FTCs 63B Denial Counterproductive

By Annie Dike, Esq.

Imagine if there were only one supplier who provided every single product you needed ─ from food to toiletries to reading materials to office supplies. You simply ordered them online and they arrived by drone the same day. That may be where things are headed. Where might this begin? With the fall of office supply giants, Staples and Office Depot.

Okay, perhaps that’s a bit overly dramatic. But, it’s not impossible. And it’s not improbable. The FTC’s recent injunction stopping the $6.3B merger between Staples and Office Depot may, in the long run, prove to be a step in the anti-competitive direction. While the FTC shut down a proposed merger between Staples and Office Depot back in 1997, the two companies argue since then they have suffered significant losses in the face of competition from standard national chain retailers that do not specialize in office supplies but offer them anyway at highly-affordable rates (Wal-Mart, Target, and the like). When the online retail giant Amazon stepped into the mix announcing its plans to expand its Amazon Business unit and offer free two-day shipping for orders of $49.00 or more on office supplies, Staples and Office Depot proposed a merger to keep both companies healthy and competitive.

The argument really does make sense. No matter how many stores both Staples and Office Depot may boast nationwide after the merger, they are still only physical locations in a select number of cities, while the internet is everywhere. It’s pervasive. It’s like Office Depot on your desktop. Who can compete with that? The FTC, however, saw otherwise. Using “selective documentation” to analyze the potential effect on competition from the merger, it found Staples and Office Depot were the only companies vying for large, national customers. The FTC promptly filed for a temporary restraining order to prevent the merger, which was recently granted with a preliminary injunction entered by the court. In order to assuage this concern, Staples offered to divest $500 million-plus in commercial contracts, but the FTC rejected this offer as well as a counter-offer to divest up to $1.25 billion. For whatever reason, the FTC seems dead-set against this merger. The trial is set for March 2016 and only time will tell, but it is interesting to ponder where decisions like this may lead.

Assume the merger falls through. Staples and Office Depot remain stand-alone companies jockeying for footing in a growing online world. You may say that they can sell office supplies online and ship them just as well as any other retailer. Can they? Can they afford to offer them at a rate lower than Amazon, with same-day free shipping for every staple, every time? Can they also offer affiliate links to help boost online sales with the same competitive commission split as Amazon? When you start to look at the reality of internet competition in this regard, you can start to envision the fall of many of the standard iconic stores we have grown accustomed to seeing in every city nationwide ─ the “staples” of the retail industry, so to speak.  We recently lost the widely-renowned Radio Shack ─ a company that was ninety-five years old with 4,000 stores nationwide ─ to stifling competition. While the merger may have been rightfully enjoined to prevent Staples and Office Depot from monopolizing the large commercial office supply market, if the result is the loss of smaller consumer business on a grand scale, Office Depot and Staples could face a grim fate. Then who’s left standing? It’s not so far-fetched to believe it could be Amazon. If that were to happen, did the FTC rob Peter to pay Paul? Which scenario has the greater risk for monopolization?

We want to hear from you. Do you agree with the FTC’s decision to thwart the merger because fewer companies means less competition or do you worry if struggling companies cannot “rally the troops” to stay in the game, they will fall in numbers? Which is the worse fate?  We certainly don’t envy the FTC’s grueling task of sorting out which mergers and acquisitions will hinder competition. We find experts who are specialize in that! Join the debate.


Annie Dike, Esq.

As a former trial and litigation attorney, Annie Dike has a keen eye for expert evidentiary issues and a clear voice for practical solutions.  Annie is a published author of both fiction, non-fiction, and a comprehensive legal practitioner's guide to hourly billing published by LexisNexis. Annie graduated from the University of Alabama School of Law cum laude.  While in law school, she served as Vice President of both the Bench and Bar Legal Honor Society and the Farrah Law Society and was a member of the Alabama Trial Advocacy Competition Team as well as Lead Articles Editor of The Journal of the Legal Profession.  Ms. Dike has published articles in The Alabama Lawyer and DRI MedLaw Update and has spoken on numerous legal issues at various conferences nationwide.

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