August 26, 2015
Will FTC quash Staples and Office Depot merger?
The Federal Trade Commission is looking at the proposed merger of Staples and Office Depot and whether it would adversely affect competition in the sale of office supplies to large corporations, according to a Bloomberg report.
Sources familiar with the FTC’s review told the news organization that while the proposed merger would have little effect on individual purchases since consumers can buy what they need from a wide array of retailers from Amazon to Walmart, the same is not true of big business. In those cases, companies typically purchase supplies on a regular schedule, receiving discounts for buying in larger quantities.
A Staples/Office Depot merger would control up to 80 percent of the large corporate account market, according to Cleveland Research Co.
Interestingly, according to the New York Post, Amazon.com supports the merger of its rivals. The company has recently begun using intermediaries to reach out to FTC regulators to lend support for the deal. The rationale for the support is that Amazon Business, a business-to-business marketplace launched in April, will have an easier time competing with one larger competitor than Staples and Office Depot as they stand now.
According to Bloomberg, regional companies such as W.B. Mason, which serve the commercial office supplies market, may also benefit from the merger as Staples and Office Depot are forced to sell off assets to gain the FTC’s approval.
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Recent Discussions
Discussion Questions
Do you think the Federal Trade Commission will disapprove the merger of Staples and Office Depot over concerns related to the large corporate account market? How do you think the merger would affect other retailers serving the B2B market, specifically those doing business with large companies?
Poll
I don’t know if the FTC will disapprove, but the agency should. On the consumer side, although office supplies and stationery are available in a wide variety of outlets, the category killers like Staples and Office Depot offer the greatest variety — important in an era of home offices. For consumers, the merger really would create a super category killer and affect the way small businesses and independent business people function. Add this to the stifling effect on corporate purchasing and the merger doesn’t look like a great deal for anybody except Staples.
The FTC should walk away and let it happen. Neither Office Depot nor Staples are all that great. There is plenty of competition and always room for more. And definitely don’t tell them to sell off stores. Otherwise you will get another Haggen fiasco because we all know they would sell to an inept retailer rather than a viable competitor. Competitors love mergers because it’s open season on stealing business while the merging companies go through their learning curve.
I think the FTC has no courage and less conviction, and hasn’t taken a significant policy position in retail in decades, so I don’t suspect they will start now.
That said, this is rapidly becoming a channel — like DVD rentals — that is overly ripe for digital disruption. So the issue isn’t so much around retail stores as it is the impact of the proposed merger on the total market, i.e., the physical and digital space, with an emphasis on the digital.
As to competition, this space is fluid. The real key for companies in this sector is to create full-service relationships, a la Xerox, and then sell the supplies through in the normal course of business — a full “offering” approach (goods and services) ranging from pencils to data storage and management and everything in between.
Given that, the competitive set is much broader than has been traditionally defined which will benefit some competitors and no doubt wipe out others and ought to give the FTC the “out” from making a tough decision they no doubt so badly want.
I think this move is not bad for the competitors, but it may be bad for the corporate businesses. With respect to competition, this merger eliminates one player which reduces the choices the customers have. These two players already have big share and between them they swap customers. Now those customers will go elsewhere.
We can talk about the impact of impact of the internet on office supplies, etc. but there are some things you just have to feel and touch to determine what you want to buy.
This week I finally decided I wanted to get a new office chair. True, I could have gone online, but I like to first sit in the chair that I may occupy for several hours a day before buying.
Having an Office Depot to go and try the chair was a wonderful benefit. Having a Staples nearby allow me to compare their offer to Staples and make an informed decision that I don’t believe would have been possible over the internet.
Admittedly a small example, but it goes for all the furniture and other office equipment that you want touch and feel. Having two competitors for my and many others’ business helps keep both of them sharp.
My vote is that they remain separate companies.
As the merged company would control 80% of the market, this merger would definitely have a great impact on business office supply purchases and reduce the number of substantial players in this space. Most of the players in this category have something to gain or lose from this new competitive landscape, there are no bystanders. It will be interesting to see if the FTC ultimately does stop this merger that has been in motion since February.
For more information, checkout out our recent blog post – “Behind the Scenes of the Office Depot-Staples Merger.”
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I don’t know if the FTC will disapprove, but the agency should. On the consumer side, although office supplies and stationery are available in a wide variety of outlets, the category killers like Staples and Office Depot offer the greatest variety — important in an era of home offices. For consumers, the merger really would create a super category killer and affect the way small businesses and independent business people function. Add this to the stifling effect on corporate purchasing and the merger doesn’t look like a great deal for anybody except Staples.
The FTC should walk away and let it happen. Neither Office Depot nor Staples are all that great. There is plenty of competition and always room for more. And definitely don’t tell them to sell off stores. Otherwise you will get another Haggen fiasco because we all know they would sell to an inept retailer rather than a viable competitor. Competitors love mergers because it’s open season on stealing business while the merging companies go through their learning curve.
I think the FTC has no courage and less conviction, and hasn’t taken a significant policy position in retail in decades, so I don’t suspect they will start now.
That said, this is rapidly becoming a channel — like DVD rentals — that is overly ripe for digital disruption. So the issue isn’t so much around retail stores as it is the impact of the proposed merger on the total market, i.e., the physical and digital space, with an emphasis on the digital.
As to competition, this space is fluid. The real key for companies in this sector is to create full-service relationships, a la Xerox, and then sell the supplies through in the normal course of business — a full “offering” approach (goods and services) ranging from pencils to data storage and management and everything in between.
Given that, the competitive set is much broader than has been traditionally defined which will benefit some competitors and no doubt wipe out others and ought to give the FTC the “out” from making a tough decision they no doubt so badly want.
I think this move is not bad for the competitors, but it may be bad for the corporate businesses. With respect to competition, this merger eliminates one player which reduces the choices the customers have. These two players already have big share and between them they swap customers. Now those customers will go elsewhere.
We can talk about the impact of impact of the internet on office supplies, etc. but there are some things you just have to feel and touch to determine what you want to buy.
This week I finally decided I wanted to get a new office chair. True, I could have gone online, but I like to first sit in the chair that I may occupy for several hours a day before buying.
Having an Office Depot to go and try the chair was a wonderful benefit. Having a Staples nearby allow me to compare their offer to Staples and make an informed decision that I don’t believe would have been possible over the internet.
Admittedly a small example, but it goes for all the furniture and other office equipment that you want touch and feel. Having two competitors for my and many others’ business helps keep both of them sharp.
My vote is that they remain separate companies.
As the merged company would control 80% of the market, this merger would definitely have a great impact on business office supply purchases and reduce the number of substantial players in this space. Most of the players in this category have something to gain or lose from this new competitive landscape, there are no bystanders. It will be interesting to see if the FTC ultimately does stop this merger that has been in motion since February.
For more information, checkout out our recent blog post – “Behind the Scenes of the Office Depot-Staples Merger.”