A Tougher Look for the FTC

Declaring it is acting to protect consumer interests, the Federal Trade Commission has rejected the proposed merger of the nation’s two largest office supply superstores. Does the action signal a renewed emphasis on the FTC watchdog role over antitrust issues? It is too early to make such a call, but the agency certainly is more active than it was under the Bush and Reagan administrations, and that is a positive change for consumers.

Maintaining that the merger of Staples Inc. and Office Depot Inc. would substantially reduce competition in numerous markets including California, the commission voted 4 to 1 last week to seek a federal court injunction against the proposed $4-billion deal. The two discount giants say they will fight the decision, but the point has been made.

The FTC said consumers would have to pay millions of dollars more for office supplies if the merger went through. The agency, which cited several examples of markets in which prices differed depending on the number of office supply superstores, said no matter how the deal was reconfigured, competitive issues would not be resolved.

Staples and Office Depot combined--with more than 1,000 stores and annual sales of $10 billion--would decidedly surpass the remaining super chain, OfficeMax Inc., which has 800 stores (including 63 that would be purchased from Staples-Office Depot) and $5 billion in sales.

Under the Clinton administration, the FTC has taken other actions that stop short of a ban, for instance putting stiff conditions on a merger of two large pharmaceutical manufacturers, Ciba-Geigy and Sandoz. And regulators required several supermarket and department store chains to divest individual stores to encourage competition before the big boys could proceed with mergers. Rite Aid and Revco Drugs were blocked from merging on grounds that low-cost outlets for prescriptions would be diminished. So, in the last two years, the commission has begun taking a more active stance. High time.