AAI Backs FTC Decision to Block Staples/Office Depot

The American Antitrust Institute (AAI) applauds the Federal Trade Commission (FTC) for taking decisive action to avert the anticompetitive and anti-consumer effects posed by a merger of Staples and Office Depot, the only two remaining office supply superstores left in the United States. “The agency deserves enormous credit for protecting competition and consumers,” said AAI President Diana Moss.

Consistent with detailed analysis in an AAI white paper, the FTC’s complaint focuses on the business-to-business market for consumable office supplies. 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. AAI’s analysis showed Staples and Office Depot dominate this market for large contract customers, and many of these large customers have no viable alternatives.

The case bears many similarities to the landmark Sysco-US Foods case, where in June 2015 the FTC successfully enjoined the proposed combination of the national broadline foodservice distributors. The court sided with the agency, citing 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.

AAI Associate General Counsel Randy Stutz, who authored the AAI white paper, credited the agency for honoring the joint FTC/DOJ Horizontal Merger Guidelines. “You have to hand it to the FTC for consistency,” said Stutz. “It is holding firm to the conviction that competitive harm to targeted groups of customers will not be tolerated.”

The Sysco-US Foods and Staples-Office Depot deals were both in markets already so concentrated that the parties apparently struggled to identify viable buyers for purposes of crafting a divestiture remedy. “3-2 or 2-1 mergers in highly concentrated markets are generally unfixable,” explained Moss. “Trying to use divestitures to facilitate entry, or to prop up a smaller rival is risky and almost doomed to failure.” Moss cited 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.

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.

Media Contacts:
Randy Stutz, Associate General Counsel, American Antitrust Institute
(202) 905-5420

Diana Moss, President, American Antitrust Institute