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Justice Dept. Should Steer Clear of Office Depot Merger

Stocks in this article: ODP OMX SPLS BUD LCC

NEW YORK ( TheStreet) -- Yesterday's announcement of the proposed merger between Office Depot (ODP) and Office Max (OMX) was a bit like deja vu all over again. Back in 1997, Office Depot and Staples (SPLS) made a similar announcement, but the Federal Trade Commission blocked that move, in what then and now appears to be a ridiculous decision, designed to "save" consumers from being gouged for pens, paper and other office supplies.

I'd be a bit surprised if the Department of Justice puts up a stink with this deal for a couple of reasons. First, the playing field has changed in recent years with the explosion of online retailing, and it's much more difficult now for the DOJ to make the argument that a merger of two office retailers will reduce competition. Second, the decision to block the Staples-Office Depot merger back in 1997 was just plain embarrassing, and may go down as one of the more ridiculous antitrust moves in recent history.

I do wonder, however, whether the DOJ's interest in the merger will be piqued due to the belief that it may result in the closing of up to 600 stores, in areas where Office Depot and Office Max stores are in close proximity to one another. That might benefit Staples, the number one name in the space, whose shares jumped 13% yesterday on the news of the merger. In fact, Staples had a bigger day than Office Depot, which was up 9%, while Office Max shares jumped 21%. I wonder whether the DOJ took notice of that? SPLS Chart SPLS data by YCharts

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