March 11, 2019
Members of the collective Advocates for Independent Business (AIB) have raised concerns about the merger between office supplier Staples and wholesaler Essendant, in comments submitted to the Federal Trade Commission (FTC).
The AIB’s dissenting letter to the FTC complains that, as Essendant is one of only two national wholesale companies for independent office supply dealers, the merger will give control to one of its largest competitors.
The letter was signed by multiple organisations, including the American Booksellers Association, the Independent Office Products & Furniture Dealers Association, Brixy, the Running Industry Association, and the American Specialty Toy Retailing Association.
“This merger should not have been approved,” the AIB missive declares. “It imperils independent office supply dealers (including those represented by one of our member organisations), harms competition and consumers, and furthers a dangerous pattern of approving vertical mergers that allow large corporations to foreclose their smaller competitors.”
Chief among the AIB’s concerns is that the new merger may allow Staples to access data relating to its competitors: “Essendant is privy to sensitive information about independent office supply dealers, including customer information; details of their contract bids, including pricing; and other data that Staples can now easily use to gain an unfair advantage,” the letter continues.
The AIB also highlights that fact that Staples will be able to raise prices to dealers at Essendant, in order to divert customers from independent dealers, towards its own commercial division. The body has called on the FTC to “aggressively police” the divide between Staples and Essendant, as well as to monitor and review the merger’s impacts, and to be willing to intervene if competition is being harmed as a result.
The FTC has also been instructed by the AIB to review its approach to vertical mergers such as this one, and adopt “stringent guidelines for reviewing these deals.”
This is just the latest criticism of the FTC’s handling of the merger, following condemnation from an anti-corruption group last month, which accused the Commission of “revolving door practices.”
The long-anticipated merger was finally approved at the beginning of this year, after a narrow 3-2 vote in favour, albeit with certain conditions.
“Staples, which is owned by the private-equity firm Sycamore Partners, will establish a firewall separating Staples’ business-to-business sales operations from Essendant’s wholesale business,” the Commission insisted. “This firewall will restrict Staples’ access to the commercially sensitive information of Essendant’s customers.”
Rebecca Slaughter and Rohit Chopra were the two Commissioners to vote against the approval of the merger, with Slaughter voicing concerns that the FTC has insufficiently addressed “Staples’ control over Essendant prices to its independent reseller competitors or its enhanced incentives to hamper independent reseller competitiveness.” Slaughter called on the FTC to commit itself to a retrospective investigation, in order to monitor for “anticompetitive conduct” by Staples.
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