By: Jonathan Hermann & Melissa R. Ginsberg (Patterson Belknap)
Staples’ parent company recently announced plans for an attempt to buy all outstanding stock of Office Depot’s parent company (ODP) for $2.1 billion, stating that it will pursue an all-cash tender offer in March if the parties cannot reach an agreement by then.
Staples attempted a similar purchase in 2016, which it called off after the D.C. District Court granted the FTC’s request for a preliminary injunction precluding the purchase. We previously reported on that hearing. ODP has indicated it shares Staples’s desire to once again attempt to unify, but it nonetheless rejected Staples’s offer, potentially signaling a skittishness to antitrust scrutiny. The recency of Staples’ defeat in court has led some to feel a sense of déjà vu. What lessons are there to learn from Staples’ prior efforts?
In 2016, the FTC challenged the purchase by arguing that the two companies were the largest office supplies vendors to large “business-to-business” (“B-to-B”) customers, which it defined as those who spent $500,000 or more per year on consumable office supplies, and that the elimination of Staples and Office Depot’s direct competition would result in anticompetitive harm to their large B-to-B customers. In responding to the FTC’s antitrust allegations, Staples and Office Depot focused largely on two issues: (1) the FTC’s market definition, and (2) the prospect that Amazon Business, founded just the year before, would offer sufficient competition to offset any anticompetitive effects of the merger…