On Monday, the Federal Trade Commission moved to block a buyout by Staples of their chief rival Office Depot. The proposed $6.3 billion merger may break anti- trust laws and stifle competition according to the FTC.
On Monday the Federal Trade Commission (FTC) moved to block a $6.3 billion proposal to merge the office supply giants Staples and Office Depot. Both senior executive officers from both companies are expected to seriously protest the action taken by the FTC.
Staples stocks dropped 11 percent on the news and Office Depot’s stocks tumbled a drastic 17 percent. The FTC’s action comes at a time when the government agency believes that Staples’ proposed buyout of their rival would challenge anti-trust laws and eliminate competition in the office supply industry, according to Bloomberg.
The FTC stated on Monday that it would create a lone giant in the national office supply industry and raise prices on those businesses and companies who are currently under contract with the two office supply giants. The chairwoman of the FTC, Edith Ramirez said, “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 cost of office supplies.”
The FTC vote was a unanimous 4-0 against the merger. Both Staples and Office Depot released a combined statement that answered the FTC’s allegations. The two companies intend to fight the FTC on its decision that they said was “based on a flawed analysis and misunderstanding of the intense competitive landscape in which Staples and Office Depot compete.”
The two office supply retailers are also looking at decisions made by the FTC two years ago when they allowed the buyout of Office Max by Office Depot to go through. At that time, the FTC commented that competition was not being squashed because companies and businesses had other options in the industry like Walmart and Amazon.
On Monday afternoon, Staples stock was trading at $11.06, a drop of 11 percent while Office Depot stocks were trading at a more humble 17 percent drop of $5.52.