Staples-Office Depot Merger: Regulators May Make It Too Easy

If antitrust law were tag-team wrestling, the $6.3 billion Staples-Office Depot merger agreement announced on Feb. 4 might be billed as the grudge match of the century. The first time the two companies tried to combine, in 1996, they accounted for less than 6 percent of U.S. sales of office supplies, yet the Federal Trade Commission, relying on a then-novel method of analysis borrowed from academic economics, concluded the combination would raise prices for some customers. In 1997 a federal judge issued a preliminary injunction that doomed the deal.

The current Staples-Office Depot merger presents a fresh enforcement challenge. The growth of Amazon.com and Wal-Mart since the last time the merger was proposed may constrain the ability of office superstores to raise prices. That would argue for approving the deal. On the other hand, there’s less competition in the niche since 2013, when No. 2 Office Depot was allowed to swallow No. 3 OfficeMax. Letting No. 1 Staples eat its combined competition might leave it with excessive pricing power.