How a New Merger Involving Staples Has Put Small Businesses at Risk

How a New Merger Involving Staples Has Put Small Businesses at Risk

By this point, the story seems all too familiar: A government-sanctioned merger has consolidated yet another industry, leaving small businesses in danger of being squeezed out altogether. In recent years, the same story has repeated itself in the cable television sector, the beef industry and the utility market. This time, it’s something much less visible to the average American consumer: office supplies. A recent merger involving Staples could allow two dominant companies to oust small competitors from the industry.

Earlier this year, the Federal Trade Commission approved a merger between Staples parent company Sycamore Partners and Essendant, one of only two office-supply wholesalers in the U.S. Essendant currently supplies products not just for big-box retailers like Staples, but also for dozens of small and independently owned retailers. According to the Institute for Local Self-Reliance (ILSR), most consumers aren’t aware of these small companies because they focus primarily on business-to-business sales. In that market, though, these small companies have accumulated decades of success, despite competition from big-box and online retailers.

The merger has small businesses worried, and for good reason. First, the merger allows Staples to influence or control the supply chain for many of its small competitors. As a result, Staples may increase prices, limit product availability or otherwise gain an upper hand in the distribution of office supplies. Second, the merger also raises the concern that the only remaining wholesaler, S.P. Richards, could also be vulnerable to consolidation.

As the stories of concerning mergers become more and more common, the work that small businesses do to set themselves apart becomes only more and more important. Small businesses, like many of Staples’ small competitors, offer more personalized service and more expert advice than many big-box companies that take a one-size-fits-all approach to customers. For communities, they create local jobs, reinvest profits in the local economy and diversify the local market. More than threaten small businesses, these increasingly common mergers threaten the strength and resiliency of local communities.

Small businesses can prevent or mitigate the harmful effects of big-box mergers by working together to solidify their position in the community. Main Street organizations, including downtown business associations and Local First groups, foster a community-wide network of small businesses. Together, member businesses develop deeper ties to the community through engaging events, charitable causes and government advocacy.

Additionally, small businesses can seek to become advocates on a higher level. Each major merger on this scale requires a government approval. Typically, the government agency tasked with approving the merger must accept and review comments from the public. According to ILSR, the FTC received nearly 2,000 comments on the Staples merger. Although many comments expressed concern about the merger, the agency chose to proceed anyway. This response may be disappointing, but it shows that small businesses nonetheless have an opportunity to influence the process. One FTC decision maker dissented from the merger’s approval, citing concern for the consolidation of industries that leaves a few, powerful companies in charge. With continued perseverance and engagement in the process, small businesses and their advocates can work to persuade agency decision makers to turn the dissent into a decision.

The Staples merger, like so many mergers before it, threatens small competitors like never before. However, small businesses can continue to engage in government and public advocacy to solidify their positions in the community and the national economy.

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