Stressed Out: FTC Riles Judge in Office Depot-Staples Case

 | Mar 24, 2016 | 12:47 PM EDT
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This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

The Federal Trade Commission doesn't want the merger of Office Depot (ODP) and Staples (SPLS) to go through, if U.S. District Judge Emmet Sullivan's assertion is true.

Sullivan accused FTC regulators of attempting to elicit false information from Amazon (AMZN) executive Prentis Wilson in written statements he made to bolster the FTC's case against the office-supply retailers.

Prentis Wilson is vice president of Amazon Business. The office-supply business is the successor to Amazon Supply.

The FTC sued to halt the merger of Office Depot and Staples ahead of its own administrative trial scheduled for May.

Sullivan called the conduct of the FTC "very disturbing," accusing the agency of  coercing Wilson "to say something for the benefit of the United States of America that is not true."

Sullivan made the comments after the court was reopened to the public following Wilson's testimony. 

Wilson declined to make comments under oath regarding a written statement, according to court transcripts, though the court record did not make clear which comments Wilson did not want to elaborate on.

Much of the proceeding Wednesday was closed to the public due to the confidential nature of Amazon's business operations. However, Sullivan ordered the parties to black out any confidential information from the testimony overnight so it could be released to the public as early as today.

During his initial testimony on Tuesday, Wilson reportedly said, "At this point, Amazon Business does not negotiate contracts with large business customers." And when asked if the company was the primary supplier for any companies with revenue over $250 million, Wilson responded that the company has been able to garner only one.

FTC attorney Tara Reinhart told Sullivan the agency never asked Wilson to lie, according to Bloomberg News.

Wilson testified that overall the company was able to open accounts with about 300,000 businesses in the first 11 months of its Amazon Business service. But its lack of ability to garner contracts from larger corporations plays into the FTC's concerns about the diversity of options in the industry.

The FTC has estimated the two companies sell 79% of the office supplies to Fortune 100 companies in the U.S.

During opening statements Monday, Staples lawyer Diane Sullivan countered that Amazon has a history of disrupting legacy retailers and to ignore its latest foray into the office-supply retail space, Amazon Business, would be foolhardy.

"The landscape of history is littered with companies who have been killed or bankrupt by digitized companies like Amazon," she said.

The hearing is expected last up to two weeks. During a conference call with analysts earlier this month, Staples said that "the acquisition of Office Depot is over from our perspective," if Sullivan rules in favor of the FTC. Businesses often abandon their merger aspirations before an FTC administrative trial due to its typically slow process.

Time is not on stressed-out Office Depot's side.  

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