EC approves Staples' acquisition of Office Depot
Following an in-depth review, the European Commission (EC) has approved the acquisition of office supplies distributor Office Depot by Staples, subject to the divestment of Office Depot's contract distribution business in Europe and entire business in Sweden.
Staples and Office Depot, both of the US, supply office products such as stationery, paper and printer supplies (e.g. toner and ink cartridges) in several European countries. Office products are marketed through a number of sales channels such as wholesale, contract sales and online sales.
The Commission's investigation focused on the effects of the transaction in the international contract sales channel as well as in the national contract sales channel in the Netherlands and Sweden.
Customers in the contract sales channel typically purchase their office supplies by entering into a framework contract with a contract stationer following a tender.
The investigation showed that only Staples, Office Depot and Lyreco are capable of entering into international supply contracts for large business customers in Europe, since they are present in several countries and can fulfil international orders. Customers do not consider switching to several national contracts as a sufficiently attractive alternative because of the lower prices achieved under international contracts and the savings in administrative costs. Moreover, the competition from specialist suppliers, such as companies supplying only printer cartridges, is limited as they offer a smaller product range and typically cannot provide the same services as those offered by contract stationers.
The Commission also found that barriers to enter the contract market are high due to the specific requirements of large contract customers who purchase under tenders. In particular, suppliers must be able to offer a large range of office products at competitive prices in a number of countries. Therefore, new competitors in this market would need to set up operations in many countries or enter into an international alliance with companies active in other countries.
The investigation also showed that online commerce companies, such as Amazon, cannot currently be considered as competitors in the contract business market in Europe since they only sell office products through the online sales channel.
The merger, as notified, would therefore have critically reduced competition in the already concentrated market for international contracts for office supplies. The Commission came to the same conclusions whether assessing the distribution of traditional office supplies as a whole or the distribution of stationery only.
The Commission also found that the transaction would have reduced competition in the markets for national contracts with large business customers in the Netherlands and Sweden, as well as in the wholesale supply of office products in Sweden. These were found to be particularly concentrated markets where few alternative suppliers are active.
To address the Commission's concerns the companies offered to divest:
- the whole of Office Depot's contract distribution business in the European Economic Area (EEA) and Switzerland to address both the competition concerns in international contract sales, as well as in national contract sales in Sweden and the Netherlands;
- Office Depot's entire business operations in Sweden to also address the competition concerns in the Swedish wholesale market for the supply of office products.
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