Office Supply Monopoly Will Harm Both Small and Large Firms, Says Study from American Postal Workers Union
New Report Says Staples/Office Depot Merger is ‘Bad for Business’
Divesting Assets Can’t Cure Damage Caused by Combining #1 and #2 Office-Supply Superstore Chains
11/03/2015 - WASHINGTON, DC – The American Postal Worker Union released “Bad for Business” today, an analysis of how the proposed Staples/Office Depot merger would hurt American businesses if approved by federal regulators. The report studies the impact of a proposed merger of Staples and Office Depot, America’s largest and second largest office-supply superstore chains, on business-to-business transactions.
“Bad for Business” analyzes the contract market, where businesses place bulk orders for office supplies. If regulators allow Staples and Office Depot to merge, the report finds:
Prices will go up and choices will go down. That’s the inevitable result of creating a monopoly in an important sector of the economy.
“If you put these two giants together, it would be like Bambi vs. Godzilla for anyone left in the market,” said Mark Dimondstein, president of the American Postal Workers Union. “Anybody else who sells or tries to sell office supplies would be tiny compared to the behemoth that Staples and Office Depot want to create – and that would eliminate any real competition.”
A combined Staples and Office Depot would have over $14 billion in annual sales to business customers in North America – nearly 14 times greater than its nearest competitor.
Anti-trust regulators around the world are concerned about the impact of the proposed merger on market competition. In addition to the review by the Federal Trade Commission in the United States, the European Union has opened an in-depth investigation (after an initial finding that the merger could be anti-competitive).
Rumors suggest that the two companies may attempt to win regulatory approval by offering to divest some holdings, such as assets of the former OfficeMax, which Office Depot absorbed in 2013.
Market data analyzed by APWU in “Bad for Business,” however, shows that divestiture couldn’t cure the harm that would be caused by combining the largest and second largest office-supply superstore chains.
According to “Bad for Business,” even if the merged companies were to divest former OfficeMax holdings, the new combined entity would still dwarf its nearest competitor. The competitive balance would not improve, and large and small businesses could be held hostage to price hikes, supply interruptions and other negative consequences of monopoly control of commodities that are essential for day-to-day business operations.
“Once you’ve created a monopoly, you can’t fix it by slicing off one small piece,” Dimondstein said. “The right approach is to prevent a single company from controlling an entire market in the first place. That’s why we have anti-trust laws – and we believe those laws should be rigorously enforced.”
“Bad for Business” follows up on “No Sale,” an earlier APWU report that focused on the impact of the proposed Staples/Office Depot merger on retail consumers. The APWU will submit its new report to the Federal Trade Commission and Department of Justice and will continue to share its legal and economic conclusions with state officials, investors, key shareholders and other stakeholders.
The APWU represents more than 200,000 active and retired employees of the U.S. Postal Service. APWU members are office-supply customers and would be affected by the proposed merger.
# # #