ANTICOMPETITIVE EFFECTS: The Merger Would Eliminate Vital Head-To-Head Competition between Staples and Office Depot
The two companies are each other’s closest competitors. They are the two largest vendors of consumable office supplies to large B-to-B customers in the United States. The scale and capabilities of Staples and Office Depot are similarly matched, and are much larger and more robust than those of the next-largest vendor of consumable office supplies to large B-to-B customers (a regional office supplies vendor, W.B. Mason).
Staples’ and Office Depot’s size allows them to obtain products from manufacturers at lower prices than other vendors generally can. Both also offer a collection of distribution services that no other vendor of consumable office supplies can match: a national footprint with an extensive array of warehouses and distribution centers located across the country; correspondingly large salesforces; product breadth and depth, including private-label products; a single point of contact across all of a customer’s locations; a single user interface that connects to a customer’s procurement and billing systems; and other significant value-added offerings, such as order tracking, utilization reporting, and customizable catalogs.
The companies acknowledge that they are each other’s closest competitors. One of Office Depot’s own documents indicates that “[o]n a national scale, Office Depot’s competition is Staples.” Staples refers to itself as operating in a “2 player national market” and notes that “[t]here are only two real choices for customers.”
They are often the first and second choices for large B-to-B customers of consumable office supplies, and predominantly win large B-to-B customers from, and lose large B-to-B customers to, each other.
Staples and Office Depot compete aggressively with each other on price and non-price terms to win and retain the business of large B-to-B customers. Staples and Office Depot frequently must compete with each other by lowering prices, increasing discounts or rebates, and providing significant cash incentives to win or keep large B-to-B customer accounts.
Large B-to-B customers benefit from the competition between the two firms. Among other things, that competition enables customers to pit Staples and Office Depot against each other to obtain lower prices and better contract terms. Large B-to-B customers switch, or threaten to switch, their business from Staples to Office Depot, and vice versa, to obtain better prices, discounts, cash incentives, and other beneficial terms. There are many of examples of direct price competition between Staples and Office Depot for large B-to-B customers. The Merger would eliminate this intense head-to-head price competition for large B-to-B customers.
Staples and Office Depot also compete aggressively on non-price terms to win large B-to-B customers by offering high-quality services. They currently risk losing business to each other if large B-to-B customers perceive one company’s service as inferior or lacking. After the Merger, Staples would face substantially less competition for large B-to-B customers, and would have less incentive to improve, or even maintain, its current level of service to win or keep business.
Retail stores and internet websites directed at retail consumers are not viable alternatives for most large B-to-B customers. Such retailers cannot provide the level of pricing or service that office supplies vendors such as Staples and Office Depot provide and that large B-to-B customers require.
Wholesale suppliers of office supplies are not meaningful alternatives for most large B-to-B customers because wholesalers generally sell only for resale, not to businesses for their own use. Even when wholesalers work with independent vendors to distribute to customers, those wholesaler-vendor partnerships cannot provide the level of pricing or service that large office supplies vendors provide and that large B-to-B customers require.
Manufacturers of consumable office supplies are not a viable distribution option for most large B-to-B customers’ consumable office supplies needs. Given the breadth of office supplies large B-to-B customers buy, such customers would have to purchase from a large number of different manufacturers to cover their employees’ needs. Such purchasing would be highly inefficient, costly, and not practicable for most large customers. Moreover, manufacturers of consumable office supplies generally sell only in very large quantities, generally far larger than a B-to-B customer would purchase for its own use. As a result, manufacturers of consumable office supplies generally do not sell their products directly to customers buying for their own end-use and not for resale.
Other office supplies vendors, such as Amazon Business, regional vendors such as W.B. Mason, distribution consortia, and vendors of adjacent products, such as janitorial/sanitation products or breakroom supplies, generally have some combination of higher costs and thus higher prices, limited geographic footprints, and/or logistical and coordination challenges for large B-to-B customers. As a result, they would not meaningfully constrain Staples’ exercise of market power post-Merger.
ANSWER BY
PROPOSED SOLUTIONS
· 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.
ANTICOMPETITIVE EFFECTS: The Merger Would Eliminate Vital Head-To-Head Competition between Staples and Office Depot
The two companies are each other’s closest competitors. They are the two largest vendors of consumable office supplies to large B-to-B customers in the United States. The scale and capabilities of Staples and Office Depot are similarly matched, and are much larger and more robust than those of the next-largest vendor of consumable office supplies to large B-to-B customers (a regional office supplies vendor, W.B. Mason).
Staples’ and Office Depot’s size allows them to obtain products from manufacturers at lower prices than other vendors generally can. Both also offer a collection of distribution services that no other vendor of consumable office supplies can match: a national footprint with an extensive array of warehouses and distribution centers located across the country; correspondingly large salesforces; product breadth and depth, including private-label products; a single point of contact across all of a customer’s locations; a single user interface that connects to a customer’s procurement and billing systems; and other significant value-added offerings, such as order tracking, utilization reporting, and customizable catalogs.
The companies acknowledge that they are each other’s closest competitors. One of Office Depot’s own documents indicates that “[o]n a national scale, Office Depot’s competition is Staples.” Staples refers to itself as operating in a “2 player national market” and notes that “[t]here are only two real choices for customers.”
They are often the first and second choices for large B-to-B customers of consumable office supplies, and predominantly win large B-to-B customers from, and lose large B-to-B customers to, each other.
Staples and Office Depot compete aggressively with each other on price and non-price terms to win and retain the business of large B-to-B customers. Staples and Office Depot frequently must compete with each other by lowering prices, increasing discounts or rebates, and providing significant cash incentives to win or keep large B-to-B customer accounts.
Large B-to-B customers benefit from the competition between the two firms. Among other things, that competition enables customers to pit Staples and Office Depot against each other to obtain lower prices and better contract terms. Large B-to-B customers switch, or threaten to switch, their business from Staples to Office Depot, and vice versa, to obtain better prices, discounts, cash incentives, and other beneficial terms. There are many of examples of direct price competition between Staples and Office Depot for large B-to-B customers. The Merger would eliminate this intense head-to-head price competition for large B-to-B customers.
Staples and Office Depot also compete aggressively on non-price terms to win large B-to-B customers by offering high-quality services. They currently risk losing business to each other if large B-to-B customers perceive one company’s service as inferior or lacking. After the Merger, Staples would face substantially less competition for large B-to-B customers, and would have less incentive to improve, or even maintain, its current level of service to win or keep business.
Retail stores and internet websites directed at retail consumers are not viable alternatives for most large B-to-B customers. Such retailers cannot provide the level of pricing or service that office supplies vendors such as Staples and Office Depot provide and that large B-to-B customers require.
Wholesale suppliers of office supplies are not meaningful alternatives for most large B-to-B customers because wholesalers generally sell only for resale, not to businesses for their own use. Even when wholesalers work with independent vendors to distribute to customers, those wholesaler-vendor partnerships cannot provide the level of pricing or service that large office supplies vendors provide and that large B-to-B customers require.
Manufacturers of consumable office supplies are not a viable distribution option for most large B-to-B customers’ consumable office supplies needs. Given the breadth of office supplies large B-to-B customers buy, such customers would have to purchase from a large number of different manufacturers to cover their employees’ needs. Such purchasing would be highly inefficient, costly, and not practicable for most large customers. Moreover, manufacturers of consumable office supplies generally sell only in very large quantities, generally far larger than a B-to-B customer would purchase for its own use. As a result, manufacturers of consumable office supplies generally do not sell their products directly to customers buying for their own end-use and not for resale.
Other office supplies vendors, such as Amazon Business, regional vendors such as W.B. Mason, distribution consortia, and vendors of adjacent products, such as janitorial/sanitation products or breakroom supplies, generally have some combination of higher costs and thus higher prices, limited geographic footprints, and/or logistical and coordination challenges for large B-to-B customers. As a result, they would not meaningfully constrain Staples’ exercise of market power post-Merger.
ANSWER BY
PROPOSED SOLUTIONS
· 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.
