC?

Image courtesy of Mike Mozart and frankieleon

On Tuesday evening, a federal judge in Washington, DC issued a preliminary injunction preventing the merger of Staples and Office Depot. The two companies called off their merger after that, but here’s the thing about the hearing: the FTC presented its case against the formation of an international office supply Voltron, but the stores decided not to put up a defense. In hindsight, that seems like a terrible idea. Why would they do that?

The Wall Street Journal proposes one likely explanation: not presenting their case meant that neither company’s CEO had to sit on the witness stand and be cross-examined by the FTC’s attorneys.

Their argument for the merger was that the two remaining office supply chains need to consolidate so they can compete against online vendors like Amazon. Part of the FTC’s case involved questioning the respective CEOs of Staples and Office Depot about how much the two companies compete now, even if their reason for merging was to fend off competition from Amazon’s commercial supply division in the future.

The companies’ attorneys did plan to mount a defense, even submitting witness lists and preparing to present in court. Ultimately, they argued to the judge that the FTC’s antitrust case was weak, and that they didn’t need to defend against it. That was a calculated risk, and it ultimately didn’t pay off.

While the judge had issues with parts of the FTC’s case and even made public part of the transcript when he believed that the agency’s attorneys had pretty much told an Amazon executive what to say, ultimately the judge decided to block the merger.

Blocked Merger of Staples, Office Depot Shines Spotlight on Legal Tactic

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