As we previously reported, Judge Emmet Sullivan of the US District Court of the District of Columbia had granted the FTC’s request for a preliminary injunction blocking the proposed Staples-Office Depot merger. Earlier this week, Judge Sullivan released a public version of the opinion supporting his decision.

To grant the injunction, the FTC must show a likelihood of success on the merits and that the equities tip in favor of granting the injunction. To do this, the FTC must show that “there is a reasonable probability that the challenged transaction will substantially impair competition,” by raising questions “so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance and ultimately by the Court of Appeals.”

During trial, defendants claimed that the FTC failed to meet even this low threshold and did not put on any testimony or witnesses. The lead counsel for Staples stated that “[i]t’s going to be the defendants’ position that we’re going to rest on the record as it exists, so there’ll be no need for additional evidence or rebuttal.” We are not aware of any prior merger hearing in which the defense opted to not put on any evidence.

This decision may have proved fatal to the Staples-Office Depot merger. Throughout the opinion, the judge noted the lack of refuting evidence from the defendants against the FTC’s claims.

Ultimately, the court made three key findings supporting his decision:

First, the court found that the FTC alleged an appropriate, relevant market in which to assess the competitive impact of the proposed transaction: sales of consumable office supplies, excluding ink and toner, to large business customers with over $500,000 annually in consumable office supply purchases. The court rejected Staples’ argument that the FTC’s exclusion of ink, toner and “beyond office supply sales,” was fatal to the market definition. The court found: (1) the FTC had shown that ink and toner were subject to significantly different competitive dynamics than consumable office supplies; and (2) that BOSS were subject to differing competitive conditions than consumable office supplies.

Second, in finding that the FTC had met its burden to show that anticompetitive effects were reasonably likely in this market, the court found that FTC could “prove its prima facie case by showing that the merger will result in an increase in market concentration above certain levels.” Considering the market share evidence from 81 Fortune 100 companies, the court found the proposed acquisition was “presumptively illegal.”

The court did not rest on this market concentration presumption, however. The court also examined the companies’ own bid data to determine that they were frequent head-to-head competitors, and highlighted internal documents showing the companies aggressively compete with each other for customers. The court also noted several instances where the defendants apparently acknowledged the reduction in competition. For example, a Staples salesperson stated, “[t]his offer is time sensitive. If and when the purchase of Office Depot is approved, Staples will have no reason to make this offer.”

The court also rejected Staples’ argument that entry by Amazon Business would restore any lost competition. Chiefly, the court said that Amazon Business (1) lacks RFP experience; (2) has no commitment to guaranteed pricing; (3) lacks the ability to control third-party price and delivery; (4) does not have the ability to provide customer-specific pricing; (5) lacks dedicated customer service agents for large business customers; (6) does not do desktop delivery; (7) does not provide detailed utilization and invoice reports; and (8) lacks product variety and breadth. The court also did not find local and regional suppliers, such as WB Mason, to be sufficient competitive restraints.

Finally, the court found that two factors weighed in the interest of granting the FTC’s requested injunctive relief: (1) the public interest in effectively enforcing antitrust laws, and (2) the public interest in ensuring that the FTC has the ability to order effective relief if it succeeds at the merits trial.

Shortly after the court’s order was released on May 11, 2016, the parties abandoned their proposed merger.