MARKET STRUCTURE AND THE MERGER’S PRESUMPTIVE ILLEGALITY
Staples and Office Depot are by far the two largest vendors of consumable office supplies to large B-to-B customers. When large B-to-B customers issue RFPs for the sale and distribution of office supplies, Staples and Office Depot (including OfficeMax, which was acquired by Office Depot in 2013) are usually the two finalists for the business. In fact, Staples and Office Depot are often the only two companies that submit a proposal to supply a broad range of consumable office supplies on a nationwide basis.
The Merger Guidelines measure concentration using the Herfindahl-Hirschman Index (“HHI”). The HHI is calculated by totaling the squares of the market shares of every firm in the relevant market. Under the Merger Guidelines, a merger is presumed likely to create or enhance market power—and is presumptively illegal—when the post-merger HHI exceeds 2,500 and the merger increases the HHI by more than 200 points.
The market for the sale and distribution of consumable office supplies to large B-to-B customers is highly concentrated, and the parties control the majority of sales. Post-Merger, the market would be substantially more highly concentrated than it is today. Post-Merger, Staples would control more than 70% of this relevant market. The next largest competitor would possess less than 5% of the relevant market. The Merger would result in a post-Merger HHI of well over 2500, and an increase in concentration of well over 200 points. Post-Merger market concentration would be more than 4900, and would increase HHIs in an already concentrated market by well over 200 points. Thus, the Merger would result in concentration above the amount necessary to establish a presumption of competitive harm.
PROPOSED SOLUTIONS
ANSWER BY PROVIDING
· Offer realistic ways to solve what isn’t working or how to improve its current condition. Explain why these solutions work by offering testable evidence.
MARKET STRUCTURE AND THE MERGER’S PRESUMPTIVE ILLEGALITY
Staples and Office Depot are by far the two largest vendors of consumable office supplies to large B-to-B customers. When large B-to-B customers issue RFPs for the sale and distribution of office supplies, Staples and Office Depot (including OfficeMax, which was acquired by Office Depot in 2013) are usually the two finalists for the business. In fact, Staples and Office Depot are often the only two companies that submit a proposal to supply a broad range of consumable office supplies on a nationwide basis.
The Merger Guidelines measure concentration using the Herfindahl-Hirschman Index (“HHI”). The HHI is calculated by totaling the squares of the market shares of every firm in the relevant market. Under the Merger Guidelines, a merger is presumed likely to create or enhance market power—and is presumptively illegal—when the post-merger HHI exceeds 2,500 and the merger increases the HHI by more than 200 points.
The market for the sale and distribution of consumable office supplies to large B-to-B customers is highly concentrated, and the parties control the majority of sales. Post-Merger, the market would be substantially more highly concentrated than it is today. Post-Merger, Staples would control more than 70% of this relevant market. The next largest competitor would possess less than 5% of the relevant market. The Merger would result in a post-Merger HHI of well over 2500, and an increase in concentration of well over 200 points. Post-Merger market concentration would be more than 4900, and would increase HHIs in an already concentrated market by well over 200 points. Thus, the Merger would result in concentration above the amount necessary to establish a presumption of competitive harm.
PROPOSED SOLUTIONS
ANSWER BY PROVIDING
· Offer realistic ways to solve what isn’t working or how to improve its current condition. Explain why these solutions work by offering testable evidence.
