By Diane Bartz
WASHINGTON (Reuters) – No. 1 office supply store Staples Inc and its biggest rival Office Depot Inc have both touted the office supply market as having just two major players, the U.S. government argued on Tuesday as it tried to get a court to prevent the two from merging.
The Federal Trade Commission was in U.S. District Court for the District of Columbia, seeking a preliminary injunction to block the proposed $6.3 billion transaction until an FTC administrative judge can review a complaint the commission filed in December aimed at stopping it.
A preliminary injunction could kill the deal since protracted litigation makes it difficult for companies to hold a merger together.
Arguing for the FTC, attorney Tara Reinhart pointed to evidence from the companies themselves that each considers the other its biggest rival.
She pointed to a memo written by an Office Depot executive about the merger with Office Max in which the executive said: “Look out Staples! Here we come, bigger and stronger!!!”
In another memo, an Office Depot executive tells a customer that if the merger with Staples is approved, the customer’s options will “dwindle to one.”
Reinhart also cited a statement by Staples CEO Ron Sargent, who said the office supply business was now “two major companies.”
The FTC litigator also addressed assertions by Staples that the FTC’s definition of the office supply market improperly failed to include ink and toner, which she acknowledged are more widely available through companies like Canon and Xerox.
She said the ink and toner argument was not relevant to the FTC’s case. “That’s a diversion,” she said.
She further argued that Amazon.com Inc was not yet at a point where it would negotiate prices or offer services that big, powerful companies demanded in order for them to hire the online retailer as their primary vendor for office supplies.
Staples and Office Depot are fighting the preliminary injunction, arguing that they face stiff competition from manufacturers selling directly, as well as from e-commerce companies and big box stores.
Staples’ lawyer, Diane Sullivan, who previously argued that her client feared Amazon, was scheduled to present closing arguments later on Tuesday.
The FTC stopped a merger attempt between the same two companies in 1997. But Staples was emboldened to make this offer for Office Depot in 2015 after that chain succeeded in buying No. 3 OfficeMax in November 2013.
(Reporting by Diane Bartz; Editing by David Gregorio)