FTC Clears OfficeMax and Office Depot Merger

FTC Relies Heavily on Econometric Analyses

On November 1, 2013, the United States' Federal Trade Commission provided regulatory clearance for the merger of OfficeMax and Office Depot, two of the largest office supplies retail chains in the United States. The office supplies industry attracted significant attention among the antitrust community in 1997, when Staples and Office Depot attempted to merge. That transaction was challenged by the FTC, and was blocked by the Court. The court proceedings in FTC v. Staples (1997) involved large-scale, complicated econometric work that pioneered the application of econometrics in antitrust cases. As a consequence, the February 2013 announcement of the OfficeMax and Office Depot merger generated a lot of public attention.

A Compass Lexecon team — Jon Orszag, Eugene Orlov, Dan Stone, Neal Lenhoff, Joseph Goodman, Jonathan Williams and many others in the Chicago office — was retained by Paul T. Denis, James A. Fishkin and Rani A. Habash of Dechert LLP to first advise the board of directors of OfficeMax and then provide economic analysis of the proposed transaction. Compass Lexecon also worked closely with Matthew J. Reilly, Kevin J. Arquit, Andrew M. Lacy and Evan I. Cohen of Simpson Thacher & Bartlett LLP, who were retained by Office Depot.

Compass Lexecon performed detailed econometric analyses of the competitive retail price effects of the transaction and the merging parties' pricing, and substantially expanded the econometric modeling used in FTC v. Staples. The analysis concluded that there was no systematic evidence that the proposed merger would result in higher retail prices, a finding that was presented to the FTC and ultimately cited as one of the main reasons to clear the merger. Specifically, the FTC said, "The econometric analysis reflects the new competitive dynamics in the industry and shows that the proposed merger is unlikely to result in anticompetitive price effects... All of the econometrics, none of which assumed or depended on any particular definition of a relevant product or geographic market, indicate that the merger is unlikely to lead to anticompetitive price increases."