- EU concerned deal may harm competition, trigger higher prices
- Deal would create single major U.S. chain for office supplies
Staples Inc.’s plan to buy Office Depot Inc. for about $6.3 billion faces an in-depth European Union probe after regulators said the deal may lessen consumer choice and lead to higher prices.
The European Commission in Brussels said the tie-up has “potential competition concerns” in the market for office supplies to business customers. The deal could “eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases,” the commission said.
“All companies and organizations, big or small, need office supplies for their daily work,” EU Competition Commissioner Margrethe Vestager said in the statement on Friday. “We are opening this in-depth investigation to make sure that the merger of two of the main suppliers of office products will not have a negative effect on competition.”
Shares of Staples and Office Depot tumbled earlier this week on renewed concern that antitrust regulators will block the deal. Staples declined an additional 2.5 percent to $12.37 on Friday, while Office Depot dropped 5.3 percent to $6.96.
The merger would create a retail chain with about $39 billion in revenue and thousands of stores. The two companies agreed to the transaction following pressure from activist investor Starboard Value. Investors endorsed the move in February after reports of the pending merger first surfaced.
The Brussels-based EU authority said its initial probe showed that Staples and Office Depot, “together with their largest European competitor Lyreco, are the main suppliers of office products to business customers.” The merger may impede smaller players with a more restricted geographical spread “and may not be able to exercise a sufficient competitive constraint on the merged company.”
EU regulators are also concerned about possible competition concerns for the wholesale of office products in Sweden, where the merger would appear to leave “no significant competitors offering a wide portfolio of products,” according to the statement.
The commission set a Feb. 10 deadline for its in-depth analysis of the deal.