ANALYSIS OF AGREEMENT CONTAINING CONSENT ORDER

TO AID PUBLIC COMMENT

In the Matter of Sycamore Partners II, L.P., Staples, Inc., 

and Essendant Inc., File No. 181-0180, Docket No. C-4667

I. INTRODUCTION AND BACKGROUND

The Federal Trade Commission (“Commission”) has accepted an Agreement Containing 

Consent Order (“Consent Agreement”) from Sycamore Partners II, L.P. (“Sycamore”), Staples, 

Inc. (“Staples”), and Essendant Inc. (“Essendant”) (collectively, “Respondents”) to remedy the 

anticompetitive effects that otherwise would result from Staples’ acquisition of all of the

outstanding shares of common stock of one of its wholesalers, Essendant (the “Acquisition”).

The proposed Consent Agreement, among other things, limits the persons within Sycamore and 

Staples who have access to certain commercially sensitive information.

On September 14, 2018, Staples and its affiliates agreed to acquire all of the outstanding 

shares of common stock of Essendant. The Complaint alleges that Sycamore’s and Staples’ 

access to certain commercially sensitive information (“CSI”), without adequate safeguards to 

ensure that Sycamore and Staples will not misuse the information, could lead to anticompetitive 

conduct. The proposed Consent Agreement remedies this concern by limiting Sycamore’s and 

Staples’ access to: (1) CSI of Essendant’s resellers; (2) CSI of end customers of Essendant’s 

resellers; and (3) Essendant’s CSI that includes, uses, or incorporates CSI of Essendant’s 

resellers or CSI of end customers of Essendant’s resellers.

On January 25, 2019, by a vote of 3-2 -- with Chairman Simons, Commissioner Phillips 

and Commissioner Wilson voting in the affirmative, and Commissioner Chopra and 

Commissioner Slaughter dissenting -- the Commission issued an Administrative Complaint, and

accepted for public comment an Agreement Containing Consent Order, resolving allegations in 

the Complaint that the Acquisition, if consummated, would violate Section 7 of the Clayton Act, 

as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 

15 U.S.C. § 45, by eliminating direct and substantial competition between Staples’ and 

Essendant’s reseller customers in the market for the sale and distribution of office products to 

midmarket business-to-business customers. The elimination of this competition could result in 

higher prices for midmarket end customers. The proposed Consent Agreement would remedy the 

alleged violations by limiting Sycamore’s and Staples’ access to CSI as described above. 

The proposed Consent Agreement has been placed on the public record for 30 days to 

solicit comments from interested persons. The Commission issued the accompanying Decision 

and Order (“Order”) as final prior to seeking public comment, as provided in Section 2.34(c) of 

the Commission’s Rules. This will allow the Commission to enforce the Order if there are any 

violations of its provisions during the public comment period. Comments received during this 

period will become part of the public record. After 30 days, the Commission again will review 

the proposed Consent Agreement and comments received, and decide whether it should withdraw 

from the Consent Agreement, or modify the accompanying Order. 
II. THE PARTIES

Sycamore is a private equity firm specializing in retail and consumer investments. 

Sycamore acquired Staples in September 2017. Headquartered in Framingham, Massachusetts, 

Staples is the largest vertically integrated reseller of office products in the United States, selling 

office products to consumers through its e-commerce website and retail stores and to corporate 

and government end customers through its North American Delivery business. Before Sycamore

acquired Staples, Staples reported sales of $18.2 billion, which includes revenues from its U.S. 

and foreign operations.

Essendant is the largest wholesale distributor of office products in the United States, with 

net sales of over $5 billion in 2017. Headquartered in Deerfield, Illinois, Essendant sells and 

distributes office products to thousands of commercial resellers through its extensive network of 

more than 60 U.S. distribution centers. Essendant also provides value-added services to its 

reseller customers, such as digitized product content and marketing tools. Essendant’s broad 

base of reseller customers includes large national accounts (such as Staples, Office Depot, and 

Costco), independent dealers, and online retailers. Essendant does not offer its products directly 

to end customers, i.e. customers buying office products for their own use.

III. THE PRODUCTS AND STRUCTURE OF THE MARKETS

Staples and Essendant both provide a broad and deep assortment of office products across

a number of product categories—including traditional office supplies, copy paper, ink and toner,

janitorial and sanitation supplies, breakroom supplies, and technology products—but do so at

different levels of the supply chain. Staples sells office products directly into all end customer 

segments—including individual consumers, small/home office, midmarket (small-and-medium 

businesses or “SMB”), and enterprise (large organizations such as Fortune 100 companies or the 

federal government). 

Essendant and S.P. Richards Company (“SPR”) are the only two U.S. wholesalers 

supplying a wide assortment of office products as well as value-added services to commercial 

resellers, including thousands of independently owned and operated dealers (also known as the 

independent dealer channel, “IDC” or, collectively, “IDCs”), throughout the United States. The 

IDCs, which predominately serve midmarket end customers in their local communities, excel at 

providing high-touch service and customizing their programs and services to fit the needs of their 

customers. The IDCs compete directly with Staples to sell office products to these midmarket 

customers.

The relevant line of commerce in which to analyze the effects of the Acquisition is the 

sale and distribution of office products to midmarket business-to-business customers. The sale 

and distribution of office products to midmarket business-to-business customers entails selling 

office products and related services to customers who purchase those products and services for 

consumption, not for resale. The relevant geographic markets in which to analyze the effects of 

the Acquisition on this market are local. Most midmarket customers have one or only a few 

locations in the same local area. Likewise, most of the IDCs who serve these midmarket 
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customers compete in one or a small handful of local markets. These relevant markets contain 

many resellers—including Staples, Office Depot, independent resellers (including Essendant’s 

resellers and SPR’s resellers), Amazon, and others—with Essendant’s reseller customers 

accounting for a substantial share of the market. Entry into these markets would not be timely, 

likely, or sufficient to mitigate the anticompetitive effects of the Acquisition, which are described 

below.

IV. THE EFFECTS OF THE ACQUISITION

To carry out the distribution activities currently undertaken by Essendant under its “Wrap 

and Label” and “Drop-ship” programs, Essendant’s reseller customers must regularly provide 

Essendant with CSI about their end customers.

Under the Wrap and Label program, Essendant’s resellers furnish detailed information 

about each end customer’s orders so that Essendant can deliver products to the reseller prepacked for the end customer. This saves a reseller the time necessary to sort through multiple 

unlabeled pallets and compile each end customer’s orders for the day. Similarly, under the Dropship program, Essendant delivers products directly to a reseller’s end customer on behalf of the

reseller when the end customer’s location is outside of the reseller’s local delivery area. This 

allows an Essendant reseller to serve end-customer locations outside of the reseller’s delivery 

area on a next-day basis seamlessly. To take advantage of these programs, Essendant’s resellers

must regularly furnish CSI such as end-customer names, locations, purchasing history, and 

product and service preferences. 

Absent a remedy, the Acquisition would give Staples access to information it previously 

could not obtain relating to Essendant’s resellers’ (i.e., Staples’ competitors’) end customers. 

The Commission’s Complaint alleges that this detailed end-customer information, together with 

Staples’ access to Essendant’s resellers’ costs of goods, could enable Staples to offer higher 

prices than it otherwise would when bidding for an end customer’s business against one of 

Essendant’s resellers. Accordingly, access to this CSI may substantially lessen competition in 

the market for the sale and distribution of office products to midmarket business-to-business 

customers by eliminating direct and substantial competition between Staples and Essendant’s 

resellers, which could result in higher prices to midmarket end customers. 

V. THE PROPOSED CONSENT AGREEMENT

The proposed Consent Agreement remedies the likely anticompetitive effects of the 

Acquisition by limiting Sycamore’s and Staples’ access to (1) CSI of Essendant’s resellers; (2) 

CSI of end customers of Essendant’s resellers; and (3) Essendant’s CSI that includes, uses, or 

incorporates CSI of Essendant’s resellers or CSI of end customers of Essendant’s resellers 

(hereinafter, “Protected Commercially Sensitive Information”). Specifically, the proposed 

Consent Agreement requires Sycamore and Staples to create a firewall separating Staples’ 

business-to-business end customer selling functions from Essendant’s wholesale selling function. 
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The firewalled employees will have responsibilities for performing Essendant’s former 

wholesale functions for Essendant’s resellers. Sycamore and Staples will be required to take all 

actions necessary to prevent access to, or the disclosure or use of, Protected Commercially 

Sensitive Information. After the Acquisition, only those Staples employees performing 

wholesale, legal and regulatory, or shared services functions or members of a prescribed 

management oversight group will have access to the Protected Commercially Sensitive 

Information, and only to the extent necessary to perform their assigned functions.

The proposed Consent Agreement also provides for the appointment of a monitor for ten 

years to assure Sycamore’s and Staples’ compliance with the Consent Agreement. Further, the 

proposed Consent Agreement contains appropriate reporting requirements.

Finally, the proposed Consent Agreement contains a prior notice provision for subsequent 

acquisitions by Sycamore or Staples resulting in total holdings of an ownership interest of more 

than ten percent of any company meeting specific criteria related to office products sales (a 

“Notifiable Acquisition”). Under the proposed Consent Agreement, for the next ten years,

Sycamore and Staples will be required to give the Commission thirty days’ advanced notice of 

any Notifiable Acquisition that is not subject to the Hart-Scott-Rodino Act. Sycamore and 

Staples must also provide the Commission with information about and documents relating to the 

to-be-acquired company. If 30 days expire without Commission action, Sycamore and Staples 

will be permitted to consummate the Notifiable Acquisition.

The Consent Agreement will have a term of ten years.

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The sole purpose of this analysis is to facilitate public comment on the proposed Consent 

Agreement. This analysis does not constitute an official interpretation of the proposed Consent 

Agreement or modify its terms in any way.