Staples: FTC rejected updated Office Depot offer

NEW YORK - Federal regulators rejected an offer from Staples (SPLS) to sell $1.25 billion in contracts, an attempt on the part of the office supply retailer to ease monopoly fears as it tries to acquire rival Office Depot (ODP).

The Federal Trade Commission sought to block the deal earlier this month believing that a tie up between the last of the major retailers in the sector would throttle competition. Regulators said that competition between the two was crucial to keep prices fair for those industries that must acquire pens, paper and other supplies.

The office supply sector has been upended by technological changes in the work place, as well as a slow economic recovery. The industry had already undergone a notable consolidation with the merger two years ago of Office Depot and OfficeMax.

Office Depot and Staples argue that competition has become even tougher since then, and that the FTC is contradicting itself because it said that the office supply market was highly competitive two years ago.

Staples, based in Framingham, Massachusetts, said that it is still willing to negotiate with the FTC and that it may pursue legal action to close the deal.

Shares of Staples Inc. slipped 4 cents to $9.38 in morning trading Monday. Shares of Office Depot Inc., based in Boca Raton, Florida, slipped 2 cents to $5.39.