Proposed merger between staples and office depot leads to concerns of higher prices

Edited at 7 p. Updated on July 16 6 p.

Proposed merger between staples and office depot leads to concerns of higher prices

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Over the next ten years, they and a number of other firms seized on the same strategy of providing a convenient, reliable and economical source of office supplies for small businesses and individuals with home offices.

These firms competed aggressively, developing office superstores as a one-step destination, carrying a full line of consumable office supply items as well as assorted other products. Staples and Office Depot have been immensely successful: Absent the merger, both companies planned to continue growing for the foreseeable future, and areas of head-to-head competition between the two firms would have increased significantly by the year Their success has redefined the retailing of office supplies in the United States, driving thousands of independent stationers out of business and eliminating by acquisition or bankruptcy some rivals who sought to compete in the office superstore market.

In the process, they have created a unique competitive arena where these two and the only other surviving office superstore — OfficeMax — do battle. This intense competitive rivalry — particularly between Staples and Office Depot — has redounded to the benefit of consumers.

Each has slashed prices, driven costs down, developed innovative approaches to marketing, distribution and store layout, and expanded into new areas of the country, bringing increasing numbers of consumers the convenience of one-stop shopping at low prices.

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Office Depot has been the most aggressive and lowest-price competitor, in turn forcing Staples and OfficeMax to compete more aggressively. This merger would end this competitive battle and leave the merged firm free to raise prices significantly.

In evaluating the legality of a merger, the antitrust laws essentially require a prediction as to whether the deal is likely to lead to less competition and, consequently, higher prices for consumers. Usually, that prediction is by necessity based on inferences derived from market concentration levels.

Here, the court need not rely on market share based predictions alone. Staples and Office Depot today charge higher prices in those parts of the country where they do not compete against each other and lower prices where they are rivals. Prices are higher in markets where the only other competitor is OfficeMax and higher in those areas of the country where Staples faces no other superstore rival.

Similarly, Office Depot — the low-price competitor — charges significantly higher prices where it faces little or no superstore competition.

US judge blocks proposed merger of Staples, Office Depot | Fox News

Most importantly, these retailers do not prevent superstores from charging anticompetitive prices. By contrast, superstores do. In city after city, the level of competition between superstores determines the prices consumers will pay for office supplies.

Staples fully appreciates the significance of superstore competition. As all three superstore chains have expanded, Staples has found itself competing head-to-head in a growing number of markets and facing increasing pressure to cut prices.

Proposed merger between staples and office depot leads to concerns of higher prices

While neither of those past efforts was successful, it now proposes merging with Office Depot, the low-price leader. Staples has long recognized Office Depot as its chief competitive threat.

The investment community too sees reduced competition as the inevitable result of this merger. Even in the absence of direct evidence, anticompetitive effects — the power to raise prices to consumers — are presumed where a merger gives a firm such a dominant market position.

Staples Staples is the second-largest office superstore chain in the United States. Like Staples, Office Depot has grown at a steady and increasing pace since its founding in Serious and substantial questions about the legality of the proposed transaction suggest this merger should not be allowed to proceed.

In this case, the evidence provides a solid empirical foundation for assessing the likelihood of anticompetitive pricing: The merger will turn the most competitive triopoly markets into duopolies, and will transform markets where only Staples and Office Depot compete into superstore monopolies.

Defendants understand the anticompetitive potential of the proposed transaction.Proposed Merger Between Staples and Office Depot Leads to Concerns of Higher Prices. Michael Baye and Patrick Scholten prepared this case to serve as the basis for classroom discussion rather than to represent economic or legal fact.

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At the end of June, a federal district court in Washington, D.C. granted the Federal Trade Commission's (FTC's) request for a preliminary injunction blocking the Staples-Office Depot merger.

(2) The proposed transaction would have combined Staples and Office Depot, two of the three leading office superstore chains. Nov 29,  · The manager had denied service to a group of young men, but an alleged victim's dine-and-dash tweets emerged.

Proposed Merger Between Staples and Office Depot Leads to Concerns of Higher Prices Michael Baye and Patrick Scholten prepared this case to serve as the basis for classroom discussion rather than to represent economic or legal fact%(1).

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Proposed Merger Between Staples and Office Depot Leads to Concerns of Higher Prices