On May 10, 2016, Judge Emmet Sullivan of the District Court of the District of Columbia held that the Federal Trade Commission had “met their burden” to show a reasonable probability that Staples’ acquisition of its rival, Office Depot, would likely cause competitive harm and that a preliminary injunction to halt the deal was in the public’s interest. Shortly after the court issued the preliminary injunction blocking the proposed merger, Staples announced that it was abandoning the transaction.

During the highly publicized preliminary injunction hearing, the FTC argued that Staples’ proposed purchase of Office Depot would result in higher prices for large business-to-business customers of consumable office supplies, and that nascent competition from online retailers and smaller competitors did not pose enough of a threat of entry to restrain the combined Staples-Office Depot’s ability to increase prices without repercussion.

Highlights of the hearing included significant questioning by the court of the FTC’s practice of collecting witness declarations from third parties, and an unusual decision by Staples’ counsel to forego a defense. In yesterday’s order, the court found that the FTC “met their burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition.” Importantly, the court also found that the equities weighed in favor of a preliminary injunction to affirmatively block the merger. In response to the injunctive relief, Staples CEO Ron Sargent stated that the parties would be abandoning the deal and that Staples would pay Office Depot a $250 million breakup fee.