As we explained in a November 6, 2014 post, federal anti-trust laws prohibit a company from cornering the market and creating a monopoly in a given industry. With any proposed business merger or acquisition, this is something that the Federal Trade Commission must take into consideration. That's because federal laws see competition as necessary in any area of business. It forces companies to innovate in pricing, quality and product selection as a way to compete for customers.
The proposed merger of Staples and Office Depot will be no different, explains a recent article in the Wall Street Journal. Much as it has in past cases, like the proposed mergers of several major cellphone service providers in past years, the FTC will need to carefully consider whether the merger between Staples and Office Depot will leave enough competition in the market to keep product prices relatively low and consumers happy.
Even though the proposed buyout of Office Depot would make Staples the only "brick-and-mortar" office-supply retail store in the United States, those in favor of the acquisition believe that there is enough evidence to show that competition is strong in the office-supply industry. Online companies like Amazon are perhaps the biggest competitors with other retail stores like Walmart coming in at a close second. Executives from Staples hope that federal regulators will consider this enough to allow the merger to proceed.
So far, Office Depot has accepted the $6.3 billion deal presented by Staples that gives Office Depot more per share than it ended the market with just days ago. The two companies will now need to wait and see if the FTC agrees with their deal and allows them to continue consolidating their businesses later on.