FTC Closes Investigation Of Merger Of Office Depot And Officemax Office Supply Superstores

The Federal Trade Commission (FTC) has closed its seven-month investigation into the $1.2 billion merger between Office Depot, Inc. and OfficeMax, Inc., the second and third largest "office supply superstores" in the country. The FTC's decision is of particular interest given the FTC's 1997 successful challenge of a similar proposed merger between Staples, Inc. and Office Depot, then the nation's largest office supply superstores. FTC v. Staples, 70 F.Supp. 1066 (D.D.C. 1997). The agency's decision to close its Office Depot-OfficeMax investigation was based on changed circumstances over the last sixteen years. According to the FTC, "the market for the sale of consumable office supplies has changed significantly" due to the proliferation of mass merchants and club stores and the "explosive growth" of online commerce. In short, the evidence of potential anticompetitive effects that caused the FTC concern in 1997 simply was absent in 2013.

FTC v. Staples

In September 1996, Staples and Office Depot announced plans to merge the two companies. In May 1997, the FTC obtained a preliminary injunction from United States District Court for the District of Columbia. While a combined Staples-Office Depot would have had only a 5.5% share of all sales of consumable office supplies, the FTC pushed to define the relevant product market as the sale of consumable office supplies through office supply superstores, in which there only three significant players. According to the FTC, both qualitative and quantitative evidence supported this narrow market definition. The FTC relied heavily on econometric evidence that demonstrated that prices were higher in areas where one office supply superstore did not have a nearby superstore competitor. Company documents explicitly confirmed this finding, revealing an intense competitive focus on other superstores and a general lack of concern with other types of suppliers, and these undoubtedly were persuasive to the district judge. The FTC also heard numerous, credible customer complaints about the proposed Staples-Office Depot deal. Recognizing that the case "hinges on the proper definition of the relevant product market," the district court accepted the FTC's narrow market definition - "the sale of consumable office supplies through [office supply superstores]" - and determined that the merger would reduce the number of competing superstores from three to two, and even from two to one in many local areas. The parties...