WASHINGTON, Dec. 7 (UPI) — Federal regulators on Monday issued a formal challenge to a proposed $6 billion acquisition of office supply chain Office Depot by Staples, stating that the deal would illegally stifle competition in the marketplace and drive prices up on consumers.
The Federal Trade Commission announced its opposition to the merger in a statement Monday.
“The commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” FTC Chairwoman Edith Ramirez said.
Officials have said a deal between Staples and Office Depot, the two largest office supply retailers in the United States, would be worth $6.3 billion.
Federal regulators believe that a merger of the industry’s two largest companies, which have in the past competitively bid for contracts, will almost certainly drive up prices for office supplies because it would remove the competition that keeps prices in check.
“By eliminating the competition between Staples and Office Depot, the transaction would lead to higher prices and reduced quality,” the FTC said in Monday’s news release.
The agency has sought a restraining order and preliminary injunction in federal court to prevent the merger. Canadian officials have also taken legal action to block the deal.
The FTC added that the entry of other potential competitors in the market would be insufficient to fill the void — a belief that Staples and Office Depot say regulators did not have two years ago.
Then, the companies said, the FTC ratified a deal between Office Depot and OfficeMax and said there was plenty of competition in the marketplace to keep prices low.
“The office products landscape has grown even more competitive since then,” a news release from Staples and Office Depot Monday said.
“We are confident that this transaction is consistent with the 2013 FTC statement in the Office Depot-Office Max merger and intend to pursue legal options in order to complete this transaction,” Office Depot CEO Roland Smith said.
The companies contend that regulators are using “flawed analysis” and are “misunderstanding” the conditions of their business landscape.
“This merger creates an unparalleled opportunity to better serve customers of Staples and Office Depot,” Staples CEO Ron Sargent said. “We’re committed to investing savings in lower prices for all customers.”
The FTC’s complaint now must be evaluated by an administrative law judge. That step is scheduled for May.
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