Fed denies Staples' Office Depot acquisition

The U.S. Federal Trade Commission filed a lawsuit to block Staples Inc from buying rival Office Depot Inc., arguing that the merger would violate antitrust laws and eliminate the rest of the competition.

According to The Wall Street Journal, the lawsuit filed on Monday claims that the acquisition would lead to higher prices and fewer choices for bulk office supply providers. The three Democrats and the Republican that comprise the current FTC commissioners all favored the lawsuit.

According to the agency's head, Edith Ramirez, "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."

In an article from the Federal Trade Commission, many big business customers buy their consumable office supplies in bulk under a contract. The various vendors give them a wide variety of office supplies to choose from, as well as fast and reliable delivery all over the nation.

These office supply vendors also provide great customer service, integration of procurement systems, customized online catalogs, and detailed reports on utilization. That kind of market can only be possible in a more competitive retail market environment.

The deal could have cost $6.2 billion. Market Watch reported that shares of the two biggest office suppliers dropped after news of the lawsuit. Staple's share dropped to almost 14 percent to $10.66, while Office Depot's share went down almost 16 percent to $5.59. When the deal was announced back in February, both companies stocks went up to its highest since 52-weeks.

"Unfortunately, the FTC's decision is based on a flawed analysis and misunderstanding of the intensely competitive landscape in which Staples and Office Depot operate," said the two company in a statement challenging FTC's perspective of the office supply business. "The FTC underestimates the disruptive effect of new competitors in the digital economy."

This is the second time the FTC blocked Staple and Office Depot merger. The first one was back in 1997.