Office Depot's Overpricing Practice is Paying a Great Price

Office Depot’s corporate headquarters in Boca Raton, Florida.

Some of you may have heard few years ago about Office Depot being investigated by the US Department of Justice or by an Attorney General due to overpricing, and how the retailer was slapped with millions of dollars as a result.

But here comes Office Depot again for the nth time. The US Department of Justice (USDOJ) is currently investigating a similar case of overpricing from some schools and local state agencies in the State of Florida. It was done by switching them to a different pricing option without the State's full knowledge or understanding.

See, this is not the first time the company had engaged with such practice. Not twice. But fourth time in a row:

• Office Depot was investigated sometime in 2008 for the second time. It was in June 2010 last year when the retailer had agreed to pay back $4.5 million to eligible claimants in Florida including schools, and local state agencies. Office Depot had denied the allegation and admitted no wrong doing.
• The third case was on 2008, the same year when it was first investigated. But this time it was the State of California as a state customer. Again, 2 years later, the company agreed to refund $2.4 million as part of the settlement.
• And the fourth, it was between 14 school districts and some non-profit organization in Missouri. After the investigation by the Attorney General, Office Depot agreed to pay $320,000 back to those schools and organizations.

As of 2009, Office Depot has undergone investigations for committing the same practice in 6 States including Ohio, California, Florida, Missouri, Colorado, and Texas. Now the company is paying a great price:

• Shares of Office Depot has started to slide as early as Tuesday after the company had disclosed in a SEC filing that it was a target of Department of Justice investigation.
• It lost $57.8 million or 21 cents a share in the fourth quarter last year.
• CEO Steve Odland resigned in October last year
• Just this month, the joint venture that owns Office Depot's headquarter sold it for $171 million.

What caused the apparent loss of business confidence for Office Depot by customers, investors, and creditors may be complex. But one obvious reason was its inability to rectify its old practice and the policy of customer transparency. I hope OD learns its lesson...this time.