Today, the Federal Trade Commission closed its investigation of an office supply super-merger: the combination of Office Depot and OfficeMax, which you'd be forgiven for thinking were the same store anyway. They'd been talking about it since early this year, and the FTC worried that the combination of two of the industry's biggest players might post a threat to competition. So they ran the numbers.
There's some precedent for antitrust enforcement in this area. Back in 1997, the FTC denied a proposed merger between Staples and Office Depot, figuring the resulting giant would have too much control over the market. Now, the OfficeMax-Office Depot tie-up would create the biggest entity in that traditional space, with some $17.5 billion in combined annual sales. But guess what's happened between 1997 and now?
That's right — the Internet.
Lots of companies and individuals just order their highlighters and paper clips from Amazon.com these days, or pick them up from Walmart or Target, putting Staples, OfficeMax and Office Depot under intense pressure. In that kind of environment, no amount of consolidation in the office supply space could threaten prices, since the external competition is so fierce.
That's probably true of lots of industries, and signifies a shift in the antitrust landscape: When you have a couple super-retailers that sell everything anywhere as close to immediately as possible, other suppliers can basically get as big as they have to to survive.
"Until this was announced, everyone was like 'oh no, has the internet competition changed the competitive analysis enough to get antitrust approval?'" said Matt Reilly of Simpson Thatcher, who argued the case for Office Depot. "This was a significant change."
Ironically, for some of those kinds of companies, it's too late: Borders and Barnes & Noble, for example, or Circuit City and Best Buy. They used to be the ones driving mom and pops out of business. Now they've come up against something even bigger.