“The FTC is simply wrong,” Staples and Office Depot heads assert.
Last month, Innovative Retail Technologies reported that a proposed merger was in the works between Staples Inc. and Office Depot Inc., which would mark a major step in consolidating the office supply retail market. The talks raised the eyebrows of antitrust regulators, however, leading the FTC to oppose the move.
Now, on the eve of the antitrust hearing which began March 21, Staples CEO Ron Sargent and Office Depot CEO Roland Smith have issued an open letter to customers on Friday slamming the Federal Trade Commission for taking action to block the proposed merger between the two companies. According to the FTC, the proposed merger would violate federal antitrust laws by “substantially reducing competition in the retail sale of supplies by office supply superstores” across the country.
The FTC stated, "Staples and Office Depot are the two largest operators of office supply superstores in the country," said William J. Baer, Director of the FTC’s Bureau of Competition. "The fact is that in those communities where Staples faces competition from Office Depot, prices are significantly lower than where it does not. Therefore, if this merger is allowed to proceed, in those areas, competition will be reduced or eliminated and consumers will pay higher prices."
In response, the letter from Ron Sargent, Chairman and CEO of Staples, and Roland Smith, Chairman and CEO of Office Depot, states that the FTC is basing its decision on "flawed analysis of the marketplace," and accuses the agency of having "cherry picked" facts to support its claim that the merger would stifle competition in the space, especially with regard to business contracts. In fact, the letter argues, “more than 99 percent of our commercial customers will be, at worst, unaffected by the merger. In reality, these customers and all others will benefit directly from the merger’s cost savings and resulting lower prices.”
The letter also cites rising competition from Amazon, arguing that the FTC has failed to consider the "disruptive effects of the digital economy" on the office supplies space.
Ultimately, the CEOs assert, “the FTC is simply wrong. The combination of Staples and Office Depot is good for customers. This has been a long and frustrating road but we look forward to a fair and impartial hearing.”
A previous attempt at a merger in 1997 was also rejected by the FTC, which cited evidence that prices of office supplies were lower in areas where both companies had stores.
