Last week, a U.S. federal judge delivered a death blow to the Office Depot-Staples merger saga, effectively ending the deal between the two companies by granting the Federal Trade Commission an injunction against the merger.

The FTC had argued that the $6 billion purposed merger would violate antitrust law, with the agency especially concerned by Staples and Office Depot’s sales to large corporate accounts. Given the two retailers’ dominating presence in the B2B office supplies space, the FTC argued a merger would significantly reduce competition in the marketplace and negatively impact large business customers. The companies argued otherwise, citing the quickly-encroaching threat of online competitors—namely, Amazon—that currently provide (or could soon provide) competition in the B2B office supplies market. 

Shortly after the ruling, Staples announced it would end its proposed merger with Office Depot.

“We are extremely disappointed that the FTC’s request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case,” Ron Sargent, Staples’ chairman and chief executive officer, said in a statement following the decision.

Following the news, RetailWire asked its BrainTrust panel of retail experts the following questions:

• Do you agree or disagree with the court’s ruling to stop the merger between Office Depot and Staples?
• Is the rationale used by the Federal Trade Commission in opposing deals such as the merger between the two chains out of touch with current market conditions?

Here are eight of the best comments from the conversation, which have been edited for content and length. 

1. Once again, the Feds make the wrong decision

Mark Heckman, Principal, Mark Heckman Consulting: With the merger of the two, a stronger company would have emerged to better to compete against the undeniable formidable competition that will continue to come from Amazon. Separately, both companies are in trouble.

I would love to see the resumes of the folks that make these bone-headed decisions. My bet is that they have little understanding of today’s business environment and what will ultimately be best for not just the consumer, but the health and vitality of the marketplace.

Not surprised that once again the Feds make the wrong decision. I see a pattern developing …

2. The marketplace should decide

Peter J. Charness, SVP America, Global CMO TXT Group: I think the marketplace should decide. My one concern though is that as industries consolidate (books, pet foods, sporting goods stores) the “new young innovative companies” don’t seem to be springing up to provide competitive new alternatives. Seems that small chains get bought out, big chains consolidate with enormous cost and pricing advantages and the choices for consumers remains narrow. (Yes, Amazon is an alternative, but there’s only one of them as well.)

3. Amazon or not, online retailers will go after the B2B office supplies market

Ross Ely, President and CEO, ProLogic Retail Services: Yes, the FTC used flawed reasoning to oppose this merger, which would have given Office Depot and Staples at least a chance to benefit from their larger scale as a combined entity. There is no doubt that the commercial market for office supplies will move to online just as the consumer market for office supplies has already done.

If Amazon hesitates to address this market, another online retailer like Alibaba or Jet will go after it. Businesses will see the benefits in convenience and cost savings and migrate away from traditional suppliers like Staples and Office Depot.

4. Staples or Office Depot will soon be out of business

J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, LLC: This decision will put one of these two companies out of business in the next five years. The speed at which online ordering of products is advancing will lead to a weakened retail store need and this merger may be attempted again in 2020.

5. Time to innovate

Gene Detroyer, Professor of Entrepreneurship and Business Strategy, The European School of Economics: More concentration in any business leads to less bargaining power by suppliers and buyers and, perhaps even more importantly, to less innovation.

In this case, the FTC did the shareholders of both companies a favor. Horizontal mergers are notoriously unsuccessful. Their failure rate (failure means the loss of shareholder value) exceeds 80%.

The better case is one of these companies trying to innovate, like Staples converting some of their retail space to office sharing space. Let the weak ones die. Let the innovators live. In this case, if there is no reason to exist for these two retailers alone, there is no reason to exist for the combined companies.

6. Deliberating at the speed of change

Larry Negrich, Director, Business Development, TXT Retail: The judge in this case did not understand the speed of change occurring in the retail business model for office products — and every other commoditized product. Even if Amazon’s B2B business is in its infancy, it will take only a matter of months for them to go heavily into the industry, while it would take years for Staples-Office Depot to respond to changing market conditions, including streamlining brick-and-mortar or attempting another acquisition process.

7. Limited full-service options

James Tenser, Principal, VSN Strategies: Like many other “category killer” formats, the office supply superstore business model has declined in relevance with the rise of online B2C model and the “contract direct” B2B model (like Staples Business Advantage). Store counts are plummeting because there isn’t enough traffic.

Consumers would retain a reasonable number of options for purchasing paper, folders and printer cartridges after an Office Depot-Staples merger: Costco, Amazon, Walmart, even CVS. Businesses might find their full-service options more limited. Can anybody name the #3 player in that sector? Quill? Uline?

So, alas, I may actually side with the FTC on its decision. Maybe top management at OD and Staples knew it was coming.

8. ‘Time for the inevitable’

Lee Peterson, EVP Brand, Strategy & Design, WD Partners: Disagree with the court. Amazon (and others) are eating their lunch and a “circle the wagons” strategy would’ve helped, although the writing is on the wall for both of them regardless — many stores will close.

I just have to say, they both deserve it. In terms of things they could’ve done to innovate, like showroom stores, the “we-work” idea or even modern updating of the physical experience … they have been SO laggard, it’s as if they have been waiting to merge to do anything other than lose.

So now what? Time for the inevitable: Staples will crush OD/OM. I just hope it’s innovation that leads the way for them. If nothing else, it’d be quicker.