Staples and Office Depot have chosen to forgo the planned $6.3 billion merger after a federal judge issued an injunction blocking the deal.
The Federal Trade Commission (FTC) requested the injunction on the grounds that the merger could potentially violate antitrust laws. They argued that this merger could reduce competition for nationwide contracts for office supplies.
They also alleged that the merger would mean higher prices and fewer options for big companies who purchase office supplies in bulk. This of course would produce a trickledown effect and the inflated prices and poor quality would affect the average consumer.
Debbie Feinstein, who heads the competition bureau at the FTC, said the ruling “is great news for business customers.”
“This deal would eliminate head-to-head competition between Staples and Office Depot, and likely lead to higher prices and lower-quality service for large businesses that buy office supplies,” she said in a statement.
The defense lawyers representing Staples and Office Depot argued that the companies needed to combine to contend with Amazon.com Inc. and its year-old Amazon Business unit. They claimed the merger would make the company more efficient and allow it to pass on lower prices to consumers.
They claimed that the merger was in no way anticompetitive.
U.S. District Judge Emmet G. Sullivan agreed with the FTC.
“There is a reasonable probability that the proposed merger will substantially impair competition” as the FTC had alleged, the Judge wrote in the order explaining his ruling.
The judge also agreed that regulators succeeded in showing that blocking the merger would be in the public’s best interest
Staples is the largest “big box” office supply chain and Office Depot is number 2. If the two companies were to merge they would create an unrivaled giant. Together both companies would become the national suppliers of pens and printer paper, effectively creating a monopoly in that market.
Monopolies harm consumers.
A monopoly’s potential to raise prices indefinitely is what is most detrimental to consumers. Because it has no industry competition, a monopoly’s price becomes the market price. Customers cannot substitute a cheaper product or service as there are no other alternatives available.
The judge determined that this merger would grant the new Staples the power to monopolize and control this market and would ultimately hurt consumers.