Fighting for their merger
This week began a federal court hearing where Staples and Office Depot are having to make their cases about whether a proposed merger of the two companies would be beneficial to or terrible for consumers. At the heart of the matter is one central question: are large corporations, such as Fortune 500 companies, likely to go shopping for their office supplies on Amazon?
FTC’s concerns
When we think of Staples and Office Depot, we often focus on the stores and consumer-facing websites, but it is their commercial supply businesses that are most lucrative. It is both retailers’ commercial supply business that concerns the FTC. Back in December, the FTC filed a lawsuit to block the merger arguing that a merged company would reduce competition nationwide in the market for “consumable” office supplies – pens, paper, sticky notes, etc. – sold to large business customers.
Staples CEO Ron Sargent and Office Depot CEO Roland Smith, sent out an open letter to customers three days before a hearing on the merger was set to start.
In the letter, both CEOs called the FTC “simply wrong” in wanting to stop the merger and argued the FTC’s findings are “based on a flawed analysis of the marketplace and a deep misunderstanding of the competitive landscape.”
“The FTC has cherry picked a few facts to fit its narrative and support its case,” the letter said. “In making its case, the FTC refuses to even acknowledge the rise of new competitors, such as Amazon, and the disruptive effects of the digital economy.”
Merger “necessary” to compete with Amazon
Now that the hearing is in progress, all parties are finally having their say. In Monday’s opening statements, the FTC shared emails from companies concerned that a mega-StaplesMaxDepot would enjoy monopoly power over the supply business and raise everyone’s prices.
The office suppliers argue that they have to merge or else face going out of business now that Amazon is aggressively going after the commercial office supply market. However, Amazon is new to the business-to-business office supply market and doesn’t have the entire infrastructure in place to include the largest corporations. On Tuesday, Prentis Wilson, vice president of Amazon Business, testified that his division isn’t yet the primary supplier for corporate business in the same way as Staples and Office Depot, but that they have hopes of bidding on large contracts in the next five years.
