Staples Inc was down the most in more than a year after U.S. regulators said they would challenge the proposed takeover by the office supply chain of Office Depot, which is the second time in the past 20 years that officials from the antitrust regulator said the merger would end competition and needed to be blocked.
Staples stock was down over 14%, the most since May of 2014 and shares of Office Depot plummeted by up to 18%, after the Federal Trade Commission announced on Monday it was seeking to stop the merger, which would leave only on national retailer of office supplies which would in turn raises prices for customers who purchase under contract.
The commission believes there is reason to believe the proposed merger between Office Depot and Staples would likely eliminate the beneficial competition that is relied upon by large companies to lower office supply costs, said Edith Ramirez the FTC Chair.
Staples was lower by 9.4% in late afternoon trading, while Office Depot remained 17% down.
The commission voted 4 to 0 to block this transaction. During the commission’s investigation, it zeroed in on corporate customers that purchase office products in large quantities in contract that ensure discounted prices and steady deliveries.
In 2013, when the FTC approved the merger between Office Depot and Office Max it found that there are many options for retail customers due to the competitions from Walmart, Target, Amazon and other retailers.
Office Depot and Staples said they could fight the case in court brought by the FTC, arguing that the deal would be a benefit to customers saying the FTC decision was based upon flawed analysis and the misunderstanding of intense competitiveness that both Office Depot and Staples compete under.
The deal worth $6.3 billion announced this past February, would combined the two largest retailers of office supplies in the United States reducing the industry to only one major chain.
The tie up is part of widespread wave of mergers sweeping industries from drug stores to beer to pharmaceuticals that are under scrutiny by the Justice Department and FTC.
The takeover by Office Depot is under review by the European Union after its regulators said last September that the deal might lower overall choice and increase prices.