Judge who killed Staples-Office Depot merger: Antitrust law is there to protect ‘mega companies,’ too

A federal judge last week killed a proposed $6.3 billion merger between office supply giants Staples (SPLS) and Office Depot (ODP), in the latest high-profile deal to fall apart.

Today, Judge Emmet G. Sullivan released an opinion outlining his reasons for agreeing with the Federal Trade Commission and rejecting the merger. In his opinion, Sullivan concurred that the deal would have jacked up prices for big-business customers in a way that would have violated US antitrust law.

In seeking to keep the deal alive, Staples and Office Depot had argued that the FTC’s attempts to shield “mega companies” from big prices were misplaced. The office-supply companies argued the merger “indisputably will benefit all retail customers, and more than 99 percent of our business customers,” according to Sullivan’s opinion.

However, Sullivan wrote that B-to-B customers (businesses that transact with other businesses) are entitled to protection under antitrust law — even if they are only part of the customer base.

“Antitrust laws exist to protect competition, even for a targeted group that represents a relatively small part of an overall market,” Sullivan wrote. Later on, he suggested the mergers could hurt this targeted group by writing, “There is overwhelming evidence in this case that large B-to-B customers constitute a market that Defendants could target for price increases if they were allowed to merge.”

In his decision, Sullivan also took aim at the highly unusual strategy of Staples and Office Depot not to call witnesses in their own defense, as Reuters noted.

Staples and Office Depot “could have presented expert witnesses to support their position” but opted not to, Sullivan noted in the opinion.

The judge’s decision represented a big blow to the companies, which have both been losing market share to Amazon.