The FTC is giving the green light to a $1.2 billion merger between retail stores OfficeMax and Office Depot. After a seven-month investigation, the agency determined that combining the two stores wouldn't present a threat to competition. The unanimous vote means the companies have cleared the final hurdle towards a merger, and in a statement, they said they expected to close the deal on November 5th. At that point, they'll release more details about how the newly unified organization will operate.
The FTC's decision contrasts with its blocking of a proposed merger of Staples and Office Depot back in 1997. Office supply superstores, a judge decided, provided a unique service and did not consider other brick-and-mortar stores like Best Buy and Walmart their primary competitors. That meant that a merger would combine two of the biggest players in the market, reducing competition. Now, the FTC has essentially decided that office supply stores' niche has eroded. Stores like Walmart and Costco, it says, have expanded their selection, and online shopping has traditional office supply stores on the defensive. "Online retailers stock a vast array of office supply products and can deliver them quickly anywhere in the country at nominal cost," it writes.
"Company documents show that [office supply stores] are acutely aware of, and feel threatened by, the continued growth of online competitors, most notably Amazon," the filing continues. "[Office supply stores] have lost, and continue to lose, substantial in-store sales to online competitors." That assertion is borne out by both companies' financials. OfficeMax reported a slight operating loss in August, and while Office Depot is reducing its operating expenses, it recorded decreasing overall profit margins and a larger loss for the same quarter. Competitor Staples also missed its earning estimates in August, with weaker sales and revenue than expected.