UNITED STATES OF AMERICA

Federal Trade Commission

WASHINGTON, D.C. 20580 

 

Office of Commissioner

Rebecca Kelly Slaughter

STATEMENT OF

COMMISSIONER REBECCA KELLY SLAUGHTER

In the Matter of Sycamore Partners, Staples, and Essendant

Commission File No. 181-0180

January 28, 2019

Right now, a great debate is taking place in Washington policy circles and even around 

the country at family dinner tables. The debate concerns the consequences for American citizens 

of fewer and more dominant companies controlling large swaths of industries and firms across 

sectors of the economy.1 While mergers between direct competitors contribute to this 

phenomenon and raise competitive concerns, vertical mergers that integrate trading partners can 

be just as pernicious in sapping our economy’s vitality. 

By its proposed acquisition of Essendant, Inc. (“Essendant”), Sycamore Partners, the 

parent company of Staples, Inc. (“Staples”), would acquire the country’s largest, and one of only 

two, nationwide office product wholesale distributors. Today, the Commission voted to accept a 

proposed consent agreement placing certain conditions on the Staples-Essendant merger. While I 

appreciate that the Commission chose to impose conditions rather than clearing the transaction 

outright, I disagree with the Commission’s decision because I believe that staff identified 

significant evidence of likely harm, and I do not believe that the parties have provided evidence 

showing that the merger’s likely harm is offset by cognizable procompetitive benefits. I also 

agree with many of the points raised by Commissioner Chopra in his dissent; he has done a 

thorough job outlining the horizontal elements of this transaction and articulating important 

points for the Commission’s consideration.

I write separately to highlight some observations regarding vertical merger enforcement 

generally, to explain my dissent, and to urge the Commission to commit to a retrospective 

investigation of the merger that will facilitate the Commission’s ability to take any necessary 

enforcement action, including against any anticompetitive conduct by the post-merger firm. 

 1 See, e.g., Adil Abdela & Marshall Steinbaum, The United States Has a Market Concentration Problem, (Sept. 11, 

2018), http://rooseveltinstitute.org/wp-content/uploads/2018/09/The-United-States-has-a-market-concentrationproblem-brief-final.pdf; Open Markets Institute, AMERICA’S CONCENTRATION CRISIS (Nov. 29, 2018), 

https://concentrationcrisis.openmarketsinstitute.org; Gustavo Grullon, Yelena Larkin, & Roni Michaely, “Are U.S.

Industries Becoming More Concentrated?” (last revised Oct. 27, 2018), https://ssrn.com/abstract=2612047

(concluding that, “[i]n the last two decades, over 75% of U.S. industries have experienced an increase in 

concentration levels” and that concentrated industries have higher profit margins without increased operational 

efficiency). 
2

Observations Regarding Vertical Merger Enforcement

Notwithstanding the majority’s apparent view that the resolution of a vertical merger 

investigation is an inappropriate occasion for a discussion of vertical merger enforcement 

generally, I would like to make some broad observations about vertical mergers and share my 

views on how the Commission should approach them before addressing the specific merits of the 

Staples-Essendant merger. 

Vertical tie-ups are occurring across the economy, and they present an enforcement 

challenge that we must meet. According to Thomson Reuters, companies announced mergers at 

record rates in 2018,2 and three of the five largest mergers announced between 2016 and the fall 

of 2018 had vertical components.

3 Moreover, some observers believe that recent high-profile 

vertical mergers, including the potential clearance of the AT&T-Time Warner merger by the 

courts, will spark further vertical merger activity.4

Given the enormous impact these mergers will have on the economy, markets, and 

consumers, the Commission should carefully examine all mergers, including vertical mergers, 

with a forward-looking perspective. As the Supreme Court explained, Section 7 of the Clayton 

Act enables the Commission to prevent anticompetitive mergers in their incipiency without 

having to wait until the merger’s anticompetitive effects come to fruition.5 I am particularly 

concerned that the current approach to vertical integration has led to substantial underenforcement.6

 2 See Thomson Reuters, Mergers & Acquisitions Review, First Nine Months of 2018, at 1–2, 5 (2018). 3 See id.; Thomson Reuters, Mergers & Acquisitions Review, Full Year 2017, at 3, 6 (2017); Thomson Reuters, 

Mergers & Acquisitions Review, Full Year 2016, at 2, 6 (2016); U.S. Dep’t of Justice Press Release, “Justice 

Department Challenges AT&T/DirecTV’s Acquisition of Time Warner.” (Nov. 20, 2017) (discussing harm from 

vertical merger); U.S. Dep’t of Justice Press Release, “Statement of the Department of Justice Antitrust Division on 

the Closing of its Investigation of the Cigna-Express Scripts Merger.” (Sept. 17, 2018) (discussing vertical merger 

analysis); U.S. Dep’t of Justice Press Release, “Justice Department Requires CVS and Aetna to Divest Aetna’s 

Medicare Individual Part D Prescription Drug Plan Business to Proceed with Merger.” (Oct. 10, 2018) (citing 

vertical integration); see also U.S. Dep’t of Justice Press Release, “Lam Research Corp. and KLA-Tencor Corp. 

Abandon Merger Plans.” (Oct. 5, 2016) (discussing potential harm from abandoned vertical merger); European 

Commission Press Release, “Commission Approves Acquisition of Rockwell Collins by UTC, Subject to 

Conditions.” (May 4, 2018) (citing vertical component).

4 Tony Romm & Brian Fung, AT&T- Time Warner Merger Approved, Setting the Stage for More Consolidation 

Across Corporate America, WASH. POST, (June 12, 2018), https://www.washingtonpost.com/news/theswitch/wp/2018/06/12/att-time-warner-decision; Cecelia Kang, Brooks Barnes, & Michael J. de la Merced, AT&TTime Warner Ruling has Deal Makers Bracing, N.Y. TIMES, (June 10, 2018),

https://www.nytimes.com/2018/06/10/technology/att-time-warner-ruling.html. 5 See Brown Shoe Co. v. United States, 370 U.S. 294, 317–18 (1962) (“[I]t is apparent that a keystone in the erection 

of a barrier to what Congress saw was the rising tide of economic concentration, was its provision of authority for 

arresting mergers at a time when the trend to a lessening of competition in a line of commerce was still in its 

incipiency. Congress saw the process of concentration in American business as a dynamic force; it sought to assure 

the Federal Trade Commission and the courts the power to brake this force at its outset and before it gathered 

momentum.”); Phila. Nat’l Bank v. United States, 374 U.S. 321, 362 (1963) (Section 7 “requires not merely an 

appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive 

conditions in the future”). 

6 I am also concerned about under-enforcement of horizontal mergers, but for the purposes of this case I am 

confining my comments to vertical merger analysis. Cf. Steven C. Salop & Daniel P. Culley, Revising the U.S. 

Vertical Merger Guidelines: Policy Issues and an Interim Guide for Practitioners, 4 J. ANTITRUST ENFORCEMENT 1, 
3

Concerns about vertical mergers are not new.7 We know that vertical mergers, 

particularly those involving highly concentrated markets, can pose a variety of significant threats 

to competition.8 Indeed, agency investigations have identified a range of competition concerns,9

including limiting access to or raising the costs of key inputs,10 restricting access to an important 

customer,11 inhibiting entry by new competitors,12 evading regulations,13 facilitating 

coordination,14 or, as the Commission also alleged in this case, allowing anticompetitive 

information sharing.15 But, among the enforcement actions that the Commission brings, many 

are settled with behavioral remedies rather than divestitures, and few of our enforcement actions 

challenge vertical mergers outright.16

 3–5 (2016) (documenting a decline in the number of vertical merger enforcement actions by presidential 

administration after the period between 1994 and 2000, but also noting that the level of enforcement is impracticable 

to judge absent further information); Steven C. Salop & Daniel P. Culley, Vertical Merger Enforcement Actions: 

1994–July 2018 (Georgetown Univ. Law Ctr., Aug. 23, 2018) (showing that, in the period between 2001 and 2018, 

the number of vertical merger enforcement actions remain lower than the six-year period between 1994 and 2000). 7 Some have argued that vertical mergers are rarely, if ever, anticompetitive and in fact are almost always 

procompetitive. See Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself, 225–45 (1978); Richard A. 

Posner, Antitrust Law, 223–29 (2d ed. 2001). However, more recent economic literature provides good cause to be 

skeptical about this perspective. For a summary of Post-Chicago School thinking on vertical mergers, see Steven C.

Salop, Invigorating Vertical Merger Enforcement, 127 YALE L. J. 1962, 1966 n.17 (2018) (identifying papers). The 

1984 Merger Guidelines, which offer agency guidance on non-horizontal mergers, took a particularly narrow view 

of harm from vertical integration, and have recently been criticized as inconsistent with contemporary analysis and 

ripe for revision. Compare U.S. Dep’t of Justice, 1984 Merger Guidelines (1984),

http://www.justice.gov/sites/default/files/atr/legacy/2007/07/11/11249.pdf with Fed. Trade Comm’n, Hr’g No. 5: 

Competition and Consumer Protection in the 21st Century, Tr. 57:3-15, 68:9-11 (Nov. 1, 2018) (Prof. Shapiro 

stating that the 1984 Merger Guidelines are not consistent with contemporary vertical merger analysis, noting the 

“complete shift” in agency thinking on unilateral effects, and calling for revised guidelines); but see Paul Yde, NonHorizontal Merger Guidelines: A Solution in Search of a Problem?, ANTITRUST, 74–82 (Fall 2007). 8 Such threats can also be heightened in nascent or rapidly evolving markets, markets with significant barriers to 

entry, or markets that may benefit from potential entry.

9 See D. Bruce Hoffman, Vertical Merger Enforcement at the FTC, 4–7 (Jan. 10, 2018) (summarizing recent vertical 

merger enforcement actions), https://www.ftc.gov/public-statements/2018/01/vertical-merger-enforcement-ftc; 

Steven C. Salop & Daniel P. Culley, Vertical Merger Enforcement Actions: 1994–July 2018 (Georgetown Univ. 

Law Ctr., Aug. 23, 2018). 10 See In re The Boeing Company, Dkt. C-4188 (compl. filed Oct. 3, 2006),

https://www.ftc.gov/sites/default/files/documents/cases/2006/10/0510165complaint.pdf. 11 See U.S. Dep’t of Justice Press Release, “AMC Required to Divest Movie Theatres, Reduce NCM Ownership and 

Complete Screen Transfers in Order to Complete Acquisition of Carmike Cinemas.” (Dec. 20, 2016),

https://www.justice.gov/opa/pr/amc-required-divest-movie-theatres-reduce-ncm-ownership-and-complete-screentransfers-order. 12 See Fed. Trade Comm’n Press Release, “FTC Seeks to Block Cytyc Corp.’s Acquisition of Digene Corp.” (June 

24, 2002). 

13 See In re Fresenius Medical Care AG & Co. KGaA, Dkt. C-4236 (compl. filed Oct. 21, 2008), 

https://www.ftc.gov/sites/default/files/documents/cases/2008/10/081021freseniuscmpt.pdf. 14 See United States v. Premdor, Inc. (compl. filed Aug. 3, 2001), https://www.justice.gov/atr/casedocument/complaint-184. 15 See In re PepsiCo, Inc., Dkt. C-4301 (compl. filed Feb. 26, 2010),

https://www.ftc.gov/sites/default/files/documents/cases/2010/02/100226pepsicocmpt.pdf; In re The Coca-Cola 

Company, Dkt. C-4305 (compl. filed Sept. 27, 2010),

https://www.ftc.gov/sites/default/files/documents/cases/2010/09/100927cocacolacmpt.pdf; In re Broadcom Limited, 

Dkt. C-4622 (compl. filed July 3, 2017),

https://www.ftc.gov/system/files/documents/cases/1710027_broadcom_brocade_complaint.pdf. 16 See Salop & Culley, supra note 9. 
4

I understand that predicting the net effects of vertical mergers can be difficult, but I am 

worried about the reliability and permissiveness of the conclusions we draw from the evidence 

gathered and analysis conducted by staff. I am concerned that we end up allowing vertical 

mergers that are anticompetitive in an effort to avoid challenges to procompetitive mergers. 

In particular, I am concerned that our conclusions depend on unreliable assumptions and 

predictions about how a vertically integrated firm will conduct itself and are too credulous about 

claimed procompetitive benefits unique to vertical integration.17 The Commission should always 

thoroughly investigate all potential theories of harm in vertical mergers. Where the Commission 

identifies competitive concerns, it should be more willing to challenge and seek to block vertical 

mergers. 

Where the Commission finds evidence that a vertical merger is likely to enhance a firm’s 

incentive and ability to engage in anticompetitive conduct, the parties must demonstrate that 

claimed efficiencies are verifiable, merger-specific, do not arise from anticompetitive reductions 

in output or service, are not mitigated by any costs necessary to achieve the efficiencies, and 

fully offset the anticompetitive harm.18 If these requirements are not met, then the Commission 

should challenge the merger. 

Merging parties will almost always cite benefits of vertical integration, including 

enhancing product quality, reducing costs, or streamlining operations.19 But such claimed 

benefits often go unsubstantiated. The claimed benefits may not be merger-specific and instead 

may be achieved via unilateral conduct or contractual arrangements. Even where they are 

merger-specific, the claimed benefits may be mitigated or eliminated by opportunity costs.20 To 

the extent that our enforcement decisions rely on claimed efficiency benefits of a transaction, 

those claimed benefits should not be taken at face value; any investigation should include a 

requirement that the parties substantiate the magnitude and merger-specificity of the claimed 

benefits in the same way the Commission endeavors to substantiate theories of harm.21 In other 

 17 Professor Salop articulated a similar concern in his recent article on vertical merger enforcement, criticizing an 

enforcement framework that “presum[es] that efficiency benefits are highly likely while competitive harms are 

unlikely or speculative.” Salop, supra note 7, at 1963. 18 In addition, I share Commissioner Chopra’s concern that merger effects that are claimed as “efficiencies” may in 

fact be harms that cannot be credited as procompetitive benefits.

19 See Steven C. Salop & Daniel P. Culley, Potential Competitive Effects of Vertical Mergers: A How-To Guide for 

Practitioners, GEORGETOWN LAW FACULTY PUBLICATIONS AND OTHER WORKS. 1392 at 5, 32–37 (2014), 

https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=2404&context=facpub. 20 See Salop, supra note 7, at 1970–71 n.37 (citing William P. Rogerson, “A Vertical Merger in the Video 

Programming and Distribution Industry: Comcast-NBCU” (2011), in The Antitrust Revolution: Economics, 

Competition, and Policy, 534 (John E. Kwoka, Jr. & Lawrence J. White eds., 6th ed. 2014)). 21 Cf. U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines § 10 (2010) [Hereinafter 

“Horizontal Merger Guidelines”] (“Efficiencies are difficult to verify and quantify, in part because much of the 

information relating to efficiencies is uniquely in the possession of the merging firms. Moreover, efficiencies 

projected reasonably and in good faith by the merging firms may not be realized. Therefore, it is incumbent upon the 

merging firms to substantiate efficiency claims so that the Agencies can verify by reasonable means the likelihood 

and magnitude of each asserted efficiency, how and when each would be achieved (and any costs of doing so), how 

each would enhance the merged firm’s ability and incentive to compete, and why each would be merger-specific.”); 

Steven C. Salop, The AT&T/Time Warner Merger: How Judge Leon Garbled Professor Nash, 6 J. OF ANTITRUST 

ENFORCEMENT 459, 467–68 (2018). 
5

words, have the parties met their burden of providing adequate evidence to show that the claimed 

benefits are verifiable, merger-specific, and sufficiently large to give the Commission enough 

comfort that the merger indeed will not be, on balance, anticompetitive? 

In practice, the likely anticompetitive effects of some vertical mergers may be difficult to 

predict reliably enough at the time of the transaction to mount a successful challenge. This 

uncertainty does not excuse the Commission from its obligation to utilize all of our authority to 

ensure that parties never abuse their position.22 As noted above, the Commission’s authority 

under Section 7 is forward-looking, and we are charged with preventing the exercise or 

attainment of market power, not merely correcting its abuse. It is particularly important that 

enforcers are mindful of this point when evaluating mergers between vertical partners in a supply 

chain; it may be more difficult to predict whether vertical mergers will be anticompetitive, 

procompetitive, or competitively neutral, but such difficulty does not alter our fundamental 

obligation to preempt illegal vertical integration. 

When faced with a close case—a vertical merger that raises meaningful competitive 

concerns, but where we have not identified sufficient evidence to justify a court challenge,23 or 

where we obtained a limited consent decree—the Commission would do well to adopt a general 

practice of planned retrospective investigations that could inform subsequent enforcement 

decisions, including a decision to challenge the consummated merger if necessary.24 While the 

anticompetitive effects of consummated mergers are more difficult to remedy and involve 

significant interim competitive harms from delayed enforcement, the ability to bring such 

challenges is an important enforcement backstop.25

In such close cases, the Commission should commit publicly, at the time the investigation 

concludes, to a follow-up retrospective investigation a few years after the merger is 

consummated and should require the parties to provide whatever data might be necessary to 

complete it.26 To the extent necessary, the Commission should also request and obtain 

 22 Some have proposed additional legislative authority that would shift the burden of proof to the parties to certain 

mergers to show that their transaction is unlikely to substantially lessen competition. For example, Senator Amy 

Klobuchar proposed legislation that would shift the burden of proof to parties to certain large vertical mergers (in 

excess of $5 billion) or certain vertical mergers involving very large firms (with assets, net annual sales, or market 

capitalization exceeding $100 billion). See Consolidation Prevention and Competition Promotion Act of 2017, 

S.1812, 115th Cong. (2017) [Hereinafter “CPCPA”]. 

23 See 15 U.S.C. § 21(b); 15 U.S.C. § 45(b). 24 The idea of routinely conducting retrospectives of close-call vertical mergers has been suggested by others, 

including Professor Tim Wu and former Commission Chairman Robert Pitofsky. See Tim Wu (@superwuster), 

Twitter (Nov. 26, 2018, 9:33 AM) https://twitter.com/superwuster/status/1067109078214864896 (“Re-reading [the]

AT&T - Time Warner opinion I am struck by sense that in hard vertical cases, retroactive merger review might be 

the way to go. Indeed the US might even announce that the merger will be watched.”); Robert Pitofsky, “Subsequent 

Review: A Slightly Different Approach to Antitrust Enforcement.” (Aug. 7, 1995) (Suggesting that, in close cases, 

the Commission “put[] the parties on notice that at some future time—two, three or four years down the road—it 

intends to revisit the market segment and the transaction to see if the transaction and others like it led to 

anticompetitive effects.”), https://www.ftc.gov/public-statements/1995/08/subsequent-review-slightly-differentapproach-antitrust-enforcement. 25 See, e.g., Steves and Sons, Inc. v. JELD-WEN, Inc., 2018 WL 4855459 (Oct. 5, 2018) (order requiring divestiture 

in private consummated merger enforcement action).

26 The Commission could seek and obtain such information from merging parties, and other firms, pursuant to 

Section 6 of the Federal Trade Commission Act. See 15 U.S.C. § 46. 
6

information from relevant third parties. This retrospective should compare the reality of the postmerger market with the predictions the Commission made at the time of the transaction about 

whether anticompetitive harms and benefits would be realized.

Where the Commission’s predictions were incorrect and there is sufficient evidence of 

anticompetitive effects as a result of the transaction, this retrospective investigation would allow 

the Commission to challenge the consummated merger or any anticompetitive behavior by the 

merged entity. Knowing that the Commission will conduct such a follow-up study also could 

disincentivize the parties from making over-reaching claims during the investigation and 

incentivize them to behave in a more procompetitive manner after the merger is consummated.27

Furthermore, if the Commission finds that the parties had materially misrepresented the likely 

effects or benefits of the merger, it can take appropriate action.28

At a minimum, these retrospective investigations could allow the Commission to analyze 

whether its predictions about market behavior were accurate and to improve its analysis going 

forward. As the majority concedes, such retrospectives can have significant value. Chairman 

Simons has spoken frequently about the importance of the Commission’s “tradition of selfcritical examination,”29 and routine study of the accuracy of our analysis can play an important 

 27 See Pitofsky, supra note 24 (“First, parties claiming efficiencies or brushing off the possibility of anticompetitive 

practices may be induced in the years following the merger to pursue more aggressively the efficiencies or avoid 

more carefully anticompetitive effects. Second, lawyers, economists and others defending transactions may be a 

little more cautious in submitting extravagant claims if they know they will be called to account at a later date.”). 28 Cf. Fed. Trade Comm’n Press Release, “Hearst Corp. to Disgorge $19 Million and Divest Business to Facts and 

Comparisons to Settle FTC Complaint.” (Dec. 14, 2001) (disgorgement and divestiture obtained for illegally 

withholding materials required for Hart-Scott-Rodino notification and consummating anticompetitive merger); U.S. 

Dep’t of Justice Press Release, “Bristol-Myers Squibb Pleads Guilty to Lying to the Federal Government About 

Deal Involving Blood-Thinning Drug.” (May 30, 2007) (guilty plea obtained and fine levied for two violations of 

the False Statements Act in connection with a Commission conduct matter); see also European Commission Press 

Release, “Commission Fines Facebook €110 Million for Providing Misleading Information About WhatsApp 

Takeover.” (May 18, 2017) (fine levied for providing incorrect or misleading information during merger 

investigation). To be sure, parties must refrain from making material misrepresentations in connection with any 

government proceeding, not merely vertical merger investigations. I emphasize this requirement here to underscore 

the importance of truthful and correct representations by parties as part of our forward-looking merger review. The 

spirit of this prohibition should deter not only explicit misrepresentations but also pre-merger claims or precommitments that are generally inconsistent with post-merger conduct. Cf. Kenneth Li, AT&T’s WarnerMedia 

Accuses DOJ with ‘Collaborating’ with Dish in HBO Dispute, REUTERS (Nov. 1, 2018), 

https://www.reuters.com/article/us-media-att-dish/atts-warnermedia-accuses-doj-with-collaborating-with-dish-inhbo-dispute-idUSKCN1N667O (Department of Justice criticizing WarnerMedia blackout of HBO on Dish network 

following AT&T proposed commitment to refrain from blackouts on Turner networks following a merger with Time 

Warner). 

29 See Prepared Remarks of Chairman Joseph Simons, at 3, Hearing on Oversight of the Federal Trade Commission, 

Before the Committee on Commerce, Science, and Transportation Subcommittee on Consumer Protection, Product 

Safety, Insurance, and Data Security, United States Senate, (Nov. 27, 2018), 

https://www.ftc.gov/system/files/documents/public_statements/1423967/js_oral_remarks_hearing_on_oversight_of_

the_federal_trade_commission.pdf; see also Prepared Remarks of Chairman Joseph Simons Announcing the 

Competition and Consumer Protection Hearings, at 3 (Jun. 20, 2018), 

https://www.ftc.gov/system/files/documents/public_statements/1385308/prepared_remarks_of_joe_simons_announc

ing_the_hearings_6-20-18_0.pdf. 
7

role in that tradition.30 The Commission has already identified one recent merger as a potential 

subject of a retrospective investigation, including on the effects of efficiencies.31 Similarly, 

Bureau of Economics Director Bruce Kobayashi has urged stakeholders to identify vertical 

mergers that merit retrospective investigation.32 I applaud and join these calls for retrospective 

review generally, and I emphasize their importance as part of our vertical merger enforcement 

program. 

I acknowledge that these retrospective investigations will require significant resources, 

and I share the majority’s concerns about how best to allocate our existing resources. I do not 

believe that a program of retrospective investigations in close cases would require unlimited 

resources, however, because these instances should arise relatively infrequently.33 I understand 

that reasonable Commissioners can disagree on what constitutes a close case—this case appears 

to be one such example—but I would nevertheless propose that the Commission determine 

whether a retrospective is appropriate based on the evidence presented in a given case. In any 

event, as with other areas of enforcement, I believe that bolstering our program of retrospective 

merger reviews is a compelling reason for Congress to devote additional resources to the 

Commission’s enforcement activities. If the majority’s intuition is correct that the Commission 

encounters enough close cases to require a dramatic increase in our appropriations in order to 

staff retrospectives for such cases, then we owe it to ourselves and to the public to advocate for 

and dedicate adequate resources to scrutinize and improve upon our conclusions.

34

Staples/Essendant Case

As noted above, Essendant is one of only two nationwide office product wholesale 

distributors, along with S.P. Richards (“SPR”). SPR and Essendant provide important services to 

local and independent office product resellers, who, in turn, serve the office product needs of 

mid-sized businesses across the country.35 Staples competes with independent resellers to serve 

mid-sized businesses and, as a result of this vertical merger, Staples will control the price and 

quality of the wholesale distribution services that Essendant provides to Staples’s Essendantbacked independent reseller competitors.

 30 Retrospective analysis has also received additional legislative support. Senator Amy Klobuchar’s bill promised to 

expand Commission authority to obtain information relevant to retrospective analysis of merger consent decrees. See

CPCPA, supra note 22. 31 Statement of the Commission, Concerning the Proposed Affiliation of CareGroup, Inc.; Lahey Health System, 

Inc.; Seacoast Regional Health System, Inc.; BIDCO Hospital LLC; and BIDCO Physician LLC (Nov. 29, 2018). 32 Fed. Trade Comm’n, Hr’g No. 5: Competition and Consumer Protection in the 21st Century, Tr. 86:2-15 (Nov. 1, 

2018).

33 Cf. Pitofsky, supra note 24 (“Circumstances that justify ‘subsequent review’ or ‘conditional clearance’ are rare. 

Most times, the enforcement agencies are in a position to make the difficult prediction that anticompetitive effects 

will or will not occur.”). 34 Cf. Pitofsky, supra note 24 (“[T]he approach offers some hope, never air tight, that enforcement officials 

perplexed by the uncertainties of a situation, will not make the mistake of allowing deals to proceed that have major 

anticompetitive and anticonsumer effects. If the significant anticompetitive effects begin to occur after the 

transaction is complete, all concerned parties know the enforcement agency may review the deal again and take 

actions necessary to preserve or restore a competitive market.”). 35 Essendant and SPR also serve resellers who, in turn, serve small and large businesses. 
8

I appreciate that the Commission’s staff have given serious treatment to a range of 

theories of anticompetitive harm from the merger. I am also pleased that the Commission 

imposed conditions that seek to deal with the very real threat of anticompetitive information 

sharing and to enhance our ability to review Staples’s future acquisitions in the office supply 

industry. I voted against the resolution of this investigation, however, because I believe that staff 

identified significant evidence of likely harm to competition, and I am concerned that the 

conclusions drawn from the evidence staff identified may underestimate the likely harm. I am 

also concerned that the parties have not met their burden of substantiating the efficiencies 

necessary to offset the transaction’s likely harm. The conditions imposed by the Commission’s 

proposed consent order do not fully resolve these concerns.

As noted in the statement of the majority, staff conducted an analysis of whether the 

integrated firm could profitably implement a strategy of raising rivals’ costs. Staff’s analysis 

considered the extent to which independent resellers would switch to SPR and the extent to 

which mid-sized businesses would switch from independent resellers to Staples given such a 

strategy. The result of staff’s analysis indicated that the transaction would result in significant 

harm. The majority accuse me of mischaracterizing this analysis. I do not; I simply disagree with 

the conclusion that the majority draws from staff’s analysis. I believe this analysis is evidence of 

harm. It suggests that, as a result of a strategy of raising rivals’ costs, mid-sized businesses 

would be forced to pay higher prices or suffer diminished quality of service regardless of which 

supplier they chose for their office supply needs. 

The majority have concluded that independent resellers can easily switch from Essendant 

to SPR if the integrated firm implemented such a strategy, and, therefore, that this strategy would 

not be profitable. The key relevant inputs in staff’s analysis, however, are consistent with the 

conclusion that independent resellers can easily switch from Essendant to SPR, and staff’s 

analysis nonetheless predicts significant harm. Moreover, some qualitative evidence indicates 

that switching from Essendant to SPR is costly for independent resellers.

The majority have offered reasons to believe that the harm estimated in staff’s analysis is 

too high or insufficiently reinforced by other lines of evidence. I acknowledge those points, but I 

believe that staff’s analysis is significant evidence that harm from the transaction is likely, and, 

indeed, I am concerned that there are reasons to believe that the estimated harm is too low. For 

example, we did not have data at sufficient levels of granularity to assess whether there are 

certain markets where mid-sized businesses would switch to Staples in larger numbers than we 

have estimated. In addition, I am concerned that independent resellers have only two viable 

options in the market for nationwide wholesale distribution today—Essendant and SPR—and 

that de novo entry by other firms into the nationwide wholesale distribution business is unlikely. 

As a result, even if SPR is a viable alternative to Essendant for many independent resellers, it is 

likely the only viable option and thus may be able to charge higher prices to resellers looking to 

avoid a relationship with Staples. 

The majority insist that their decision does not rest on crediting claimed efficiencies, but 

given my disagreement about whether and to what extent there is evidence of likely harm, I 

briefly describe below my assessment of the efficiencies evidence adduced in this investigation. 

Taking staff’s estimate of harm on its face, the Commission must ask whether there is sufficient 
9

evidence to conclude that cognizable efficiencies do in fact offset that estimate. I am not 

persuaded that there is such evidence. 

As an initial matter, upon review of the record, I do not believe that efficiencies from the 

elimination of double marginalization are a meaningful effect of this merger. Focusing on the 

identified claims, I am concerned that the parties have not produced evidence showing that the 

claimed efficiencies are indeed efficiencies and not harms, are merger-specific, are not mitigated 

by any costs that must be incurred to achieve the efficiencies, or will likely be realized at 

sufficient magnitudes after the merger is consummated.36 The Commission brings significant 

experience to bear in our analysis of efficiencies in the office supply industry, but that expertise 

does not excuse the parties from meeting their burden to substantiate their claims, and I do not 

believe that the remaining substantiation provides a sufficient basis to credit the efficiency 

claims made in this case. Confronted, as I am, with what I believe to be evidence of likely harm 

and a lack of evidence of cognizable, offsetting efficiencies, I must respectfully disagree with the 

majority that the transaction is unlikely to result in anticompetitive harm outside the scope of the 

Commission’s order. 

Our consent order does not address Staples’s control over Essendant prices to its 

independent reseller competitors or its enhanced incentives to hamper independent reseller 

competitiveness. I also share Commissioner Chopra’s concerns about the efficacy of the firewall 

to remedy the information sharing harm. Accordingly, I do not believe the consent order fully 

remedies the merger’s likely anticompetitive effects.

A Retrospective and Monitoring

The Commission’s order requires that Staples provide prior notice of any acquisitions in 

excess of 10% of any independent reseller or other marketer of office supplies. Staples’s market 

position relative to other independent resellers was a significant issue in our investigation, and I 

believe that prior notice will be a useful tool for the Commission to monitor whether Staples will 

pursue a strategy of raising rivals’ costs in local office supply markets.

In addition, I call on the Commission to commit publicly to a targeted retrospective

investigation, within several years of the acquisition’s consummation, to evaluate other aspects 

of the market bearing on our analysis, and to assess whether such developments are consistent 

with our pre-merger analysis. Besides this analysis, I urge the Commission to monitor conduct in 

this industry, and I encourage Essendant-backed independent resellers and other stakeholders to 

report any evidence of anticompetitive conduct by Staples. With the benefit of pre-commitment, 

hindsight, and ongoing monitoring, we may be able to refine and bolster confidence in our 

analysis and deter or prosecute future anticompetitive conduct by Staples. Ultimately, if there is 

 36 As discussed in note 21 above, our analysis of efficiencies claims is predicated on information in the parties’ 

possession. This is true in both horizontal and non-horizontal mergers. It is therefore incumbent on the parties to 

substantiate their claimed efficiencies, including by detailed and comprehensive responses to requests from 

Commission staff, to allow the Commission to credit any cognizable efficiencies against any likely harm. Cf. 

Horizontal Merger Guidelines § 10; see also Herbert J. Hovenkamp, Appraising Merger Efficiencies, 24 GEO.

MASON L. REV. 703, 726 (2017) (“[I]nformation is asymmetrical: firms almost always know more about their own 

internal processes and the costs of changing them than any outsider, including the merger enforcement Agencies.”). 
10

sufficient evidence of actual anticompetitive effects as a result of the transaction, we can and 

should bring an enforcement action to break-up the merger.