Yesterday, the Commissioner of Competition (the “Commissioner”) filed an application to the Competition Tribunal challenging Staples, Inc.’s (“Staples”) proposed acquisition of Office Depot Inc. (“Office Depot”). The Commissioner’s announcement coincided with the US Federal Trade Commission’s (the “FTC”) parallel challenge south of the border.
On February 4, 2015, Staples announced that it would acquire Office Depot in a transaction valued at $6.3 billion. At the time, Staples claimed that the transaction would result in “at least $1 billion of synergies” and that these saving would “dramatically accelerate strategic reinvention which is focused on driving growth in the delivery businesses […].” See press release here.
Staples is a major US based supplier of office products, such as stationary, computers and accessories, office furniture, janitorial products, etc. In Canada, Staples operates through four subsidiaries, including Corporate Express Canada Inc. (also known as “Staples Advantage”) which focuses on the delivery of office products to business customers. Office Depot, also a US based supplier of office products (including providing business delivery services) and operates in Canada under the Grand & Toy brand.
According to the Bureau’s press release, it believes that the merged entity would account for over 80% of sales of various office products and that the proposed acquisition would likely substantially lessen competition in the office products delivery business segment in Canada. The Bureau indicated that affected customers include for profit, and not-for profit businesses, governments, health care organizations and educational institutions, which collectively purchase more than $500 million in office products in Canada annually.
The Bureau is seeking either a complete partial blocking of the transaction.
The focus on the B2B aspect of the parties’ businesses suggests that the Bureau does not believe that smaller office supply businesses or online vendors are effective substitutes for business customers seeking delivery and related services.
The focus of how the proposed merger may impact a particular set of customers is a good reminder for companies seeking to merge with competitors to ensure that they consider the potential impact of their deal on the various types of customers they service to proactively identify possible concerns. The other interesting takeaway is that, even in retail mergers, the presence of online vendors may not be sufficient to address the Bureau’s substantive concerns.
Finally, this case serves as a useful reminder that the Bureau works closely with competition agencies in other jurisdictions, including with respect to bringing parallel enforcement action where it believes it is appropriate to do so.
We will continue to monitor developments related to this case.