The deal between Framingham, Mass.-based Staples and Boca Raton, Fla.-headquartered Office Depot — the only U.S. office-supply companies with national reach and the sector's top two chains — would significantly reduce national competition in the market for office supplies sold to large business customers, the FTC said.
"The Commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies," FTC Chairwoman Edith Ramirez said in a statement issued with the decision. "The FTC's complaint alleges that Staples and Office Depot are often the two top bidders for large business customers."
Even a revised package of actions Staples submitted last week in a late bid to address anti-trust concerns about the transaction failed to sway FTC officials.
Shares of both firms plunged after the announcement. Staples shares closed down 13.75% at $10.66. Office Depot shares ended the trading day 15.75% lower at $5.59.
The companies said they plan to contest the FTC decision, contending that the acquisition would benefit customers employees and shareholders.
Staples and Office Depot also said they intend to show that the FTC underestimated the disruptive effect of new competitors in the digital economy and ignored competition Staples faces from competitors, including office products dealers, manufacturers selling office supplies direct to business customers, dealers in adjacent categories, Internet resellers and others.
"The combined company would generate significant savings, and we're committed to investing savings in lower prices for all customers," Ron Sargent, Chairman and CEOof Staples, said in a formal response. "We'll also use the savings to continue to invest in our people, technology and customer service."