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Selected by Seung-gyu Jo
Second, the FTC changed the definition of the relevant market from the total market for
office supplies to the market served only by the office-supply superstores. Staples and
Office Depot together sell about 75 percent of office supplies sold by superstores, but
only about 5 percent of total office supplies.
The FTC's restricted definition of the relevant market ignores reality by assuming that the
office-supply superstores face no effective competition from the many other types of
stores and mail order retailers selling office supplies. In fact, Wal-Mart alone has about
the same revenue from office supplies as would the proposed merger.
Staples and Office Depot grew and prospered by selling to price-sensitive customers. It
is absurd to assume that these same customers would ignore the opportunity to
purchase office supplies from outlets other than the superstores. The FTC has been
spooked by a monster of its own creation.
Unfortunately, on the basis of this analysis and with prodding from the Nader group, the
FTC announced on March 10 that it would seek a preliminary injunction against the
merger. The stock of Office Max increased 2 percent that day, again seeming to confirm
that the proposed merger would have reduced the price of office supplies.
In a final effort to avoid delay of the merger, and based on a recommendation by the
FTC staff, Staples and Office Depot agreed to sell 63 of their stores to Office Max (at a
bargain price) to maintain two-superstore competition in markets that, after the merger,
would otherwise have only one superstore. Clearly, if eventual divestiture would be a
feasible remedy to a final ruling against the merger, a preliminary injunction now is
wholly unnecessary. Both companies have also made a public commitment to reducing
prices after the merger.
But all of this has been to no avail. The parties and the District Court have been
burdened with an unnecessary hearing on the FTC's petition for a preliminary injunction.
Even if Staples and Office Depot win in the District Court, the commission will hold an
extended administrative procedure on the merger that could easily last a year, and the
issue will ultimately have to be resolved again in the courts.
Surely, there must be something more important for the FTC to do than punish the most
aggressive price-cutters in the office-supply market. Or maybe not. In the latter case,
Congress should ask why the FTC is doing the work of the Antitrust Division of the
Justice Department. Do we really need two antitrust agencies?
This article originally appeared in Legal Times
Source: http://www.cato.org/dailys/6-26-97.html