The Federal Trade Commission has taken the first step toward blocking the proposed $6.3 billion merger of Staples and Office Depot, saying the deal would hurt competition in the market for office supplies sold to large corporations.
The commission filed an administrative complaint charging that the merger between Massachusetts-based Staples, the world's largest seller of office supplies, and Florida-based Office Depot would violate antitrust laws.
"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," said FTC Chairwoman Edith Ramirez.
Many large business customers buy office supplies by contract, the FTC said. That provides them with a wide range of office supplies at competitive prices, fast and reliable nationwide delivery, dedicated customer service and customized online catalogs, among other things, it said.
"That business-to-business market is distinct from the more competitive retail markets for office supplies sold to consumers," Ramirez said.
The FTC blocked a merger between the companies in 1997, but the companies were hoping the changes in the market since then would persuade regulators to see this deal differently. Big-box stores and Internet retailers play a much bigger part in the business.
Staples and Office Depot issued a joint statement saying the FTC's vision of the office supply market is outmoded and "based on a flawed analysis and misunderstanding of the intensely competitive landscape in which Staples and Office Depot operate":
"The FTC underestimates the disruptive effect of new competitors in the digital economy. It also ignores the vigorous existing and expanding competition Staples and Office Depot face from numerous strong competitors, including office products dealers supported by large national wholesalers, manufacturers selling office supplies directly to business customers, dealers in adjacent categories, cooperatives of regional players, Internet resellers, big-box chains, and club stores."
In addition to the administrative complaint, the FTC has authorized its staff to seek an injunction against the merger. An administrative trial will begin on the FTC's complaint on May 10, 2016.
The FTC conducted its investigation with the Canadian Competition Bureau, which has also sued to block the merger.