FTC Closes Investigation of Merger of Office Depot and OfficeMax Due to Online Competition

11/1. The Federal Trade Commission (FTC) sent a letter to Office Depot, and a letter to OfficeMax, regarding its investigation of their proposed merger. The letters announce that "it now appears that no further action is warranted" and that "the investigation has been closed".

These letters state that the FTC investigated pursuant to Section 7 of the Clayton Act (15 U.S.C. § 18), which is an antitrust statute, and Section 5 of the FTC Act (15 U.S.C. § 45), which the FTC recently began interpreting as if it were an antitrust statute.

The FTC also released a statement [PDF] explaining why it allowed the second and third largest office supply stores (OSS) to merge. First, there is the growth of competition from large stores such as Walmart and Costco.

Second, there is "the explosive growth of online commerce, which has had a major impact on this market. Online retailers stock a vast array of office supply products and can deliver them quickly anywhere in the country at nominal cost. Company documents show that OSS are acutely aware of, and feel threatened by, the continued growth of online competitors, most notably Amazon."

It continues that the OSSs "have lost, and continue to lose, substantial in-store sales to online competitors. This increased competition from online retailers has caused OSS to respond with new pricing practices and other strategies. For example, because online prices are often lower than in-store prices, and because many customers comparison shop in-store prices against online prices, OSS are often pressured to match these lower online prices in their stores."

Also, "in-store and online channel boundaries are blurring as OSS seek to create a seamless customer experience by offering in-store pickup for online orders and using in-store Internet kiosks to order products online."