United States District Court, District of Columbia
FEDERAL TRADE COMMISSION, COMMONWEALTH OF PENNSYLVANIA, AND THE DISTRICT. OF COLUMBIA, Plaintiffs,
STAPLES, INC. and OFFICE DEPOT, INC., Defendants.
G. SULLIVAN UNITED STATES DISTRICT JUDGE.
an analogy to the fate of penguins whose destinies appear
doomed in the face of uncertain environmental changes,
Defendant. Staples Inc.- ("Staples") and Defendant
Office Depot, Inc. ("Office Depot") (collectively
"Defendants") argue they are like "penguins on
a melting iceberg, " struggling to survive in an
increasingly digitized world and an office-supply industry
soon to be revolutionized by new entrants like Amazon
Business. Prelim. Inj. Hrg Tr. ("Hrg Tr.") 60:15
(Opening Statement of Diane Sullivan, Esq.). Charged with
enforcing antitrust laws for the benefit of American
consumers, the Federal Trade Commission ("FTC") and
its .co-plaintiffs, the. Commonwealth of Pennsylvania and the
District of Columbia, commenced this action in an effort to
block Defendants' proposed merger and alleged that the
merger would "eliminat[e] direct competition between
Staples and Office - Depot" resulting in
"significant harm" to large businesses that
purchase office supplies for their own use. Compl., Docket
No. 3 at ¶ 4. The survival of Staples' proposed
acguisition of Office Depot hinges on two critical issues:
(1) the reliability of Plaintiffs' market definition and
market share analysis; and (2) the likelihood that the
competition resulting from new market entrants like Amazon
Business will be timely and sufficient to restore competition
lost as a result of the merger.
to Defendants' announcement in February 2015 of their
intent to merge, the FTC began an approximate year-long
investigation into the $6.3 billion merger and its likely
effects on competition. Defs.' Proposed Findings of Fact
and Conclusions of Law ("Defs.' FOF") ¶
58. On December 7, 2015, by a unanimous vote, the FTC
Commissioners found reason to believe that the proposed
merger would substantially reduce competition in violation of
Section 7 of the Clayton Act and Section 5 of the FTC Act.
Compl. ¶ 34. That same day, Plaintiffs commenced this
action seeking a preliminary injunction pursuant to Section
13(b) of the FTC Act, 15 U.S.C. § 53 (b) to enjoin the
proposed merger until the FTC's administrative
proceedings are complete. Pls..' Mot. Prelim. Inj.,
Docket No. 5 at 1.
antitrust case involved an extraordinary amount of work. As a
result of the FTC's investigation and seven weeks of
discovery, more than fifteen million pages of documents were
produced, more than seventy depositions around the country
were taken, and five expert reports were completed.
Defs.' FOF ¶ 60. The Court presided over an
evidentiary hearing and heard testimony from ten witnesses
from March 21, 2016 to April 5, 2016. Id. Nearly 4,
000 exhibits were admitted into evidence. Id. ¶
61. Despite onerous time constraints created by the nature of
this unique litigation, lawyers for the parties and
non-parties completed this work with civility and
professionalism while demonstrating the highest level of
sophistication and competency in their written and oral
advocacy. The Court commends the lawyers and the
paralegals for their outstanding work.
conclusion of Plaintiffs' case, Defendants chose not to
present any fact or expert witnesses, arguing that Plaintiffs
failed to establish their prima facie case. Hrg Tr.
2889:20-25 (Ms. Sullivan: "It's going to be the
defendants' position that we're going to rest on the
record as it exists, so there'll be no need for
additional evidence or rebuttal."). And, although
entitled to a trial on the merits before an Administrative
Law Judge at the FTC, Defendants indicated that they will not
proceed with the merger if Plaintiffs' motion is granted.
Hrg Tr. at 3034:18-22; Defs.' FOF ¶
consideration of the evidence presented during the hearing,
the parties' proposed findings of fact and conclusions of
law, and the relevant legal authority, the Court concludes
that the Plaintiffs have established their prima
facie case by demonstrating that Defendants'
proposed merger is likely to reduce competition in the
Business to Business ("B-to-B") contract space for
office supplies. Defendants' response relies in large
part on the prospect that Amazon Business will replace any
competition lost because of the merger. Although Amazon
Business may transform how some businesses purchase office
supplies, the evidence presented during the hearing fell
short of establishing that Amazon Business is likely to
restore lost competition in the B-to-B space in a timely and
sufficient manner. For the reasons discussed in Section IV
infra, Plaintiffs' Motion for Preliminary
Injunction is GRANTED.
Section II of this Memorandum Opinion, the Court sets forth
important background information, including many critical
findings of fact underpinning the Court's analysis.
Section III establishes the relevant legal standard pursuant
to the Clayton Act. The Court's analysis in Section IV
proceeds as follows: (A) legal principles considered when
defining a relevant market; (B) application of legal
principles to Plaintiffs' market definition; (C)
Defendants' arguments in opposition to Plaintiffs'
alleged market; (D) conclusions regarding the relevant
market; (E) analysis of the Plaintiffs' arguments
relating to the probable effects on competition based on
market share calculations; (F) Defendants' arguments in
opposition to Plaintiffs' market share calculations; (G)
conclusions regarding Plaintiffs' market share; (H)
Plaintiffs' evidence of additional harm; (I)
Defendants' response to Plaintiffs' prima
facie case; and (J) weighing the equities. In Section V,
the Court concludes that the proposed merger must be enjoined
due to the likelihood of anticompetitive effects that would
result were the merger to be consummated.
day millions of employees throughout the United States
utilize office supplies in the course of their daily work. To
sustain employees' use of pens, Post-it notes and
paperclips, large companies purchase more than two billion
dollars of office supplies from Defendants annually. Hrg Tr.
10:23-24, (Opening Statement of Tara Reinhart, Esq.).
Companies that purchase office supplies for their own use
operate in what the industry refers to as the B-to-B space.
B-to-B customers prefer to work with one vendor that can meet
all of the companies' office supply needs. Hrg Tr. at
204:1-20 (Gregg O'Neill, Category Manager for Workplace
Services at American Electric Power ("AEP")
testifying that because the company spends two million
dollars on office supplies, its leverage with one vendor is
greater than it would be if it utilized twenty vendors);
Id. at 1617:1-1618:4 (Leo J. Meehan, III, CEO of WB
Mason testifying about the benefits of utilizing one primary
vendor, including lower prices, growth rebates, assistance
with controlling leakage, etc.).
establish a primary vendor relationship, companies in the
B-to-B space request proposals from national suppliers like
Staples and Office Depot. See e.g., Hrg Tr. (AEP) 194:
10-195:16. The request for proposal ("RFP") process
typically results in a multi-year contract with a primary
vendor that guarantees prices for specific items, includes an
upfront lumpsum rebate, and a host of other services.
Pls..' Proposed Findings of Fact and Conclusions of Law
("Pls..' FOF") SISI 41-46. Because the office
supplies consumed by large companies are voluminous, such
companies typically pay only half the price for basic
supplies as compared to the average retail consumer.
Plaintiffs' Exhibit ("PX") 06100, Pls..'
Expert Dr. Carl Shapiro's Report ("Shapiro
Report") at 019.
Defendants Staples and Office Depot
as big-box retail stores in the 1980s, Defendants are the
primary B-to-B office supply vendors in the United States
today. Hrg Tr. 59. Plaintiffs allege that Defendants sell and
distribute upwards of seventy-nine percent of office supplies
in the B-to-B space. Hrg Tr. 20-21. Since the 2013 merger of
Office Depot and Office Max, Defendants consistently engage
in head-to-head competition with each other for B-to-B
contracts. See, e.g., PX04322 Staples ("SPLS") 001
(identifying only Office Depot as "Key
and Office Depot are publicly traded corporations. Compl.
¶¶ 29 and 30. Staples is the largest office
supplier of consumable office supplies to large B-to-B
customers in the United States and operates in three business
segments: (1) North American stores and online sales; (2)
North American commercial; and (3) international operations.
Id. ¶ 29. In fiscal year 20l4, Staples
generated $22.5 billion in sales, with more than half of all
sales coming from office supplies. Id. In fiscal
year 2013, 34.8 percent of Staples' total revenue came
from the North American commercial segment. Id.
Depot is the second largest office supplier of consumable
office supplies to large B-to-B customers in the Unites
States. Id. ¶ 30. Like Staples, Office Depot
operates in similar business segments: (1) North America
retail; (2) North American business solutions; and (3) an
international division. Id. In fiscal year 2014,
Office Depot made $16.1 billion in revenue, with nearly half
of those sales coming from office supplies and 37.4 percent
of overall sales from B-to-B business.
"commercial" and Office Depot's "business
solutions" segments focus on the B-to-B contracts at
issue in this case. While both companies serve businesses of
all sizes, this case focuses on large B-to-B customers,
defined by Plaintiffs as those that spend $500, 000 or more
per year on office supplies. Hrg Tr. 30:4-6. Approximately
1200 corporations in the United States are included in this
alleged relevant market. Hrg Tr. 2473:17-18.
February 4, 2015, Defendants entered into a merger agreement
in which Staples would acquire Office Depot for a combination
of cash and Staples' stock. Compl. ¶ 32. Shortly
after the merger was announced, the FTC launched an
investigation into the competitive effects of the proposed
merger. Defs.' FOF ¶ 58. Ultimately, the FTC
commissioners filed an administrative complaint before an FTC
Administrative Law Judge ("ALJ") and also
authorized the Plaintiffs to seek a preliminary injunction to
prevent the Defendants from consummating the merger to
maintain the status quo pending a full hearing on the merits.
Compl. ¶ 34. Plaintiffs filed this suit the same day.
Pls..' Mot. Prelim. Inj.
Regional and local vendors
and local office supply vendors exist throughout the country.
Hrg Tr. 84:2. However, they typically do not bid for large
B-to-B contracts. Hrg Tr. 907:7-14 (James Moise, Senior Vice
President and Chief Sourcing Officer for Fifth Third Bank
testifying that regional suppliers Office Essentials and WB
Mason declined to bid on their RFP); Hrg Tr. 1941:18-20
(Leonard Allen Wright, Vice President of Strategic Sourcing
for Health Trust Purchasing Group ("HPG") noting
that neither WB Mason nor MyOfficeProducts could meet
HPG's needs nationwide). When regional office supply
vendors compete for large RFPs, they are rarely awarded the
contract. PX02138 (Sears (Realogy) Dep. 156: 15-21, 191:6-17)
(". . .1 was concerned about [WB Mason's] ability to
service the entire country . . . .") .
Mason is a regional supplier that targets its business to
thirteen northeastern states plus the District of Columbia
(known in the industry as "Masonville").
Id. WB Mason "ranks a distant third"
behind Staples and Office Depot. PX03021-002, Meehan Decl. It
6. In fiscal year 2015, WB Mason generated approximately $1.4
billion in total revenue. Id. WB Mason has no
customers in the Fortune 100 and only nine in the Fortune
1000. Hrg Tr. 1611:21-1611:24. According to WB Mason's
CEO, Leo Meehan, "Staples and Office Depot are the only
consumable office supplies vendors that meet the needs of
most large B2B customer[s] across the entire country, or even
most of it." Meehan Decl. ¶ 19.
Mason recently abandoned a plan to expand nationwide. Hrg Tr.
1672 (Mr. Meehan: "And then I just got cold feet about
it _____.") When asked during the i
'hearing if WB Mason would accept a divestiture of cash
assets from the Defendants to cover the expenses of
nationwide expansion, Mr. Meehan would not commit to
accepting such a proposal. Id. 1790 (Mr. Meehan:
"I don't know if I would. That's a big
Inc.'s ("Amazon") effort to compete in the.
office supply industry, including the B-to-B space, is Amazon
Business. Amazon began exploring how to target companies'
procurement of office supplies more than fourteen years ago.
PX02166, Mendelson Dep. 178:24-179:7; Hrg Tr. 525:10-526:10.
In 2002, Amazon launched an "office product store at
Amazon.com, " a cooperative effort with Office Depot.
Mendelson Dep. 178:24-179:7. In 2007, Amazon launched the All
Business Center. Id. 175:18-176:21. In April 2012,
Amazon launched Amazon Supply, a marketplace for selling a
variety of products, including office supplies to business
customers. Hrg Tr. 524:3-4.
Business was launched just over one year ago, in April 2015.
Amazon Business is a "top priority" for Amazon, Hrg
Tr. 659:17-20, and a "must win" opportunity.
Id. 660:8-14. In 2016, Amazon Business forecasts
making $___ profit. Defendants' Exhibit ("DX")
05038. By 2020, Amazon Business's forecasts estimate $___
revenue, ___ percent($____) coming from the sale of basic
office supplies. Hrg Tr. 719:25 - 720:3, 856: 5-16. ___ Hrg
in its infancy, Amazon's vision is for Amazon Business to
be the "preferred marketplace for all professional',
business and institutional customers worldwide." DX00030
at 1. Amazon Business has several undisputed strengths:
tremendous brand recognition, a user-friendly marketplace,
cutting edge technological innovation, and global
reach. Hrg Tr. 663:13 (Vice President of Amazon
Business, Prentis Wilson: "We actually don't worry a
lot about our competitors. Our focus has been on serving our
customers."). Amazon Business also has several
weaknesses with regard to its entry into the B-to-B space.
One weakness is that Amazon Business" is inexperienced
in the RFP process. Amazon Business has not bid on many RFPs
and has yet to win a primary vendor contract. Hrg Tr.
551:11-13 ("Q: Has Amazon Business ever won an RFP for
the role as primary supplier of office supplies? A:
No."). Amazon Business' marketplace model is also at
odds with the B-to-B industry because half of the sales made
through the marketplace are from independent third-party
sellers over whom Amazon Business has no control. Hrg Tr.
843: 7-9 ("Q: You have no plans to force the third
parties to offer particular prices? A: No, we'll never do
The Clayton Act
7 of the Clayton Act prohibits mergers or acquisitions
"the effect of [which] may be substantially to lessen
competition, or to tend to create a monopoly, " in any
"line of commerce or in any activity affecting commerce
in any section of the country." 15 U.S.C. § 18.
When the FTC has "reason to believe that a corporation
is violating, or is about to violate, Section 7 of the
Clayton Act, " it may seek a preliminary injunction
under Section 13(b) of the FTC Act to "prevent a merger
pending the Commission's administrative adjudication of
the merger's legality." FTC v. Staples,
Inc., 970 F.Supp. 1066, 1070 (D.D.C. 1997) (citing'
15 U.S.C. § 53(b)); see also Brown
Shoe v. U.S., 370 U.S. 294, 317 (1962) ("Congress
saw the process of concentration in American business as a
dynamic force; it sought to ensure the Federal Trade
Commission and the courts the power to brake this force . . .
before it gathered momentum.") "Section 13(b)
provides for the grant of a preliminary injunction where such
action would be in the public interest-as determined by a
weighing of the equities and a consideration of the
Commission's likelihood of success on the merits."
FTC v. Heinz Co., 246 F.3d 708, 714 (D.C. Cir. 2001)
(citing 15 U.S.C. § 53(b)).
Section 13(b) Standard for Preliminary Injunction
standard for a preliminary injunction under Section 13(b)
requires plaintiffs to show: (1) a likelihood of success on
the merits; and (2) that the equities tip in favor of
injunctive relief. FTC v. Cardinal Health, 12
F.Supp.2d 34, 44 (D.D.C. 1998). To establish a likelihood of
success on the merits, the government must show that
"there is a reasonable probability that the challenged
transaction will substantially impair competition."
Staples, 970 F.Supp. at 1072 (citation omitted)
(internal quotation marks omitted). "Proof of
actual' anticompetitive effects is not required; instead,
the FTC must show an- appreciable danger of future
coordinated interaction . based on predictive judgment."
FTC v. Arch Coal, Inc., 329 F.Supp.2d 109, 116
(D.D.C. 2004) (internal quotations omitted).
Court's task,, therefore, is to "measure the
probability that, after an administrative hearing on the
merits, the Commission will succeed in proving that the
effect of the [proposed] merger 'may be substantially to
lessen competition, or tend to create a monopoly' in
violation of Section 7 of the Clayton Act.'"
Heinz, 246 F.3d at 714 (quoting 15 U.S.C. §
18). This standard is satisfied if the FTC raises questions
going to the merits "so serious, substantial, difficult
and doubtful as to make them fair ground for thorough
investigation, study, deliberation and determination by the
FTC in the first instance and ultimately by the Court of
Appeals." Id. at 714-15 (citations omitted)
(internal quotation marks omitted). As reflected by this
standard, Congress' concern regarding potentially
anticompetitive mergers was with "probabilities, not
certainties." Brown Shoe Co., 370 U.S. at 323
(other citations omitted).
the Court "must balance the likelihood of the FTC's
success against the equities, under a sliding scale."
F.T.C. v. Whole Foods Market, Inc., 548 F.3d 1028,
1035 (D.C. Cir. 2008). The equities or "public
interest" in the antitrust context include: "(1)
the public interest in effectively enforcing antitrust laws,
and (2) the public interest in ensuring that the FTC has the
ability to order effective relief if it succeeds at the
merits trial." Sysco, 113 F.Supp. 3d at 86.
"[t]he issuance of a preliminary injunction prior to a
full trial on the merits is an extraordinary and drastic
remedy." FTC v. Exxon Corp., 636 F.2d 1336,
1343 (D.C. Cir. 1980)(citations omitted) (internal quotation
marks omitted). The government must come forward with
rigorous proof to block a proposed merger because "the
issuance of a preliminary injunction blocking an acquisition
or merger may prevent the transaction from ever being
Baker Hughes Burden-Shifting Framework
United States v. Baker Hughes, Inc., 908 F.2d 981,
982-83 (D.C. Cir. 1990), the U.S. Court of Appeals for the
D.C. Circuit established a burden-shifting framework for
evaluating the FTC s likelihood of success on the merits. See
Heinz, 246 F.3d at 715. The government bears the
initial burden of showing the merger would result in
"undue concentration in the market for a particular
product in a particular geographic area." Baker
Hughes, 908 F.2d at 982. Showing that the merger would
result in a single entity controlling such a large percentage
of the relevant market so as to significantly increase the
concentration of firms in that market entitles the government
to a presumption that the merger will substantially lessen
burden then shifts to the defendants to rebut the presumption
by offering proof that "the market-share statistics
[give] an inaccurate account of the [merger's] probable
effects on competition in the relevant market."
Heinz, 246 F.3d at 715 (quoting United States v.
Citizens & S. Nat'1 Bank, 422 U.S. 86 (1975)
(alterations in original)). "The more compelling the
prima facie case, the more evidence the defendant must
present to rebut it successfully." Baker
Hughes, 908 F.2d at 991. "A defendant can make the
required showing by affirmatively showing why a given
transaction is unlikely to substantially lessen competition,
or by discrediting the data underlying the initial
presumption in the government's favor." Id.
the defendant successfully rebuts the presumption, the burden
of producing additional evidence of anticompetitive effect
shifts to the government, and merges with the ultimate burden
of persuasion, which remains with the government at all
times." Id. at 983. "[A] failure of proof
in any respect will mean the transaction should not be
enjoined." Arch Coal, 329 F.Supp.2d at 116. The
court must also weigh the equities, but if the FTC is unable
to demonstrate a likelihood of success on the •merits,
the equities alone cannot justify an injunction. Id.
Court's analysis proceeds as follows: (A) legal;
principles considered when defining a relevant market; (B)
application of legal principles to Plaintiffs' market
definition; (C) Defendants' arguments in opposition to
Plaintiffs' alleged market; (D) conclusions regarding the
relevant market; (E) analysis of the Plaintiffs'
arguments relating to the probable effects on competition
based on market share calculations; (F) Defendants'
arguments in opposition to Plaintiffs' market share
calculations; (G) conclusions regarding Plaintiffs'
market share; (H) Plaintiffs' evidence of additional
harm; (I) Defendants' response to Plaintiffs'
prima facie case; and (J) weighing the equities.
Legal principles considered when defining a relevant
discussed supra, the burden is on the Plaintiffs to
show that the merger would result in a single entity
controlling such a large percentage of the relevant market
that concentration is significantly increased and competition
is lessened. See e.g. Baker Hughes, 908 F.2d at 982.
To consider whether the proposed merger may have
anticompetitive effects, the Court must first define the
relevant market based on evidence proffered at the
evidentiary hearing. See United States v. Marine
Bancorp., 418 U.S. 602, 618 (1974) (Market definition is
a "'necessary predicate' to deciding whether a
merger contravenes the Clayton Act."). Examination of
the particular market, including its structure, history and
probable future, is necessary to "provide the
appropriate setting for judging the probable anticompetitive
effects of the merger." FTC v. Arch Coal, Inc.,
329 F.Supp.2d at 116 (quoting Brown Shoe at 322 n.
28); see also United States v. General Dynamic, 415
U.S. 486, 498 (1974). "Defining the relevant market is
critical in an antitrust case because the legality of the
proposed merger  in question almost always depends on the
market power of the parties involved." Cardinal
Health, Inc., 12 F.Supp.2d at 45.
components are considered when defining a relevant market:
(1) the geographic area where Defendants compete; and (2) the
products and services with which the defendants' products
compete. Arch Coal, Inc., 329 F.Supp. 2d. at 119.
The parties agree that the United States is the relevant
geographic market. Hrg Tr. (Shapiro) 2151:23-2152:4; see
also Orszag Dep. 155:15-19. The parties vigorously
disagree, however, about how the relevant product market
should be defined.
Supreme Court in Brown Shoe established the basic
rule for defining a product market: "The outer
boundaries of a product market are determined by the
reasonable interchangeability of use or the cross-elasticity
of demand between the product itself and substitutes for
it." Brown Shoe, 370 U.S. at 325. In other
words, a product market includes all goods that are
reasonable substitutes, even where the products are not
entirely the same. Two factors contribute to an analysis of
whether goods are "reasonable substitutes": (1)
functional interchangeability; and (2) cross-elasticity of
demand. See e.g., Sysco, 113 F.Supp. 3d at
following discussion demonstrates, the concepts of cluster
and targeted markets are critical to defining the market in
Consumable office supplies as cluster market
markets allow items that are not substitutes for each other
to be clustered together in one antitrust market for
analytical convenience. Shapiro Report at 007 (noting that
cluster markets are "commonly used by antitrust
economists.") The Supreme Court has made clear that
"[w]e see no barrier to combining in a single market a
number of different products or services where that
combination reflects commercial realities." United
States v. Grinnell Corp., 384 U.S. 563, 572 (1966).
Here, Plaintiffs allege that items such as pens, file
folders, Post-it notes, binder clips, and paper for copiers
and printers are included in this cluster market. Compl.
¶¶ 36-37. Although a pen is not a functional
substitute for a paperclip, it is possible to cluster
consumable office supplies into one market for analytical
convenience. ProMedica Health Sys., Inc. v. FTC, 749
F.3d 559, 565-68 (6th Cir. 2014). Defining the market as a
cluster market is justified in this case because "market
shares and competitive conditions are likely to be similar
for the distribution of pens to large customers and the
distribution of binder clips to large customers."
Shapiro Report at 007; see also PX02167 (Orszag Dep.
91:11-15) ("So, for example, pens may not often be
substitutes for notebooks in the context of this case, but a
cluster market would be the aggregation of those two and then
the analysis of those together for, as we talked about
earlier, analytical simplicity.").
Large B-to-B customers as target market
legal principle relevant to market definition in this case is
the concept of a "targeted" or "price
discrimination" market. According to the Merger
When examining possible adverse competitive effects from a
merger, the Agencies consider whether those effects vary
significantly for different customers purchasing the same or
similar products. Such differential impacts are possible when
sellers can discriminate, e.g., by profitably raising price
to certain targeted customers but not to others. [...]
When price discrimination is feasible, adverse competitive
effects on targeted customers can arise, even if such effects
will not arise for other customers. A price increase for
targeted customers may be profitable even if a price increase
for all customers would not be profitable because too many
other customers would substitute away.
U.S. Dep't of Justice & FTC Horizontal Merger
Guidelines §3 (2010) (hereinafter Merger
a market around a targeted consumer, therefore, requires
finding that sellers could "profitably target a subset
of customers for price increases ..." See
Sysco, 113 F.Supp. 3d at 38 (citing Merger Guidelines
Section 4.1.4.) . This means that there must be
differentiated pricing and limited arbitrage. Dr. Shapiro
concluded that arbitrage is limited here because "it is
not practical or attractive for a large customer to purchase
indirectly from or through smaller customers."
Application of, relevant legal principles to Plaintiffs'
concepts of cluster and targeted markets inform the
Court's critical consideration when defining the market
in this case: the products and services with which the
Defendants' products compete. Arch Coal, Inc.,
329 F.Supp. 2d. at 119. The parties vigorously disagree on
how the market should be defined. As noted supra,
Plaintiffs argue that the relevant market is a cluster market
of "consumable office supplies" which consists of
"an assortment of office supplies, such as pens,, paper
clips, notepads and copy paper, that are used and replenished
frequently." Compl. ¶¶ 36-37. Plaintiffs'
alleged relevant market is also a targeted market, limited to
B-to-B customers, specifically large B-to-B customers who
spend $500, 000 or more on office supplies annually. Hrg Tr.
on the other hand, argue that Plaintiffs' alleged market
definition is wrong because it is a "gerrymandered and
artificially narrow product market limited to some,
but not all, consumable office supplies sold to only the most
powerful companies in the world." Defs.' FOF ¶
4 (emphasis in original). In particular, Defendants insist
that ink and toner must be included in a proper definition of
the relevant product market. Id. ¶ 101.
Defendants also argue that no evidence supports finding sales
to large B-to-B customers as a distinct market. Id.
Brown Shoe "Practical
Brown Shoe practical indicia support Plaintiffs'
definition of the relevant product market. The Brown
Shoe "practical indicia" include: (1) industry
or public recognition of the market as a separate economic
entity; (2) the product's peculiar characteristics and
uses; (3) unique production facilities; (4) distinct
customers; (5) distinct prices; (6) sensitivity to price
changes; and (7) specialized vendors. Brown Shoe, 37
0 U.S. at 325. Courts routinely rely on the Brown
Shoe factors to define the relevant product market.
See, e.g. Staples, 970 F.Supp. at 1075-80;
Cardinal Health, 12 F.Supp.2d at 46-48; FTC v.
Swedish Match, 131 F.Supp.2d 151, 159-64 (D.D.C. 2000);
FTC v. CCC Holdings, 605 F.Supp.2d 26, 39-44
(D'.D.C. 2009); United States v. H & R
Block, 833 F.Supp.2d 36, 51-60 (D.D.C. 2011)
most relevant Brown Shoe indicia in this case are:
(a) industry or public recognition of the market as a
separate economic entity; (b) distinct prices and sensitivity
to price changes; and (c) distinct customers that require
specializ-ed vendors that offer value-added services,
including: (i) sophisticated information technology (IT)
services; (ii) high quality customer service; and (iii)
Industry or public recognition of the alleged market as a
separate economic entity
in the office supply industry identify customers according to
how much they spend annually and recognize B-to-B customers
as a distinct group. Shapiro Report 006-008. For example,
Staples defines "Enterprise" customers as those who
spend over $1 million per year, "Commercial"
customers as those who spend between $100, 000 and $1
million'per year,, and "mid-market" customers
as those who spend between $6, 000 and $100, 000 per year.
PX04062 (SPLS) at 009; PX04088 (SPLS) at 23. Office Depot
maintains similar categories. PX02002 (Calkins, Office Depot
("ODP") IH 85:16-86:7). According to Staples, the
$500, 000 spend mark ...