The proposed merger of business retail giants Staples and Office Depot is in trouble. Federal antitrust regulators may block the deal, fearing an office supply monopoly.
Staples and Office Depot first proposed the merger back in February. In a previous Inquisitr report, the deal worth $6.3 billion at the time would involve Staples buying rival Office Depot. The new combined company would be a much stronger competitor to other retailers like Walmart and Amazon.
As reported by the New York Post, the multi-billion dollar merger of Staples and Office Depot has the Federal Trade Commission (FTC) concerned and could vote to block the deal entirely.
The FTC worries that a combined Staples-Office Depot would control too much of the market and stifle fair competition. The office supply behemoth would be the only office supply company for major corporations, as well as the U.S. government. As it stands now, all of the Fortune 1000 companies get their office supplies from either Staples or Office Depot.
Fortune reports that two of the four FTC commissioners dislike the deal and may vote against it. Reportedly, the two fear that a company of that size, with essentially zero competition, could too easily manipulate pricing.
To help sway the FTC in favor of the deal, Staples wants to transfer $600 million worth of contracts to the office supply wholesaler Essendant Inc. However, this may not completely satisfy regulatory concerns since Essendant would only be wholesaling to other smaller office supply stores for retail sale and not directly to end consumers.
The FTC isn’t the only potential roadblock to the Staples and Office Depot merger. The American Postal Workers Union (APWU) wants the deal stopped as well and may influence the FTC’s vote.
According to the APWU, a united Staples-Office Depot would have 14 times more combined sales than its nearest competitor. This potentially creates a “Godzilla” that would stomp any other office supply store into the ground.
APWU President Mark Dimondstein expressed the union’s opposition earlier this year.
“We will urge the Department of Justice and the Federal Trade Commission to block this monopolistic and unlawful merger now, just as they did 17 years ago. And we call on Congress to weigh in with the FTC and the Department of Justice to stop it.”
He went on to say that the merger would bring higher prices for consumers plus cause stores to close and people to lose jobs.
The union’s opposition to the deal is rooted in the fact that Staples has been offering mail services at its retail stores. As a result, the United States Postal Service (USPS) has since reduced employee hours and services in many post offices. Additionally, workers are supposed to encourage postal customers to shop at Staples for some mailing services.
“Staples is an anti-worker corporation, and we don’t want to see its reach expanded. We will vigorously oppose this merger. It’s bad for workers and bad for consumers,” said Dimondstein.
Staples and Office Depot tried to get together before, but were denied government approval. In 1997, the FTC stepped in and broke up an attempted merger of the two. Much like today, the deal was blocked due to concerns the new conglomerate would hurt retail competition.
In 2013, however, the antitrust watchdog had a different attitude. When Office Max and Office Depot merged, the FTC said consumer office supplies had changed since 1997 and decided they had no problem with the deal.
Now, it would seem that the FTC may be swinging the other way. So far, both companies have complied with all regulator requests for information, as required, to help determine the estimated market share once the two companies are combined.
The FTC’s four-member panel will announce their final decision early next week.
Antitrust regulators in China and New Zealand have already put their seal of approval on the Staples-Office Depot deal. Regulators in Europe are still looking at potential merger repercussions and are not expected to finish their review until sometime in March.
Neither Staples nor Office Depot has commented on the potential FTC block of the merger. Shares of both Staples and Office Depot fell nearly two percent in early trading yesterday.
[Photo by Scott Olson/Justin Sullivan/Getty Images]