## Facts

- Staples, Inc. and Office Depot, Inc. were two of the three national office supply superstore chains; OfficeMax was the remaining national rival.
- The parties executed a merger agreement in which Office Depot would become a Staples subsidiary, with Office Depot shareholders receiving Staples stock.
- The parties made premerger filings under the Hart-Scott-Rodino Act; the Federal Trade Commission investigated for several months.
- The FTC sued in federal district court seeking a temporary restraining order and a preliminary injunction under § 13(b) of the FTC Act to block consummation pending an administrative proceeding alleging violations of § 7 of the Clayton Act and § 5 of the FTC Act.
- After a multi-day evidentiary hearing, the court granted a preliminary injunction; the parties later abandoned the merger.
- The FTC relied on internal business records and econometric analyses indicating prices for consumable office supplies were lower where Staples and Office Depot competed head-to-head, and higher where superstore competition was absent.

## Issues

1. Whether the relevant product market was the sale of consumable office supplies through office supply superstores, rather than a broader market including mass merchandisers, club stores, and other retailers.
2. Whether the relevant geographic markets were local metropolitan areas where the superstores overlapped, rather than a national market.
3. Whether the FTC showed a likelihood of proving the merger may substantially lessen competition in violation of § 7 of the Clayton Act in properly defined markets.
4. Whether preliminary injunctive relief was warranted under § 13(b) of the FTC Act based on likelihood of success and the equities/public interest.

## Decision

- The court granted the FTC’s motion for a preliminary injunction, blocking the merger pending administrative adjudication.
- The court accepted the FTC’s product market: consumable office supplies sold through office supply superstores.
- The court accepted the FTC’s geographic markets: metropolitan areas in which consumers could practicably shop among competing superstores.
- The court found the merger would substantially increase concentration in many local markets, frequently leaving only one or two superstore competitors.
- The court concluded the FTC was likely to prove unilateral anticompetitive price effects, supported by localized pricing evidence, internal documents, and econometric testimony.
- The court rejected claims that entry or repositioning by other retailers would be timely, likely, and sufficient to counteract competitive harm.
- The court found defendants failed to show merger-specific efficiencies sufficient to offset the likely competitive injury.
- The court held the balance of equities and the public interest favored an injunction because consumers faced near-term harm from higher prices and post-merger relief would be difficult.

## Legal Principles

- Under § 13(b) of the FTC Act, a federal court may grant preliminary injunctive relief when the FTC shows a likelihood (or reasonable probability) of ultimate success on the merits and that interim relief serves the public interest.
- Relevant product markets may be defined narrowly where evidence shows a distinct competitive constraint, including internal firm records, pricing practices, and empirical price effects.
- Relevant geographic markets may be local where purchasing patterns, firm pricing zones, and competitive assessments are organized around metropolitan areas.
- High market concentration and large concentration increases in properly defined markets create a strong inference of likely anticompetitive effects under structural merger analysis.
- Unilateral effects evidence—showing that removing a close rival is likely to permit price increases—can support a preliminary injunction, especially when supported by systematic pricing data and econometrics.
- Entry and expansion arguments must be supported by evidence that entry would be timely, likely, and sufficient to prevent anticompetitive outcomes.
- Claimed efficiencies must be substantiated and merger-specific, and must be sufficient to counterbalance predicted competitive harm.

## Conclusion

The court preliminarily enjoined the Staples–Office Depot merger after finding the FTC likely to prove that combining two close office-superstore rivals would lessen competition in many metropolitan markets, leading to higher prices for consumable office supplies, and that the public interest favored preserving local price competition pending administrative review.


F.T.C. v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997)