Judge slams the FTC as it tries to block Staples and Office Depot merger

March 24, 2016 11:05 AM

(Bloomberg)—U.S. District Judge Emmet Sullivan, who is deciding whether to grant an injunction that would halt the merger of Staples Inc. and Office Depot, knocked the U.S. Federal Trade Commission for attempting to elicit false information from an Inc. executive to bolster its case.

The rebuke spurred investor speculation that the deal can overcome the FTC’s objections. Staples is attempting to acquire Office Depot for about $6.3 billion, unifying the two largest U.S. office-supply chains. The transaction would help the companies cope with declining sales and the retail industry’s shift to e-commerce.

Shares of Staples, No. 4 in the Internet Retailer 2015 Top 500 Guide, and Office Depot (No. 8) surged after the judge’s criticism. Staples shares jumped Thursday morning as much as 7.8% to $10.83 in New York, the best intraday performance since February 2015. Office Depot climbed as much as 13% to $7.16, also the biggest rally in more than a year.

Sullivan said on Wednesday that it’s “very disturbing” when the government tries to persuade a witness “to say something for the benefit of the United States of America that is not true,” according to a hearing transcript. Sullivan made the comments after Prentis Wilson, a vice president of a new Amazon unit that sells office supplies to companies, testified in the trial.

Sullivan said that Wilson declined to make comments under oath regarding a written statement, according to the transcript, which didn’t specify what the comments concerned. The judge added that he wanted the matter, which arose in a closed-door session, made public.

Amazon’s role

Wilson was called to testify by the FTC about Amazon’s nascent business selling office supplies to corporations. The entry of Amazon, No. 1 in the Top 500, into the office-supply market is central to the case because Staples and Office Depot claim the online retailer will be a formidable competitor to an enlarged Staples. The agency, which sued to block the merger in December, says that the two companies dominate the market for sales to large corporate customers and the tie-up would lead to higher prices.

Tara Reinhart, a lawyer for the FTC, told Sullivan that the agency “certainly never asked” Wilson to say something that wasn’t true.

Responding to FTC questioning on Tuesday, Wilson said Amazon had secured only one contract from a company with more than $250 million in revenue. On Wednesday, in response to questions from a lawyer for Staples, Wilson said that overall, about 300,000 businesses had opened accounts with Amazon in the first 11 months of its Amazon Business service.

The case is Federal Trade Commission v. Staples Inc., 15-cv-2115, U.S. District Court, District of Columbia (Washington).




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