FTC asked Amazon Business Exec. to lie in declaration

Staples Office Depot MergerA routine part of FTC enforcement actions in federal court is the FTC’s use of witness declarations, which operate much the same as affidavits.  Pursuant to 28 U.S.C. § 1746 a party may submit an unsworn declaration in lieu of a sworn affidavit.  A declaration, unlike an affidavit that is made under oath before a judge, notary public, or other person with legal authority, is a written statement submitted to a court in which the writer swears ‘under penalty of perjury’ that the contents are true.

FTC Wanted Witness to Lie in Declaration

In the recent Staples /Office Depot merger fight, the FTC’s use of a witness declaration to support its contention that the merger violates U.S. antitrust laws has come under fire.  According to a transcript of a closed-door session during the merger trial, Amazon Business Vice President Prentis Wilson testified that the FTC asked him to lie in his declaration that Amazon did not believe it would be in a position to bid on office supply contracts with large businesses until early 2017.

In response to Wilson’s allegations against the FTC, U.S. District Judge Emmett Sullivan asked Wilson, “And that wasn’t true was it?”

“That’s why we were unwilling to say that,” the Amazon executive answered. “We weren’t sure if that was going to be true or not.”

“Were you surprised that the government was telling you what to say and not say?” Sullivan said.

“Yes,” Wilson replied, subsequently adding, “I was signing this thing, it was going to be factual.”

Judge Sullivan Wants Wilson’s Testimony Made Public

Following Wilson’s testimony that the FTC asked him to perjure himself, Judge Sullivan said it’s “very disturbing” when the FTC tries to persuade a witness “to say something for the benefit of the United States of America that is not true” in a declaration.  In fact Judge Sullivan was so upset by Wilson’s testimony concerning his declaration that, after the courtroom was reopened, the judge said that he wants Wilson’s testimony to be made public.  Judge Sullivan stated that the executive’s comments in the closed testimony “speak for themselves,” which is why he wants “it out there on the public docket.”

FTC Denies Any Wrongdoing

In response to Judge Sullivan’s stirring comments, Tara Reinhart, a lawyer for the FTC, told the judge that the FTC “certainly never asked” Wilson to say something “that wasn’t true” in his declaration.  Additionally, in a court filing dated March 2, which was only recently made public, the FTC said that the procedures used to draft Wilson’s declaration were not “unusual or inappropriate.”

Wilson’s Testimony is Key to FTC’s Case Against Merger

Wilson’s testimony is potentially impactful to whether or not Judge Sullivan will grant the FTC’s motion to block the planned merger between Staples and Office Depot.  Amazon’s entrance into the office-supply market is central to the merger fight because Staples and Office Depot claim that Amazon Business will be a significant competitor to an enlarged Staples.  The FTC has said that Staples and Office Depot already dominate the market for sales to larger corporate businesses and that the merger would only lead to higher prices for corporate businesses.

As part of his testimony, Wilson told the FTC that it had only been able to obtain only one contract from a business with more than $250 million in revenue.  However, under questioning from Staples’ attorneys, Wilson said that overall, about 300,000 businesses had opened accounts with Amazon in the first 11 months of its Amazon Business service.  As a result, it would seem that Amazon Business has or will be able to bid on office-supply contracts with large businesses prior to 2017.

Judge Sullivan Also Questions McDonald’s Exec.’s Testimony

Unfortunately, Wilson’s testimony was not the only witness whose testimony attracted Judge Sullivan’s ire.  Judge Sullivan also questioned the testimony of a McDonald’s Corp. executive who testified that the merger would lead to higher prices of office supplies for the restaurant chain and that it wouldn’t be practical to do business with a number of smaller vendors as an alternative to Staples.  Judge Sullivan bluntly asked that if McDonald’s can source food all over the world from multiple vendors, why can’t it do the same for office supplies.

“If the merger goes through and the contract is terminated, you’re going to have to figure out a way to do business, right?” Sullivan asked Jason Cervone, a global sourcing and procurement manager at McDonald’s.

“Right, and it would not be favorable to McDonald’s at all,” Cervone said.

“That’s what I find hard to believe,” Sullivan said, “because that — this worldwide conglomerate, you know, that’s been highly successful, I’m actually kind of shocked you said that.”

FTC Alleges Merger Would Reduce Competition for “Consumable” Office Supplies

The FTC filed an administrative complaint to block the planned merger between Staples and Office Depot in December 2015.  “Staples, Inc.’s proposed $6.3 billion acquisition of Office Depot, Inc. would violate the antitrust laws by significantly reducing competition nationwide in the market for ‘consumable’ office supplies sold to large business customers for their own use,” the FTC said in a press release.  Additionally, the FTC “authorized staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding.”

The case is Federal Trade Commission v. Staples Inc., 15-cv-2115, U.S. District Court, District of Columbia (Washington).

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