Regulators contest Staples combination with Office Depot

Lately, mergers and acquisitions have increased on the back of cheap financing and slow economic growth, although a few companies have fallen prey to antitrust regulatory bodies.

"We are confident that this transaction is consistent with the 2013 FTC statement in the Office Depot-Office Max merger and intend to pursue legal options in order to complete this transaction".

Shares of the two office supply retailers fell sharply after the Federal Trade Commission (FTC) announced its decision.

The commission said that there was evidence to show that deal wouldn't harm consumers, but also allowed the deal in part because the combined forces of Office Depot and OfficeMax would have competition from an independent Staples.

In response, both Staples and Office Depot agreed to challenge the FTC's decision, and hinted that the merger would help generate net synergies in excess of $1 billion over the three-year integration period.

In reaching its decision, the FTC is acting against the best interests of the thousands of business customers served by Staples, Office Depot and our competitors.

The Bureau's review found that if the acquisition were to proceed, Staples would account for over 80% of sales of various office products to affected customers in Canada, including supplies such as pens, pencils, highlighters, staples, sticky notes and paper.

The proposed merger would leave just one office supply retailer with a brick-and-mortar presence.

The companies said in a statement on Monday that they would fight the FTC in court, arguing that they face stiff competition from manufacturers who sell their own products, e-commerce companies, big box stores and others.

FTC adds in the press release that both Staples and Office Depot can provide low prices, nationwide distribution when competing for contracts.

The stock price of Staples dropped 13.75% to $10.66 per share while the stock value of Office slid 15.75% to $5.59 per share. In 1997, the commission successfully sued to block their proposed merger, saying the tie-up would have hurt competition. It insisted that the savings created would make the two companies more efficient, which would enable them to offer lower prices.

The FTC isn't focused on competition over dwindling shoppers for office supplies.