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Staples-Office Depot Merger In Limbo After FTC Action

The Federal Trade Commission (FTC) has moved to block Staples’ proposed $6.3 billion acquisition of Office Depot.

Following a unanimous vote, the regulatory agency filed an administrative complaint charging that the merger of the nation’s two largest office supply chains would violate antitrust laws by significantly reducing category competition within the b-to-b channel.

According FTC Chairwoman Edith Ramirez, uniting the channel’s two main suppliers will result in lower quality and higher prices for office products that are bought on contract by large businesses. The agency said it is seeking a temporary restraining order and a preliminary injunction in federal court to block the buyout, which was first announced in February.

The two chains intend to contest the FTC’s decision, which they said is based on “flawed analysis and misunderstanding of the intensive competitive landscape.”

In a statement, Staples chairman/CEO Ron Sargent said the merger would generate significant cost savings that will result in lower prices for all customers, and will allow the combined business to better compete with e-tailers, national discounters, direct-selling vendors, and regional co-ops. Staples has projected “net synergies” of more than $1 billion over a three-year integration period as the merged business “aggressively reduces global expenses” and closes redundant stores.

Sargent said the FTC’s move contradicts the agency’s own findings in approving Office Depot’s 2013 merger with then No. 3 office supply chain OfficeMax, when it described the marketplace as highly competitive.

He also confirmed a report that the FTC had rejected an offer by Staples and Office Depot to divest more than $500 million in commercial business.