With Staples, Obama Once Again Interferes With The Private Sector

His remarks on health care come as the office-supply chain is under antitrust review

The Staples office-supply chain is now the latest victim in a series of politically charged attacks from the White House on corporations.

In an interview with BuzzFeed, President Obama said: “There is no reason for an employer who is not currently providing health care to their workers to discourage them from either getting health insurance on the job or being able to avail themselves of the Affordable Care Act.”

He continued: “I haven't looked at Staples stock lately or what the compensation of the CEO is, but I suspect that they could well afford to treat their workers favorably and give them some basic financial security, and if they can't, then they should be willing to allow those workers to get the Affordable Care Act without cutting wages.”

Not only does that show a fundamental misunderstanding of the Affordable Care Act and Staples' personnel policies, but it inserts the president into an upcoming antitrust decision as to whether Staples US:SPLS will be allowed to acquire Office Depot US:ODP

It is perhaps not coincidental that Staples got a major boost by Mitt Romney, President Obama's rival in the 2012 election, and his investment firm. Staples is headed by Republican Ronald Sargent, a prime target for President Obama.

A Staples' spokesman explained that Staples has had a 25-hour-per-week policy for part-time workers for the past decade, even before the Affordable Care Act was conceived. However, the president must be aware that the Affordable Care Act offers a substantial disincentive for employers to hire workers for more than 30 hours per week, which has led to an increase in involuntary part-time workers.

The disincentive works this way. Employers who do not offer health insurance have to pay penalties on employees who work 30 or more hours per week, because this is the definition of full time under the regulations. Employers who do offer health insurance have to extend it to those who work 30 or more weekly hours, a prospect that can be costly because insurance now has to be more generous to comply with ACA standards.

That has led to an increase in people working part time who want full-time jobs. As my Manhattan Institute colleague Scott Winship testified before the Subcommittee on Human Resources of the House Committee on Ways and Means on Wednesday: “69% of employed men aged 18 to 64 were working full time in 2007, but just 63% were in 2014, while the decline among young women was from 55 to 49%. About half of these declines were due to a rise in involuntary part-time work. … Among men and women of all ages, involuntary part-time work constituted a larger share of all part-time work in 2014 than in 2007.”

The president must know that workers who are not receiving health insurance are eligible for health insurance on the exchanges. Employers who do not offer health insurance cannot affect their employees' chances of getting insurance on the exchange.

The announced purchase of Office Depot by Staples, with its upcoming antitrust review, makes Obama's comments even more inappropriate. On Feb. 4, Staples and Office Depot announced that Staples will purchase Office Depot's shares for 44% over its Feb. 2 closing price. That values Office Depot at $6.3 billion.

Some observers say that the proposed merger will lead to an anti-competitive market concentration. Either the Justice Department or the Federal Trade Commission will have to decide whether Staples will be allowed to purchase Office Depot under antitrust law.

Now the president has publicly stated that he has differences with Staples' management. Those differences could reasonably be interpreted by senior officials at the Justice Department or more likely the Federal Trade Commission as political cover to block the proposed merger.

Staples needs approval from one of those agencies to merge with Office Depot, and will likely need President Obama's blessing. Obama has appointed the Justice Department officials and nominated all five of the current FTC commissioners.

Staples tried to buy Office Depot back in 1996, but the FTC blocked a proposed merger between the two companies in 1997. Now the transaction will face even more regulatory hurdles because Office Depot purchased another office-supply company, Office Max, in 2013.

While the two companies continue to hold significant market share in sales of office supplies such as paper and pens, the marketplace has become increasingly dynamic and competitive over the past decade. Online retailers like Amazon US:AMZN and large discount stores such as Walmart US:WMT now offer alternatives for the same supplies at similar, if not cheaper, prices.

The rise of those discount chains has led to the demise of other retailers, including the once-profitable electronics chain Circuit City and retail book chain Borders. Revenue at Office Depot have fallen by a third since 2007.

The president's attack on Staples is the latest in a series of White House interference with private companies. Shortly after the president took office, he admonished banks for taking part in conferences in Las Vegas. Two months ago, his National Labor Relations Board decided to target McDonald's US:MCD franchises. Now he is needlessly attacking Staples.

Favored companies include Comcast US:CMCSA and CVS US:CVS The Comcast-NBC Universal merger went through in 2010, and Susan Crawford, in her book “Captive Audience,” describes the close ties between the White House and Comcast. Just a year ago, Obama praised CVS for removing tobacco products from its shelves.

These actions give the appearance of preference for those who curry favor with the powerful, and it squeezes out some disfavored companies that can supply innovative products and services to consumers.

It does not help the economy when companies whose executives financially support the same party as the president are publicly praised and thanked, and invited to White House parties, while those who fall on the wrong side of the White House are shamed. The president should take note: Don't interfere in matters involving individual companies.

This piece originally appeared in WSJ's Marketwatch

This piece originally appeared in WSJ's MarketWatch