Federal Trade Commission v. Staples, Inc.
190 F. Supp. 3d 100
D.D.C.2016Background
- Staples announced a $6.3 billion plan to acquire Office Depot in Feb 2015; the FTC, Pennsylvania and D.C. sued and sought a preliminary injunction to block the merger pending administrative proceedings.
- Plaintiffs defined the relevant product market as a cluster of "consumable office supplies" (pens, paper, Post-its, etc.) sold and distributed to large B‑to‑B customers (those spending ≥ $500,000/yr); geographic market = United States.
- Plaintiffs' economist (Dr. Carl Shapiro) used spend data from 81 Fortune 100 companies to estimate market shares: Staples ≈ 47.3%, Office Depot ≈ 31.6% (combined ≈ 79%); pre‑merger HHI ≈ 3,270, post‑merger HHI ≈ 6,265 (very highly concentrated).
- Defendants argued the market should include ink/toner and other BOSS products (or be broader) and that new entry/expansion — particularly Amazon Business and regional suppliers (e.g., W.B. Mason) — would timely and sufficiently restore competition.
- The court found (1) Brown Shoe indicia and the hypothetical monopolist (SSNIP) analysis support Plaintiffs' targeted, cluster market; (2) ink/toner and many BOSS items face different competitive conditions (e.g., managed print services) and may be excluded; (3) Plaintiffs established a strong prima facie case based on HHI and additional bid and documentary evidence; (4) evidence that Amazon or regional players would eliminate harm within ~2–3 years was insufficient.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relevant product market | Consumable office supplies to large B‑to‑B customers is a proper cluster/target market (SSNIP satisfied) | Market is artificially narrow; should be broader (include ink/toner, BOSS) | Court: Market definition proper; Brown Shoe factors and Shapiro HMT support Plaintiffs. |
| Inclusion of ink/toner and BOSS | Exclude ink/toner/BOSS because competitive conditions differ (MPS, separate sourcing) | Include them as commercial reality and to reduce Plaintiffs’ market shares | Court: Exclusion appropriate — ink/toner and many BOSS items face distinct competition and distribution channels. |
| Market concentration and prima facie case | Shapiro’s Fortune 100 sample shows combined ~79% share and HHI increase >> 200 points → presumption of illegality | Sample overstated shares; methodological/data issues (missing firms, leakage, attribution) | Court: Shapiro’s method is a reasonable approximation; Plaintiffs established prima facie case (HHI jump supports presumption). |
| Entry/expansion (Amazon, regional) | Entry by Amazon Business and regional vendors will not be timely or sufficient to offset harm | Amazon Business and regional players will expand and restore competition | Court: Defendants failed to show timely, likely, sufficient entry/expansion in 2–3 year horizon; Amazon lacked RFP experience, guaranteed pricing, desktop delivery; regional firms cannot serve nationally. |
Key Cases Cited
- Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (establishes product‑market definition framework and "practical indicia")
- United States v. Baker Hughes Inc., 908 F.2d 981 (D.C. Cir. 1990) (burden‑shifting framework for merger analysis and presumption from market concentration)
- FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997) (prior Staples/Office Depot merger litigation and market considerations)
- FTC v. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) (Section 13(b) preliminary injunction standard and public‑interest balancing)
- United States v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004) (predictive judgment standard; market analysis for mergers)
- F.T.C. v. Sysco Corp., 113 F. Supp. 3d 1 (D.D.C. 2015) (enjoining a combination of market leader and second‑largest firm; equities discussion)
- F.T.C. v. Whole Foods Market, Inc., 548 F.3d 1028 (D.C. Cir. 2008) (sliding scale balancing of likelihood of success and equities for Section 13(b) injunction)