What A Difference 16 Years Can Make: FTC Approves Merger Between Office Superstore Giants Office Depot And Officemax

In 1997, most people thought of Amazon.com as mainly an online bookseller, you couldn't buy groceries at Wal-Mart or Target, and if you wanted floppy disks, VHS tapes, or a fax machine, you drove to your local Staples, OfficeMax, or Office Depot.

In light of developments in the office supply market in the last 16 years, the Federal Trade Commission ("FTC"), in a complete about-face from its successful 1997 challenge of the proposed merger of office supply superstores Staples, Inc. ("Staples") and Office Depot, Inc. ("Office Depot"),1 recently unanimously voted to close its seven-month investigation into the proposed $1.2 billion merger of Office Depot, Inc. and OfficeMax, Inc. ("OfficeMax").

FTC v. Staples

In its Statement closing the investigation into the proposed merger of Office Depot and OfficeMax, the Commission found that the competitive dynamics were very different than in the 16-year-old Staples case. In 1997, the FTC successfully obtained a preliminary injunction blocking the proposed merger of Staples and Office Depot (at the time two of the three largest office supply superstores), arguing that the deal would lead to competitive harm in the relevant product market — the "sale of consumable office supplies through office supply superstores."2 The Staples case was a notable victory for the FTC. In the two decades prior to Staples, the Antitrust Division of the Department of Justice and the FTC had brought few cases, instead choosing to negotiate consent settlements.3 Moreover, the antitrust agencies' win-loss records at the time could be described as mediocre, at best.4 When the Staples case went to court, stock market speculators and the national press were overwhelmingly of the position that the superstores would prevail and the government would lose its first big merger case of the 1990s.5

In Staples, the FTC used strategic plans and pricing information to show a distinct market for the sale of consumable office supplies through office supply superstores. By establishing that these superstores were a market unto themselves, the FTC was able to reduce the number of players from two to one in 15 cities and from three to two in 27 more cities.6 The FTC then presented pricing evidence, including internal Staples documents and Office Depot documents illustrating price comparisons, and showing that in geographic areas where three office supply superstores competed, prices were at their lowest; when two were present prices increased...