FTC Likely to Approve Office Depot, Office Max Merger

According to news sources, the Federal Trade Commission is likely to approve the merger of Office Depot and OfficeMax, the second- and third-largest office supply megastores. After reviewing the antitrust implications of the proposed merger, news reports said, the agency is expected to rule the merger would not substantially lessen competition and decrease consumer choice.

The Wall Street Journal noted:

The FTC’s views are a signal that the agency believes the market has changed in the 16 years since the commission in 1997 won a court ruling that blocked the would-be merger of Staples Inc. and Office Depot. At the time, the FTC argued the earlier proposed deal would harm retail competition in geographic markets around the country and lead to higher prices for consumers.

But Internet competition to the office-supply superstores has stiffened since then, a dynamic that OfficeMax and Office Depot emphasized with FTC antitrust officials.

It’s ironic that if the FTC in this merger recognizes that markets are dynamic, not static, why they didn’t realize that in 1997 when they closed down the earlier office products merger and countless other mergers that would have benefited consumers? As CEI has stated in numerous comments, most recently below,

. . . antitrust enforcers assume that the future will be static rather than dynamic. In fact, government antitrust action may hold back innovation.

Antitrust regulators usually narrowly redefine markets rather than considering the larger field in which the sector is operating. Computers, operating systems and search engines are one such example. More than a decade ago, U.S. antitrust regulators also redefined markets involving “mega-office products discount stores” and denied a merger without considering catalogues and e-commerce sites offering those same products. That showed a major shortcoming in not recognizing how markets were evolving through technological innovations.

Consumers are the ones who benefit from the vibrant competition that exists in the high-tech industries. They are the ones who would suffer if the government disrupts that market through antitrust action to mold its own view of the future. The nature and speed of institutional and technological change is misunderstood. Predicting where systems will go in the future is a task for markets, not antitrust lawyers.