Corporate America’s love of potentially profit-boosting mergers is set to reach a new apex this year with nearly 10,000 deals being announced. But federal regulators have begun to bat down a few.
On Monday, two mega-deals were hit. General Electric called off the $3.3 billion sale of its appliance division to Electrolux of Sweden after facing resistance from the Department of Justice. And the Federal Trade Commission said it would attempt to block the merger of Staples and Office Depot.
In both cases, regulators said the deals could potentially raise prices for consumers.
“We’re smack in the middle of a merger wave,” said Diana Moss, president of the American Antitrust Institute. “You have an environment where you have very few competitors in key markets..”
In the United States alone, nearly 10,000 mergers and acquisitions worth more than $2 trillion have been announced so far this year, according to data provider Dealogic, setting a record.
But consolidation in several markets has begun to raise concerns among regulators.
The $6.3 billion deal to combine the titans of paper clips, printing paper and other office essentials was fraught from the beginning. Regulators blocked Office Depot and Staples from merging nearly two decades ago. But the companies argued that the industry has changed dramatically since then.
In a statement, the FTC said not enough has changed, noting that Staples and Office Depot are each other’s closest competitors. The proposed deal “is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” the agency said.
Staples and Office Depot said they will fight for the deal. “Unfortunately, the FTC’s decision is based on a flawed analysis and misunderstanding of the intensely competitive landscape in which Staples and Office Depot operate,” the companies said in a joint statement signed by their chief executives.
Staples stock fell nearly 14 percent Monday, while Office Depot’s crumbled more than 15 percent.
The demise of General Electric’s sale of its appliance business came amid a court fight.
General Electric has been trying to sell its appliance business for years as it focuses on the industrial parts of the company. But the Justice Department argued that merging Electrolux’s line of appliances, including Frigidaire, with GE’s flagship products, including its GE Monogram line, would raise prices for consumers. The department filed suit in July.
Both sides have been arguing their case before a U.S. District Court since November, but before a ruling could be handed down, GE said in a statement that it was calling off the deal with Electrolux. It said it would still pursue a sale.
“This deal was bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial,” Deputy Assistant Attorney General David I. Gelfand said in a statement.
GE’s stock was flat Monday.