Judge takes major issue with FTC in Staples/Office Depot proceedings

Dive Brief:

In a twist in the court battle between the Federal Trade Commission and Staples over the retailer’s acquisition of rival Office Depot, the presiding judge unsealed documents Thursday showing that the FTC pressured Amazon to lie and say its business-supplies efforts would not be ready to compete until 2017, when they have already launched in the space.
The U.S. District Judge for Washington, D.C., Emmet Sullivan, unsealed the portion of the proceedings that show that the FTC told Amazon to falsely testify, although an Amazon executive chose not to do so. Sullivan himself questioned Prentis Wilson, VP of Amazon Business, regarding the matter.
The FTC has moved to block the merger, saying that there will be a lack of competition in the business-contracts supplies business if the two retailers merge.

Dive Insight:

In its zeal to protect competition in office supplies retail, the FTC may have gone too far.

On Wednesday, the judge deduced by questioning that Amazon rejected language provided by the FTC that said Amazon Business wouldn’t be ready to respond to “Requests for Proposal” for business contracts for two years and that it didn’t have much control over the quality of goods supplied by third-party sellers in its marketplace.

Although Amazon struck the FTC’s proposed language and never testified to any lack of readiness or quality in the space, Judge Sullivan asked Amazon’s Wilson a series of questions that made clear that the FTC’s desired characterization of Amazon’s Business efforts wouldn’t fly. Sullivan took issue with the FTC’s action, even though it never went anywhere, and unsealed the portion of the day’s court reporting that recorded his exchange with Wilson on Thursday.

“And my comments, I want them public, also, and the exchange I just had with Mr. Wilson because that shouldn’t be kept from the public,” he said, according to the document. “The public ought to know that the government wanted Amazon to say some things that weren't true, and that's going to be public.”

At points, Wilson seems reluctant to answer Sullivan, or to characterize the FTC’s actions one way or another, because, he said, he was concerned about being factual and not revealing confidential communications he had with his lawyers. But Sullivan was adamant in his questioning, and took the unusual step of unsealing that portion of the day’s proceedings.

The exchange could mark the turning point for the matter, which, until now, has increasingly seemed to favor the FTC’s argument that a Staples-Office Depot merger would stifle competition in business contracts.

In fact, while the FTC has downplayed Amazon’s influence, it’s Staples that has filed for more information about the e-retail giant’s business contracts pursuits.

The court exchange revealed pretty clear evidence that Amazon is, actually, well on its way to establishing a robust business in the space. In fact, before Wednesday’s hearing, rumors began to swirl that Amazon itself would attempt to buy Office Depot or another business supplies company. In any case, contrary to what the FTC apparently would have liked to hear in court, Staples and Office Depot may indeed need to merge in order to be able to take on Amazon, whether it’s in two years, or sooner.