Staples is trying to salvage what now appears to be a doomed $6.3 billion merger with rival Office Depot by demonstrating to skeptical regulators that Amazon represents major competition.
The office supplies retailer last week filed a motion to compel Amazon to hand over more than the “15 heavily redacted documents” that it previously provided, in hopes of challenging the Federal Trade Commission’s block of its merger plans.
The FTC blocked the Staples/Office Depot plan in December, saying the deal would stifle competition in the business contracts side.
For a while there, it seemed like the Staples/Office Depot merger would go through. The FTC didn’t like the idea in 1997, when Staples and Office Depot first announced plans to merge; at that time, the agency cited evidence that prices of office supplies were lower in areas where both companies operated stores. In hopes of winning approval, both organizations agreed to sell 63 of their stores to third rival OfficeMax.
But things have changed. That these two companies agreed to merge not so long after Office Depot completed its own acquisition of rival OfficeMax is a testament to how much stiffer the competition has grown in the office supplies market thanks to the likes of Amazon, Wal-Mart and others.
It’s that increased competition from non-office supply retail that led many to believe that the FTC might bless the Staples/Office Depot union this time around. In fact, that was the FTC’s own stated reasoning when it allowed Office Depot’s acquisition of OfficeMax in 2013. “Our decision highlights that yesterday’s market dynamics may be very different from the market dynamics of today,” the FTC wrote.
But today it's not the retail side but the business supplies side that has emerged to trip up the deal. Antitrust watchdog advocates raised the issue over the summer, urging the FTC to take a close look. The European Union had similar concerns, but approved the merger last month after Staples agreed to sell of part of its business-contracts deals. The retailer has made a similar offer stateside.
It’s not clear whether the data from Amazon would do much to undermine the FTC’s stance, or, if it does, why it’s taken so long for Staples to present the court with the argument that Amazon's business contracts present plenty of competition in the space.
Staples CEO Ron Sargent said earlier this month that the retailer is working on a “Plan B” in case it isn’t able to prevail in its plans to merge with Office Depot. Speaking on a conference call, Sargent said the FTC has “an incredibly narrow” definition of Staples’ office supply business, adding that Staples has been mulling contingency plans including boosting sales of non-office supplies and shuttering more stores.
“Our commitment to the acquisition hasn’t changed," Sargent told analysts, the Boston Herald reports. "Our top priority is to get the deal done.”
In related news, Staples announced Tuesday morning it is renaming its B2B division Staples Business Advantage. The company also is rolling out Staples Easy System, an ordering platform giving business customers tools like voice commands, SMS and e-mail. Staples said the Easy System will consolidate orders from multiple employees and devices into one shopping cart, making it easier to manage and update orders.