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Statement of 

Chairman Joseph J. Simons, Commissioner Noah Joshua Phillips, and 

Commissioner Christine S. Wilson

Concerning the Proposed Acquisition of Essendant, Inc. by Staples, Inc.

FTC File No. 181-0180

Staples, Inc. (“Staples”), now owned by the private equity fund Sycamore Partners 

(“Sycamore”), proposes to merge with Essendant, Inc. (“Essendant”). Staples is the world’s 

largest retailer of office products and related services. In addition to sales in other channels, 

Staples sells office supplies directly to mid-sized businesses. Essendant is a wholesale 

distributor of office products and sells to independent commercial dealers/resellers and others in 

the upstream office supply distribution market. The independent dealers that are customers of

Essendant compete with Staples for downstream sales to mid-sized business customers. Thus, 

for the most part, Staples and Essendant do not compete with each other; rather, Staples 

competes with Essendant’s customers.

Following a staff investigation that considered several possible vertical and horizontal theories of 

competitive harm, the Commission has voted 3-2 to issue a complaint and accept a settlement, 

which would resolve the only competitive concern arising out of this transaction that is supported 

by the evidence. Specifically, the Commission found that, without adequate safeguards postmerger, Staples would gain access to the competitively sensitive information of Essendant’s 

dealer customers and the customers of those dealers, which could enable Staples to engage in 

anticompetitive conduct. To resolve this issue, the Commission’s proposed order imposes 

firewalls and other safeguards to protect the competitively sensitive information of Essendant’s 

dealer customers, as well as the sensitive information of the customers of those dealers. 

The structure of this market and the competitive questions about the proposed transaction 

required an in-depth, careful investigation and analysis. That is exactly what the staff conducted. 

They interviewed more than a hundred market participants, analyzed party and third-party data, 

reviewed full document productions by the merging parties that included millions of documents, 

and conducted sophisticated economic analyses using the best economic tools available. Staff 

thoroughly investigated every theory of anticompetitive harm that might reasonably be 

applicable to this case. Based on that investigation, staff found that the evidence did not support 

any claims of likely anticompetitive harm other than the one for which a remedy has been 

obtained. We agree.1

 

The primary theory of harm that was considered and rejected involves Staples potentially raising 

Essendant’s prices. This hypothetical conduct potentially would force Essendant’s independent 

dealer customers to raise prices to their customers—the mid-sized businesses—some of whom 

would presumably look for other suppliers. Staples would lose money from whatever sales 

Essendant lost due to its higher prices. But if enough businesses that switched sales away from 

the independent dealers decided to buy from Staples, in theory, the overall strategy could be 

profitable. The evidence, however, did not support this theory.

 1 Commissioner Chopra’s dissent suggests that the Commission is “jumping to conclusions” and that “an 

independent fact-finder or Court” would likely reach different conclusions. But the Commission is basing its 

conclusions on, as we describe above, staff’s extremely thorough investigation conducted in this matter. The notion 

that the Commission is relying on an “insufficiently developed record” is simply untenable. 
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First, the evidence showed that rather than absorbing price increases from Essendant, many

independent dealers would switch to Essendant’s largest competitor, S.P. Richards. The 

evidence demonstrated that S.P. Richards offers comparable products and services and is viewed 

as a strong substitute for Essendant. Staff closely scrutinized the strengths and weaknesses of 

S.P. Richards relative to Essendant, including geographically, and the evidence showed that S.P. 

Richards is a viable substitute for Essendant. Although there are some transaction costs to 

switching wholesalers, the evidence showed that a substantial number of independent dealers 

have switched their wholesaler in the past, use both wholesalers today, and reported that they 

would be willing to shift their business in the face of a price increase from Staples.2

 Further, the 

evidence showed that many independent dealers could take other actions to counter any attempt 

by Staples to increase prices or degrade services, including buying directly from office supply 

manufacturers or from other sources. Thus, the evidence did not support the theory that Staples 

could profitably raise the prices that Essendant charges its customers in the first place.

The record further showed that even if Staples raised Essendant’s prices and in turn independent 

dealers that used Essendant as their primary wholesaler raised prices, the customers those dealers 

would lose would not likely switch to Staples. Staples’ share in the downstream market for midsized businesses is small. And even that small share likely overstates Staples’ competitive 

significance, because Staples is not presently a particularly close substitute for mid-sized end 

customers who currently purchase from Essendant dealers. The evidence indicated that Staples’ 

niche of this market is focused on customers who are less reliant on high-touch services. In 

contrast, the customers of Essendant’s dealers typically value service, such as optimized 

delivery, personalized customer service, and inventory services, and, accordingly, find Staples 

unattractive. Even if Essendant’s dealer customers stuck with Essendant in the face of a price 

increase, the downstream customers that those dealers would lose from the resulting higher 

prices would not switch to Staples; they would likely switch to dealers buying from S.P. 

Richards or other sources of supply. Thus, there was insufficient evidence to support the theory 

that Staples would engage in any kind of post-merger cost-increasing or “foreclosure” strategy 

aimed at Essendant and its customers.

Staff also investigated a number of other theories of harm. They considered whether there would 

be a loss of potential competition in which either Staples or Essendant would move into the 

distribution space currently occupied by its merger partner. The investigation found insufficient 

evidence to support such a theory of competitive harm. Staff also considered whether the 

combined entity could exercise increased market power on the “buy side”—i.e., in purchasing 

supplies from manufacturers or other suppliers—that Staples could then exploit against its 

suppliers. A significant portion of the procompetitive efficiencies expected to arise from the 

merger would indeed flow from lowering purchasing costs. However, while the record reflects 

that such cost savings are likely to be achieved, the evidence did not support the theory that those 

cost savings would result from an increase in Staples’ buyer market power. Such cost savings 

are only anticompetitive when they result from an exercise of market power by the buyer, which 

requires that the buyer possesses the ability to reduce overall market demand and price by 

reducing its own purchases. This conduct inflicts a welfare loss under well-recognized 

monopsony models—but that welfare loss does not occur when, for example, a buyer obtains a 

 2 Although Commissioner Slaughter argues that “some qualitative evidence indicates that switching from Essendant 

to SPR is costly for independent resellers,” as discussed, the strong weight of the evidence rejects Commissioner 

Slaughter’s hypothesis.
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reduced price from suppliers by offering to buy more of their output, or by reducing the 

suppliers’ transactions costs.3

 The evidence here did not support any monopsony theory, and 

instead was consistent with procompetitive cost reductions.

In their dissenting statements, Commissioners Slaughter and Chopra raise a number of issues 

concerning this transaction. We address each below.

Both dissents question the parties’ efficiency claims, arguing in particular that the merged firm’s 

proffered ability to buy office supplies at lower prices should not be fully credited as an 

efficiency because it could instead constitute evidence of an increase in monopsony power. 

However, as we discuss above, this issue was carefully considered and the record did not support 

this concern based on the facts of this case. In any event, our decision does not rest on 

efficiencies, but rather on the absence of evidence that this acquisition will result in 

anticompetitive harm outside of the specific area addressed in our order.

Commissioner Chopra argues that, post-merger, Sycamore “will have a strong incentive to 

rapidly increase margins to make a clear case to a potential future acquirer,”4 on the grounds that 

private equity firms “generally take controlling equity stakes in firms with the hope of realizing

significant gains through sale to a buyer or an exit through public markets”5 and likely “will

operate assets much differently” than an independent Staples would.6 Commissioner Chopra has 

repeatedly stated his negative view of private equity,7 but the application of that general view to 

the facts of this case does not raise a cognizable antitrust concern. The antitrust laws focus on 

curbing harm to the competitive process. This concern has nothing to do with the competitive 

process; it would exist regardless of whether Sycamore owned Staples, did not own Staples, or 

started a brand new private equity fund and made its first acquisition the purchase of Essendant.8

 

The Commission does not dwell on motives that have no relevance to how the acquiring 

company would use the acquired business to harm the competitive process. 

Commissioner Slaughter’s dissent raises concerns that de novo entry is unlikely. The staff and 

the majority do not rest any part of their analysis on a likelihood of de novo entry. We assume it 

will not occur, and so do not rely on it for our conclusions. 

 3 Roger D. Blair & Jeffrey L. Harrison, Monopsony: Antitrust Law and Economics 45-48 (2d ed. 2011). 4 Statement of Commissioner Chopra, Sycamore Partners, Staples, and Essendant (Jan. 28, 2018) at 3 (hereinafter 

“Chopra Statement”). 

5 Chopra Statement at 3 n.9. 6 Chopra Statement at 4. 7 See, e.g., Pallavi Guniganti, FTC Commissioner hits out at private equity, GCR (Sept. 28, 2018), 

https://globalcompetitionreview.com/article/usa/1174735/ftc-commissioner-hits-out-at-private-equity; Statement of 

Commissioner Rohit Chopra, Linde AG, Praxair, Inc. and Linde PLC (Oct. 22, 2018) at 2-3, 

https://www.ftc.gov/system/files/documents/public_statements/1416947/1710068_praxair_linde_rc_statement.pdf. 8 Commissioner Chopra also expressed concerns that the firewall remedy is potentially penetrable, and thus he 

would allow independent resellers to freely port customer data to another wholesaler. But the Commission has 

employed firewalls in past vertical merger cases, and the integrity of those firewalls was robust. Fed. Trade 

Comm’n, The FTC’s Merger Remedies 2006-2012: A Report of the Bureaus of Competition and Economics at 17 

n.34 (Jan. 2017) (“All vertical merger orders were judged successful.”), 

https://www.ftc.gov/system/files/documents/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competitioneconomics/p143100_ftc_merger_remedies_2006-2012.pdf. Also, many independent resellers already use both 

Essendant and S.P. Richards. As a result, such an addition to the Order would not change competitive conditions 

much, but would impose an undue burden on the merging parties. And finally, independent resellers did not request 

this remedy during our investigation.
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Commissioner Slaughter also is concerned that switching between Essendant and its primary 

direct competitor in wholesaling, S.P. Richards, is costly and unlikely. As discussed above, the 

evidence does not support this concern. We know that independent resellers are not locked in to 

either Essendant or S.P. Richards; indeed, many independent resellers use both. Staff’s 

investigation, involving hundreds of interviews, also showed that switching wholesalers was not 

an insurmountable hurdle for independent resellers; in fact, many of them can and do switch or 

credibly leverage one wholesaler off the other in negotiations. Moreover, while the dissent 

speculates that there may be geographic areas in which switching would be more difficult, as 

noted above, staff investigated this issue and concluded that the evidence did not support this 

concern.

As we also discuss above, this concern only would rise to the level of an antitrust problem if the 

customers of Essendant’s dealers were likely to switch to Staples to a sufficient degree to 

provide Staples with an incentive to raise prices to Essendant’s customers. But the evidence did 

not support this hypothesis; rather, it showed that sufficient switching to Staples is unlikely 

because of Staples’ low share in this particular downstream market, and the differentiation 

between the services Staples and the wholesalers provide. As a law enforcement agency, our 

fidelity must be to the facts—not speculation. 

Commissioner Slaughter asserts that staff concluded significant price effects would arise as a

part of a raising rivals’ cost strategy by Staples. This mischaracterizes the staff’s analysis. Staff

specifically concluded that a raising rivals’ cost strategy would not be profitable for Staples. 

Overall, Commissioner Slaughter is substituting hypotheses for the informed conclusions drawn 

from the staff’s thorough investigation. 

Commissioner Chopra, on the other hand, claims we put too much faith in economic models. 

Not so. As in any case, we considered staff’s recommendation based on their investigation of 

documents, interviews, data, and economic analysis. In this case, none of those items supported 

taking any action other than the remedies we have imposed. 

In addition to commenting on this specific transaction, Commissioner Slaughter’s dissent raises a 

series of generalized concerns about merger enforcement, and in particular, vertical merger 

enforcement. Although a detailed discussion of the many and complex issues implicated by a 

general critique of vertical merger enforcement is beyond the scope of this statement, a few 

points are worth noting. 

First, the dissent seems to suggest that our decision in this case is part of a decades-long, 

bipartisan pattern of faulty analysis, improper assumptions, unreliable predictions, 

underweighting evidence of anticompetitive effect, and overweighting evidence of efficiencies. 

But there is a vigorous debate over whether that assertion has any merit, and the sources cited in 

the dissent have been subject to substantial criticism for both methodological flaws and 

irrelevance to competition policy. 9 Consistent with our long-standing tradition of self-

 9 See, e.g., Joshua D. Wright et al., “Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster 

Antitrust,” Sept. 14, 2018, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3249524; Joshua D. Wright, 

“Market Concentration,” Note submitted to the Hearing on Market Concentration, DIRECTORATE FOR 

FINANCIAL AND ENTERPRISE AFFAIRS, COMPETITION COMMITTEE, OECD (June 7, 2018),

https://one.oecd.org/document/DAF/COMP/WD(2018)69/en/pdf; Greg Werden & Luke Froeb, “Don’t Panic: A 

Guide to Claims of Increasing Concentration” (Apr. 16, 2018), 
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evaluation, learning, and evidence-based policy-making, the Commission has instituted a series 

of public hearings, in part, to determine whether the evidence supports the concerns raised by our 

dissenting colleagues. In this process, we hope our colleagues are willing to subject the sources 

on which they rely to the same scrutiny they apply to those that have garnered widespread 

acceptance in the past. 

Second, while the dissent tries to carve a sharp distinction between the Commission’s approach 

to vertical mergers and the dissent’s preferred approach, this is a false dichotomy. There is no 

disagreement that vertical mergers can be pro- or anticompetitive; that as the economy generates 

increased merger activity, there may be more mergers—and more problematic mergers—that 

should be reviewed carefully; that Section 7 of the Clayton Act is an incipiency statute; and that 

we should seek to enjoin or otherwise remedy anticompetitive transactions before they are 

consummated. There is no dispute that vertical mergers can harm competition in several ways, 

which have been well-known at least since the seminal article on vertical foreclosure theory was 

published in the Yale Law Journal in 1986.10 Likewise, we fully agree with the dissent’s view 

that we should investigate all potential theories of harm in vertical mergers—just as the staff did 

in this matter. We also agree that under the Horizontal Merger Guidelines, claimed efficiencies 

must be verified, cognizable, merger-specific, and passed through11, and we recognize that it is 

not a rarity for merging parties to overstate efficiencies or fail to support them properly.12 And, 

we agree that where there is credible evidence, the Commission should obtain relief that will 

eliminate the relevant harm, and that structural remedies are usually preferred but not always 

essential. The decision in this case embodies that view. 

So with what aspect of the Commission’s vertical enforcement philosophy does the dissent 

disagree? One point appears to be a simple misapplication of particular facts—the dissent’s 

claim that the Commission challenges few vertical mergers. But the Commission has blocked or 

obtained relief in numerous vertical transactions in that period. In fact, in the two years that our 

current Chairman served as Bureau Director and Commissioner Wilson served as Chief of Staff 

under then-Chairman Timothy J. Muris, the Commission voted to block one vertical transaction, 

which the parties abandoned as the result of the Commission vote to seek to enjoin it, and 

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3156912; Carl Shapiro, Antitrust in a Time of Populism, (Oct. 

24, 2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3058345.

10 See Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve 

Power Over Price, 96 YALE L.J. 209 (1986). 11 The Commission’s hearings that addressed vertical mergers considered whether the Commission should 

promulgate vertical merger guidelines. One question that may be considered is whether the standards for efficiency 

claims in vertical mergers should parallel the standards for horizontal mergers. 12 We do not, however, share Commissioner Slaughter’s apparent view that the staff does not test efficiency claims. 

The staff rigorously, and often skeptically, examine any and all efficiency claims. Indeed, staff has declined to 

credit the parties’ proffered efficiencies in so many litigated cases that many antitrust lawyers and economists have 

argued that efficiencies are ineffective as a defense in court. See, e.g., Herbert Hovenkamp, Appraising Merger 

Efficiencies, 24 GEO. MASON L. REV. 703, 704 (2017) (“Few areas of merger law are more controversial than the 

treatment of such efficiency claims, which are often raised but almost never found to justify a merger that has been 

shown to be prima facie unlawful.”); Timothy J. Muris & Bilal Sayyed, Three Key Principles for Revising the 

Horizontal Merger Guidelines, The Antitrust Source at 7 (Apr. 2010) (“In our experience, agency leaders do not 

apply different levels of proof, but some (not all) investigating attorneys appear more skeptical of efficiency claims 

than they do of potential anticompetitive effect claims.”). 
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obtained a divestiture of the acquired, offending asset in another case.13 The fact that the parties 

chose not to litigate does not negate the Commission’s willingness to challenge these deals. And 

of course, of the 1,500 to 2,000 or so HSR filings we receive annually, the overwhelming 

majority are universally recognized as presenting no anticompetitive concerns at all. Thus, the 

fact that most of them were not remedied means nothing.

More broadly, the dissent seems to take issue with the Commission’s emphasis on bringing cases 

where theories are supported by facts. But the incipiency standard under Section 7 imposes 

meaningful obligations on the government before allowing it to block a transaction. Specifically, 

it requires us to establish more than a theoretical concern—it must be probable (not certain) and 

substantial. Simply theorizing a harm that might arise out of a merger is not enough. We must 

be able to explain and to prove with facts how a given vertical merger is likely to cause harm in 

the case at hand. We must provide evidence. 

Finally, the dissent appears to suggest that the Commission commit to a retrospective review of 

every transaction that raises antitrust concerns, but where the Commission does not challenge the 

transaction because the evidence available at the time indicates that those concerns are unlikely 

to be realized. That suggestion is interesting in theory and given unlimited resources, we might 

well support it. Also interesting would be retrospectives on vertical mergers we chose not to 

challenge, and retrospectives on assumptions we have made about how markets likely would 

develop in cases where we brought enforcement actions (e.g., a finding of high entry barriers in 

the challenged market). But the practical reality is that we do not have remotely enough 

resources to institute such a program, even if the data were available (which may not be true in 

many cases). Consider, for instance, some of our recent enforcement numbers. In FY 2017, the 

FTC issued 33 second requests and brought 21 merger enforcement actions.14 One could easily

claim that each transaction subject to a second request was a close call. Thus, to do a 

retrospective for every merger subject to a second request but that did not result in an 

enforcement action would have required us to do 12 retrospectives. Commissioner Slaughter 

also would commit us to do retrospectives on transactions where relief was obtained. Her 

approach would likely commit us to doing on the order of five times or more the number we 

have done in most years, which is not possible with our current resources. 

The issue of retrospectives is a critical one for the Commission and merger enforcement more 

generally. This is why expanding our merger retrospective program has been a priority of the 

Chairman and Commissioner Wilson since before confirmation, and why it is one of the issues 

being explored in our Hearings.15 The Commission has a record of conducting retrospectives 

and, after the Hearings conclude, we will synthesize what we have learned and develop an 

approach or approaches for additional retrospectives that make sense. We are likely to consider 

how to best use our existing resources, which may militate in favor of one approach, and also 

what would be a more optimal approach assuming access to more resources. But we cannot 

 14 FTC & DOJ, Hart-Scott-Rodino Annual Report FY 2017, https://www.ftc.gov/policy/reports/policyreports/annual-competition-reports. 14 FTC & DOJ, Hart-Scott-Rodino Annual Report FY 2017, https://www.ftc.gov/policy/reports/policyreports/annual-competition-reports. 15 See Fed. Trade Comm’n, Hearings on Competition and Consumer Protection in the 21st Century, 

https://www.ftc.gov/policy/hearings-competition-consumer-protection.
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commit to a program that is unsustainable with our current resources and may in many cases be 

impossible to implement even with unlimited resources.

In closing, we emphasize one overarching point: as a law enforcement agency, we are 

constrained by the parameters of our authorizing statute and the facts of the case in front of us. 

That constraint is critical to the rule of law and the effective functioning of markets. Even in the 

context of a merger review, which, as both dissents emphasize, is a forward-looking exercise, we 

must base our predictions on facts supporting a cognizable theory under Section 7 of the Clayton 

Act. The dissents highlight a number of concerns, but all of those concerns were either 

investigated assiduously and ruled out by staff or speak to potential injuries that fall outside the 

scope of antitrust law. For these reasons, we decline to take broader action and vote to accept the 

consent decree as currently formulated.