Dive Brief:

• The Federal Trade Commission Monday filed a federal complaint in court to block the proposed merger between office supplies retailers Staples, Inc. and Office Depot Inc., over antitrust concerns in the corporate contracts business. 

• The FTC believes that, although there are other small companies in the business supplies space, they aren’t large or strong enough to provided a necessary level of competition to avoid anticompetitive pricing and other issues, according to FTC chairwoman Edith Ramirez.  

• Staples and Office Depot issued a joint statement saying that the FTC’s analysis was flawed and that they would fight the complaint in court. Both companies' stock fell on the news Monday. 

Dive Insight:

For a while there, it seemed like a Staples-Office Depot merger would go through.

The FTC actually didn’t like the idea in 1997, when Staples and Office Depot announced plans to merge. At the time, the agency cited evidence that prices of office supplies were lower in areas where both companies operated stores. In hopes of winning approval, both companies had also agreed to sell 63 of their stores to third rival OfficeMax.  

But things have changed in the past 17 years.

That these two had agreed to merge not so long after Office Depot completed its own acquisition of rival OfficeMax is a testament to how much stiffer the competition has grown in the office supplies market from the likes of Amazon, Wal-Mart, and others.

It’s that increased competition from non-office supply retail that led many to believe that the FTC might bless the union this time around. In fact, that was the FTC’s own stated reasoning when it allowed Office Depot’s acquisition of OfficeMax in 2013. 

“Our decision highlights that yesterday’s market dynamics may be very different from the market dynamics of today,” The FTC wrote in 2013.

But today it's not the retail side, but the business supplies side that has emerged to trip up the deal. Antitrust watchdog advocates raised the issue over the summer, urging the FTC to take a close look. And the European Union has similar concerns.

“The Commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” Ramirez said in a statement. “The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers.”

While the companies say they’ll fight the FTC’s move, Boston College law professor Brian Quinn, a mergers and acquisitions expert, told the Boston Globe that they’ll more likely soon drop the matter and move on.

“It could take years to litigate this,” Quinn told the Globe. “They have too many other things they can do with their money.”