Staples Merger: Does Confidence Remain Strong For Go Ahead ?

Staples merger

Staples and Office Depot have confirmed “substantial compliance” with the FTC’s “Second Request” for information

As the Federal Trade Commission’s (FTC) continue to determine whether Staples’ acquisition of Office Depot can go ahead, both parties remain confident that the deal will be approved by the end of the year.  Yet doubts still remain amongst analysts and business insiders as to whether the merger will still go ahead, particularly after the Sysco ruling earlier this year which was covered in our article, Staples Merger in Doubt after Sysco Ruling.

Impact On Customer Choice

At the end of August, Staples and Office Depot confirmed that they have “substantially” complied with the FTC’s “Second Request” for information. The FTC has not yet confirmed compliance and both parties have agreed not to close the merger until at least 45 days after each company has certified its compliance. The original acquisition date for the deal to go through was 4th November but this could be extended to February 2016 if antitrust approval is still outstanding.

Staples CEO and Chairman, Ron Sargent stated:”We are pleased to have completed our submission of documents and information to the FTC in connection with the Second Request. We will continue to work closely with the FTC, and we look forward to completing the transaction.”

The FTC is currently still considering whether the Staples merger will have an adverse effect on customer choice. Whilst B2C customers would still be able to buy their office supplies from an array of retailers including Amazon and Walmart, B2B customers would not have the same options. According to research from the Cleveland Research Company, the deal would see Staples/Office Depot with 80% of the corporate market share in the US alone.

Is Amazon A Valid Competitor?

amazon business

Staples argue the emergence of Amazon into the market shows that competition is strong

The emerging competitor in the office supplies market, Amazon.com is welcoming the merger.  According to the New York Post, Amazon has been using intermediaries to connect with FTC regulators to support the deal. Having launched Amazon Business earlier this year, discussed in our previous article Case Study: How Amazon Is Impacting The Office Supplies Market, the company sees having just one main competitor to deal an easier proposition than having to contend with two separate rivals.

Staples has also been arguing strongly that the emergence of Amazon into the market shows that competition is strong. Ron Sargent has been stridently pointing out Amazon’s impact on the market over recent weeks calling Amazon, “A very strong competitor for us in retail.com and in our contract business,” and “a significant threat to the B2B office products industry.”

Antitrust analysts remain to be convinced by this, Randy Stultz, the associate general counsel for the America Antitrust Institute states: “We see a lot of reasons to doubt whether there are any other competitive alternatives out there.”

He is sceptical about Amazon being a valid alternative for large B2B buying under contract sales.

“If Staples and Office Depot are the only two companies capable of serving these large customers, and there are no other alternatives out there that would discipline the merged firm in order to prevent a price increase post merger, you get a very serious competitive problem.”

Sam Rose