The federal judge’s decision is a victory for the Federal Trade Commission, which argued that the combined national supplier of pens and printer paper would harm buyers.
Staples and Office Depot abandoned their merger after a federal judge sided with U.S. antitrust officials who challenged the combination of the two largest office suppliers, saying it would create an unrivaled giant.
U.S. District Judge Emmet Sullivan in Washington, D.C., blocked the $6.3 billion deal Tuesday, a victory for the Federal Trade Commission, which argued that the combined national supplier of pens and printer paper would harm buyers.
The FTC met its “burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large business-to-business customers,” Sullivan wrote in a three-page order issued late Tuesday.
Staples stock fell 10 percent in after-hours trading before being halted, while Office Depot shares plunged 26 percent.
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Sullivan’s ruling — an injunction putting the deal on ice while the FTC challenges the tie-up in its administrative court — killed the planned merger. Office Depot Chief Executive Officer Roland Smith said in a statement after the decision that it would not appeal and that the companies would terminate the agreement effective May 16.
The ruling is a win for antitrust officials grappling with a record wave of mergers that are combining some of the biggest companies across industries. Sullivan’s decision marks the second time the FTC has blocked a combination between the two companies. In 1997, the commission successfully sued to halt their proposed merger.
“Today’s court ruling is great news for business customers in the office supply market,” Debbie Feinstein, the head of the FTC’s bureau of competition, said in an e-mailed statement. “This deal would eliminate head-to-head competition between Staples and Office Depot and likely lead to higher prices and lower quality service for large businesses.”
The FTC sued Staples and Office Depot late last year, contending a single national office-supply seller with no obvious rival would undermine the ability of large corporate clients to bargain for better prices by playing the two firms off one another in negotiations.
Defense lawyers argued that the companies needed to combine to contend with looming competition from Amazon.com. and its year-old Amazon Business unit. They claimed the merger would make the enlarged Staples more efficient and allow it to pass on lower prices to consumers.
The companies attacked the government’s case as contrived to make the deal appear unfairly anticompetitive.
After the FTC presented its case to Sullivan, Staples told the judge the agency hadn’t met its burden for blocking the deal and declined to present its own evidence in support of the merger.
The decision caps Sullivan’s role in an often contentious proceeding. The parties disagreed over how to define the relevant market for assessing the merger’s impact on competition and the judge frequently interrupted the questioning of witnesses for his own queries.