FTC attacked by merger trial judge

March 24, 2016

The US Federal Trade Commission’s headquarters

The judge presiding over the Staples-Office Depot court case called the conduct of the Federal Trade Commission (FTC) “disturbing” in regards to early proceedings.

Bloomberg reported on Judge Emmet Sullivan’s criticisms of the FTC for “attempting to elicit false information” from Amazon Business Vice President Prentis Wilson, who had testified in the case. Calling the FTC’s conduct in the case “very disturbing”, Sullivan added that it was a concern that the FTC was trying to persuade Prentis “to say something for the benefit of the United States of America that is not true, after Wilson “declined to make comments under oath regarding a written statement”.

No further information was given as part of the case transcripts, with the matter arising “in a closed-door session”, and Sullivan demanded that the matter should be “made public”. Wilson’s role at Amazon Business concerns selling office supplies to companies, while Tara Reinhart, the lawyer for the FTC, responded that it “certainly never asked [Wilson to say something] that wasn’t true”.

Wilson had been asked about Amazon’s work in the office products sector, noting that it had “secured only one contract” from a company with over $250 million (€223 million) in revenue, and that overall “around 300,000 businesses had opened accounts with Amazon in the first 11 months” that Amazon Business had been in operation.

Sun Sentinel reported in turn the FTC’s accusation that Staples and Office Depot have allegedly “been warning their corporate customers to lock in prices before they rise” after the merger, with one exhibit presented an email from an Office Depot account manager to a corporate customer. This email stated that “if and when the purchase of Office Depot is approved, Staples will have no reason to make this offer”, referring to a three-year agreement worth $500,000 (€447,687).

Another email from Office Depot to a customer warned that competition will “dwindle to one”, and that “for companies wanting savings, new terms or additional incentives, now is the time to ink those details in a long-term contract”. The FTC also highlighted “fierce” and “aggressive” competition between Staples and Office Depot for the corporate market, with an internal email from a sales representative “bemoaning the fact that Office Depot has again lost an account to Staples”.

Last week saw the involvement of Amazon in the case and rumours of it helping out the merger, while further settlement talks were revealed that had come to nothing. The FTC filed the lawsuit to block the $6.3 billion (€5.8 billion) merger last year, with the companies offering to divest commercial contracts for approval. This was rejected, leaving Staples to call it “misguided”, and was an upgrade from a previous offer.

Both companies extended their merger agreement to May in January, after new developments suggested “renewed optimism” in the merger being granted, but sources stated “the odds of a settlement are near zero”. The two previously called the decision to block their merger “flawed”, though the EU recently approved the merger after concessions, while both companies also sold their corporate contract business to Essendant, but the FTC was said to have been “unimpressed”.