March 17, 2016
The FTC (the United States Federal Trade Commission) said it would approve the Staples and Office Depot merger if they divested a “going concern”.
Sun Sentinel reported on the meeting between Staples, Office Depot and the FTC last week “to discuss a potential settlement […] just before a pre-trial conference” that began this week, with FTC lawyer Tara Reinhart stating in court that the “only settlement that the agency is willing to consider” was the two companies “divesting a going concern”, or a company “that can continue operating on its own”.
At the pre-trial conference, where Reinhart had announced this, Staples’ lawyer Diane Sullivan stated that “nothing’s come of that”, with US District Court Judge Emmet Sullivan questioning both sides about a potential settlement. He also asked if there was “any optimism at all? Are you still talking”, with Sullivan replying that “there’s always hope, your Honour, but […] as far as I know, there’s not been much progress”.
Reinhart added that the FTC was asked if it would accept a “slightly sweetened” offer from the two companies, noting that “the defendants know well what the FTC’s expectations are for a settlement here […] divesting the business”. She also queried the suggestion from Staples and Office Depot that their respective CEOs – Ron Sargent and Roland Smith – attend the hearing, noting that this was a concern for the FTC as Sargent is a witness for “both sides” of the case.
Sullivan also asked the judge if one of the company’s attorneys could cross-examine Prentis Wilson, Vice President of Amazon Business, because Amazon is “a key and growing and dominant, or soon to be dominant, competitor in the business-to-business market”; to which Sullivan asked: “Why can’t he be here? Subpoena him. Tell him I encourage him to honour the subpoena.” Earlier this week, Staples also submitted a court motion to get more documentation from Amazon, because Staples and Office Depot “are trying to show in court that Amazon and other online and discount retailers create stiff competition that threatens the companies’ ability to survive separately”.
The Federal Trade Commission (FTC) filed a lawsuit last year to block Staples and Office Depot’s $6.3 billion (€5.8 billion) merger, with the suit seeing the companies offer to divest $1.25 billion (€1.14 billion) of commercial contracts in exchange for approval. This was rejected by the FTC, leaving Staples to call it “misguided”, and was an upgrade from a previous offer of $600 million (€558 million).
Both companies extended their merger agreement to May in January in light of the court case, after new developments earlier this year suggested “renewed optimism” in the merger being granted, but sources stated “the odds of a settlement are near zero”. Staples is also reportedly facing the threat of loans being withdrawn, and made a series of staff cuts. The two companies previously called the decision to block their merger “flawed”, with a court case likely in March.
However, the European Union recently approved the merger after Staples and Office Depot made concessions, while both companies also sold their corporate contract business to Essendant, but the FTC was said to have been “unimpressed” by the concession. Meanwhile, Staples has now revealed it plans to close 50 stores this year, and confirmed that over 1,000 jobs had been cut.
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