The European Commission has opened an in-depth investigation under the EU Merger Regulation into the acquisition of office supplies distributor Office Depot by its competitor Staples, both of the US. The Commission has concerns that the takeover could lead to price increases and less choice.
Both Staples and Office Depot are active in the distribution of office products via a number of sales channels, including wholesale, retail, direct sales (online and catalogue) and national or international supply contracts. The Commission’s preliminary investigation indicated potential competition concerns in the market for the supply of office products to business customers through international contracts in the European Economic Area (EEA), as well as in the market for the supply of office products to business customers through national contracts in the Netherlands and Sweden. The customers of office supplies include companies in the private sector and public administrations.
Commissioner Margrethe Vestager, in charge of competition policy, commented: “All companies and organisations, big or small, need office supplies for their daily work. We are opening this in-depth investigation to make sure that the merger of two of the main suppliers of office products will not have a negative effect on competition.”
The Commission’s initial investigation has shown that Staples and Office Depot, together with their largest European competitor Lyreco, are the main suppliers of office products to business customers. Several smaller players have a more limited geographic presence and may not be able to exercise a sufficient competitive constraint on the merged company. The transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases.
The preliminary investigation has also indicated possible competition concerns with regard to the wholesale of office products in Sweden, where the merging parties appears to have no significant competitors offering a wide portfolio of products.
The Commission will now investigate in-depth the proposed acquisition to determine whether these initial concerns are confirmed or not. The opening of an in-depth inquiry does not prejudge the final result of the investigation.
The Commission now has 90 working days, until 10 February 2016, to take a final decision. The transaction was notified to the Commission on 21 August 2015.
Companies and products
Staples is a publicly held US-based company, listed on the Nasdaq. It is active as a distributor of office supplies in North and South America, Europe, Asia, Australia and New Zealand.
Office Depot is a publicly held US-based company, listed on the Nasdaq. It is active as a distributor of office supplies in 57 countries.
Merger control rules and procedures
The Commission must assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
In addition to the current transaction, there are four other on-going phase II merger investigations: