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Antitrust Keyed to Areeda, 8th Ed.
Federal Trade Commission v. Staples, Inc.
Citation:
970 F. Supp. 1066 (1997)Facts
In September 1996, Staples, Inc. and Office Depot, Inc. announced plans to merge in a transaction structured as a pooling of interests. At the time, Staples was the second largest office superstore chain in the United States with approximately 550 stores, while Office Depot was the largest with over 500 stores. OfficeMax was the only other significant office superstore chain in the country. The FTC conducted a seven-month investigation and ultimately challenged the merger, arguing it would substantially reduce competition in the sale of consumable office supplies through office superstores.
The FTC’s evidence showed that Staples and Office Depot charged significantly higher prices in markets where they faced no competition from other office superstores compared to markets where they competed with each other or with OfficeMax. Specifically, prices were approximately 13% higher in markets with only one office superstore chain than in markets with all three chains. The evidence also showed that when a new office superstore entered a market, the existing superstores would lower their prices, but they did not similarly respond to entry by other retailers like Walmart or warehouse clubs.
The defendants argued that the relevant product market should be defined more broadly as all sellers of office supplies, including mass merchandisers, warehouse clubs, mail-order companies, and independent stationers. Under this broader market definition, a combined Staples-Office Depot would have only a 5.5% market share. The defendants also claimed the merger would generate significant efficiencies that would be passed on to consumers.
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