Why Staples and Office Depot should have merged (blocked by FTC and DOJ).

·Problem:The FTC is trying to block the Staples/Office Depot merger because it has reason to believe that the proposed merger would violate Section 7 of the Clayton Act: it may lessen competition or create a monopoly. ·Staples, Office Depot, and Office Max may be the largest office supply retailers on the market, but what is there individual market share? Without these facts the HHI cannot be calculated. If they each control about 10% of the …

…competition. ·Another reason this merger poses no threat to consumers is that manufacturers of office supplies have powerful incentives to guard against retail monopoly. Monopolists raise prices. Higher prices reduce consumer demand. If the Staples-Office Depot merger reduced competition and sales volume, manufacturers distributing through these retail outlets would lose sales. To avoid losing revenues, office-supply producers would offer discounts and other favorable deals to rival retailers in order to prevent a Staples-Office Depot monopoly.