Staples sued by U.S. in bid to block Office Depot takeover

Staples will face a challenge by U.S. antitrust officials, who said for the second time in 20 years that the office supply chain’s proposed takeover of Office Depot Inc. will squelch competition and should be blocked.

The U.S. Federal Trade Commission filed a complaint Monday seeking to block the combination, which would leave just one national retailer of office supplies and raise prices for corporate customers who buy under contract, the agency said in a statement.

“The commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies,” said FTC Chairwoman Edith Ramirez. “The FTC’s complaint alleges that Staples and Office Depot are often the top two bidders for large business customers.”

During its investigation, the FTC zeroed in on the market for corporate customers that buy office products in large quantities through contracts that ensure steady deliveries and discounted prices. Two years ago, when the agency approved Office Depot’s merger with Office Max, it found that retail consumers have numerous options due to competition from Amazon.com Inc. and big-box retailers like Wal-Mart Stores Inc.

The $6.3 billion deal, announced in February, would combine the two biggest office-supply retailers in the United States, reducing the industry to a single major chain. The tie-up is part of a merger wave sweeping across industries from beer to drug stores to pharmaceuticals that’s under scrutiny from antitrust officials at the FTC and the Justice Department.

The Office Depot takeover is still facing an in-depth review in the European Union after regulators there said in September that the deal may reduce choice and raise prices.

The merger would create a retail chain with about $39 billion in revenue and thousands of stores.

GE scraps home appliance sale

GE has scrapped a $3.3 billion plan to sell its home appliance business to the Swedish company Electrolux, a deal opposed by U.S. regulators over concerns about competition.

The Fairfield, Conn., conglomerate said that it will continue to run the business as it looks for other options to sell it.

General Electric Co. offered no reason for its decision in a brief statement released Monday.

Electrolux is the world’s second-biggest home appliance maker after U.S. rival Whirlpool. The Stockholm-based company sells most of its products in the U.S. under the Frigidaire brand.

The U.S. Department of Justice had sued to stop the deal in July, saying the combined company would dominate sales of ovens and other cooking-related kitchen appliances, especially to customers like home builders, property managers, hotels and governments.

An antitrust attorney representing Electrolux downplayed competitive concerns by noting that Asian brands like Samsung and LG have rapidly increased their share of the large appliance market over the past decade.

The attorney also said huge retailers like Home Depot and major home builders can pressure manufacturers to keep prices low and competition intense.

Electrolux said Monday that it “regrets that GE has terminated the agreement while the court procedure is still pending.”

The company said settlement proposals that it considered to be reasonable were offered to federal regulators and would have addressed concerns about competition, but the Department of Justice rejected those proposals.

General Electric has been selling parts of its portfolio as it pushes to focus more on core industrial businesses that make large, complicated equipment for other companies.

Nick Heymann, an analyst at William Blair and Co., called the Electrolux deal “great,” but said GE “couldn’t get around” the antitrust issues. Samsung and LG, with strong market share in North America, could be prospective new buyers, he said.

GE said Monday that it was entitled to a breakup fee of $175 million from Electrolux.

Associated Press

This story was originally published December 7, 2015 at 10:45 PM with the headline "Staples sued by U.S. in bid to block Office Depot takeover."