Photo: Federal Trade Commission (FTC)

ILSR Submits Comments to the FTC on Staples / Essendant Merger

Date: 26 Feb 2019 | posted in: Retail | 0 Facebooktwitterredditmail

The Federal Trade Commission (FTC) has approved a merger that will harm independent office products dealers and that has the potential to set a dangerous precedent that will lead to the approval of similar mergers in other industries.

At issue is Staples’ purchase of Essendant, one of only two wholesalers that service independent office supply businesses. That’s right: the FTC is allowing a major competitor to independent dealers to buy one of their primary suppliers. Despite this clear conflict of interest, the FTC has given the merger a green light with only minimal conditions.

The FTC is allowing people to weigh in with comments. ILSR has submitted comments, which explain why this merger will harm competition, undermine independent office supply businesses, and accelerate Amazon’s dominance of this industry. (We’ve also written an article about this for the Washington Monthly.)

This is a great opportunity to tell the FTC to stop waving through mergers that harm competition and imperil the ability of independent businesses to compete. By submitting a comment, you not only register your disapproval with the FTC, but these comments become a public record for Congress, which has oversight over the agency. ILSR believes that the FTC has not been fulfilling its mission to protect competition and has been far too quick to approve harmful mergers. This merger is a prime example.

  • You can submit a comment here. The deadline for commenting is midnight Eastern time on Wednesday, February 27.
  • You can see other comment letters here.
  • Tips: There is no right or wrong way to write a comment letter. Express your concerns in clear, straightforward language. If you are a business owner, self-identify yourself as such, if you feel comfortable doing so, and perhaps note how your concerns about this merger relate to dynamics in your own industry

Here are some suggested points to include in your comment letter:

  • Mergers like this make it hard for independent businesses to survive and compete on a level playing field. Independents provide distinct market and consumer benefits that are not matched by larger companies. Their decline harms the economy and deprives consumers of the option of these distinct benefits.
  • Between 20 and 25 percent of office supplies are sold by independent dealers. These dealers are highly competitive. Most have offered next-day delivery for 30 years or more. They routinely win contracts to supply government agencies and mid-sized businesses, demonstrating that they can and do compete with the big chains and Amazon on price and service.
  • There are just two wholesalers in the office supply industry, Essendant and S.P. Richards. These wholesalers are a lifeline for independent office dealers. With this merger, the FTC is allowing a major competitor to control one of these lifelines.
  • Through this merger, Staples will gain access to highly sensitive data that Essendant has about independent dealers, including the pricing and terms that they are offering when bidding on competitive contracts that Staples is also bidding on. The proposed “firewall” to be established between Staples and Essendant is insufficient to address this clear conflict-of-interest. Among other things, it is unenforceable with regard to the verbal sharing of information between Staples and Essendant.
  • Staples has a significant incentive to raise the prices that Essendant charges independent office dealers, thus increasing the prices they charge and helping to steer more customers to Staples. Staples has been trying to increase its share of the market that independent dealers serve (mid-sized businesses and government agencies) and this merger gives them way to do that through actions that harm competition. Independent dealers that rely on Essendant cannot easily switch to S.P. Richards and this is an inadequate safeguard to prevent anticompetitive conduct by Staples.
  • Staples is owned by Sycamore Partners, a private equity firm with a track record of buying retailers only to gut them by selling off their most valuable pieces. Should Sycamore do this to Essendant, it would result in deep harm to independent office supply dealers and consumers. The FTC did not consider this in its decision.
  • By approving this merger, the FTC is setting a dangerous precedent for future mergers involving the suppliers that independent businesses depend on. Vertical mergers and consolidation among wholesalers increasingly threaten the ability of independent businesses to compete, harming competition and consumers.

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Zach Freed was a Research Associate at the Institute for Local Self-Reliance from 2018 to 2020, where he researched and wrote about antitrust and corporate power. Prior to his time at ILSR, Zach was a policy staffer for Rep. Keith Ellison.