Sixteen years after Federal Trade Commission lawyers scored a landmark courtroom win to block the merger of Office Depot Inc. and Staples Inc., the agency today allowed the merger of Office Depot and Office Max Inc. to go forward without conditions. The market for office supplies, the agency explained, has changed greatly.
The FTC found that the $1.2 billion Office Max merger, which combines the second and third largest office supply superstores, "is unlikely to substantially lessen competition in the retail sale of consumable office supplies," and voted 4 – 0 to close its six-month investigation without taking action.
New competition from stores such as Target, Walmart and Costco, as well as Internet office supply retailers has reshaped the competitive landscape for the industry, the FTC found.
In 1997, when the agency brought the Staples case, it successfully argued that office superstores were a distinct market, and used pricing data to show that consumers paid more in areas where the superstores didn’t compete.
That’s no longer the case. FTC staff “replicated the type of econometric work performed in Staples” as well as additional analysis, the FTC reported. None of it showed the current merger was likely to raise prices, according to the agency, citing “overwhelming evidence.”
“Our decision highlights that yesterday’s market dynamics may be very different from the market dynamics of today,” the FTC said. “Significant developments in the market for consumable office supplies have led us to approve a merger when we had blocked a similar merger sixteen years ago.”
Simpson Thacher & Bartlett partners Matthew Reilly and Kevin Arquit represented Office Depot, and Dechert partners Paul Denis and James Fishkin represented Office Max.
“The commission decision’s to clear the OfficeMax/Office Depot merger represents an important step forward in the analysis of retail mergers,” Denis said in a written statement. “Our integration of advanced empirical methods with ordinary course business practices will have broad ranging application in other retail sector deals.”