US seeks to block Staples-Office Depot merger

US antitrust officials challenged Monday a proposed $6.3 billion merger between office-supply giants Staples and Office Depot, arguing the combination would harm the business-to-business market for office supplies and services.

The Federal Trade Commission said the deal could lead to higher prices and reduced quality for customers who rely on the two companies for large contracts for consumable office supplies, such as pens, file folders, paper clips and paper.

In addition to selling these goods, the two companies also provide a range of services, customer service and integration of procurement systems.

"That business-to-business market is distinct from the more competitive retail markets for office supplies sold to consumers," the FTC said.

The deal "would violate the antitrust laws by significantly reducing competition nationwide in the market for 'consumable' office supplies sold to large business customers for their own use."

Staples and Office Depot strongly defended the deal as necessary given rising competition.

"The companies intend to show that the FTC underestimates the disruptive effect of new competitors in the digital economy and ignores the vigorous competition Staples faces from numerous competitors, including office products dealers, manufacturers selling office supplies direct to business customers, dealers in adjacent categories, cooperatives of regional players, Internet resellers, big-box chains and club stores," the companies said in a joint statement.

Staples and Office Depot pointed to the FTC's 2013 ruling approving a combination of Office Depot and Office Max that recognized this changing landscape that "has grown even more competitive since then."

The companies said they offered to divest $500 million in commercial business, but the FTC has rejected the proposal.

The FTC filed an administrative complaint opposing the deal. It also authorized staff to seek a temporary restraining order and preliminary injunction in federal court. The proposed merger was announced in February.

The FTC move comes on the heels of a probe announced by European Union antitrust officials in September over similar concerns.

In afternoon trade, shares of Office Depot plunged 15.6 percent to $5.60, while Staples tumbled 10.6 percent to $11.05.