By Maureen K. Ohlhausen, Co-Chair of the Antitrust and Competition Law Practice at Baker Botts in Washington, DC and former Acting Chairman of the Federal Trade Commission, and Anthony W. Swisher, a Partner with Baker Botts.

Vertical merger enforcement has received plenty of attention recently, even prompting the DOJ Antitrust Division and the Federal Trade Commission to consider development of guidelines for future matters.  The most newsworthy recent enforcement matter is the Antitrust Division’s failed challenge to the vertical AT&T/Time Warner transaction.  But vertical issues have not been confined to DOJ; vertical enforcement remains a key issue at the FTC as well.  The FTC has had at least two high-profile vertical enforcement matters in the last year—Northrop Grumman/Orbital ATK and Staples/Essendant

The more recent of those two—the Commission’s decision allowing the vertical combination of Staples and Essendant to proceed with only limited conduct relief—provides a window into the FTC’s views on vertical merger analysis, as well as insights on the Commission’s approach to merger enforcement more broadly.  In an unusual circumstance, a very limited consent decree generated four statements from the Commission:  the majority statement, two dissenting statements from Commissioners Chopra and Slaughter (who were skeptical of the relief obtained and suggested that blocking the merger entirely might be more appropriate), and a concurring statement from Commissioner Wilson.  Taken together, these statements reveal some interesting insights about the current state of Commission antitrust enforcement—in vertical mergers, certainly, but more generally as well.

The Staples/Essendant Transaction

In September 2018, Staples announced the acquisition of Essendant, Inc., an office supply wholesaler selling to independent office supply distributors, who in turn provide office supplies principally to mid-sized companies.  Staples is the world’s largest office supply retailer.  Staples and Essendant thus are not principally competitors; they instead stand in a vertical relationship.  Essendant is a supplier to firms that compete with Staples downstream to provide office supplies to companies. 

As a vertical deal, the Staples/Essendant transaction falls into a category of transaction that has attracted little antitrust scrutiny since the waning days of the hyper-aggressive antitrust enforcement period of the late 60s and early 70s.  Vertical theories have enjoyed something of a renaissance lately, however, with DOJ’s unsuccessful attempt to block the AT&T/Time Warner transaction based on a vertical theory.  Staples/Essendant represents the FTC’s most recent foray into this field and suggests that the Commission’s approach to vertical mergers might best be summarized as “follow the evidence.”