Mergers & Acquisitions

IN THIS ISSUE: The FTC's Consent Decree in the Staples/Essendant Deal Sets the Playing Field for the New Commission's Split on Antitrust Enforcement 1 Reflections on BB&T/SunTrust and Recent Bank M&A 6 Interview: Looking Back at the Case (Fresenius) 7 Economic Evidence in Merger Review: EU's Highest Court Clarifies Rights of Defense 10 "Harder Better Faster Stronger": Evaluating EDM as a Defense in Vertical Mergers 11 From The Editor 16 THE FTC'S CONSENT DECREE IN THE STAPLES/ESSENDANT DEAL SETS THE PLAYING FIELD FOR THE NEW COMMISSION'S SPLIT ON ANTITRUST ENFORCEMENT By Ben Gris and Mark G. Weiss Ben Gris is a partner, and Mark G. Weiss is an associate, in the antitrust practice of the Washington, DC office of Shearman & Sterling LLP. Contact: ben.gris@shearman.com or mark.weiss@shearman.com. On January 28, 2019, the Federal Trade Com- mission ("FTC") entered into a consent decree with office supply superstore Staples Inc. ("Staples") in its acquisition of office supply wholesaler Essendant Inc. ("Essendant"). 1 The deal is primarily vertical, but the length and depth of the review shows that the FTC is quite active and thorough, even when investigating vertical deals. In adopting a limited behavioral remedy, the FTC revealed fundamental disagreements be- tween the new Commissioners and a deep schism over the correct level of merger enforcement and methods to police growing industry consolidation. Background Staples, owned by private equity firm Syca- more Partners II, L.P. ("Sycamore"), is "the larg- est vertically integrated reseller of office products in the United States" 2 and sells office supplies to individual consumers and to corporate and gov- ernment end customers. 3 Essendant also special- izes in office supplies, but sells only at the whole- sale level to commercial resellers, including US customers such as Office Depot, Costco, a host of independent dealers, online retailers, and its purchaser, Staples. 4 Staples and Essendant are thus vertically situated because they sell to a dif- ferent level of the supply chain. Both companies supply mid-sized businesses, although only Staples sells to those businesses directly. Accord- ingly, the FTC's review focused on mid-sized businesses and local markets. 5 The Deal Staples, via its parent Sycamore, filed for antitrust clearance to acquire Essendant in early June 2018. 6 The review, thus, wore on for more than seven months before a final disposition of the deal was announced in late January 2019. The lengthy review of this transaction continues a trend of significant enthusiasm at the FTC and DOJ for investigating large vertical mergers. 7 The most interesting aspect of the FTC's enforcement action is likely, however, not the specifics of the consent decree, but the widely- divergent perspectives of the Commissioners as to the appropriate standards and levels of merger LAWYER The M&A March 2019 ▪ Volume 23 ▪ Issue 3 42478985

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