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Staples Closes Defense, Calls No Witnesses in Merger Trial Brought by FTC

Yesterday, Staples closed its defense in the case brought by the Federal Trade Commission (FTC) to block the Staples-Office Depot merger—without calling any witnesses.  (We covered the first week of the trial here.) Judge Emmet Sullivan of the D.C. District Court stated that he “did not anticipate” this unusual move by Staples.  The CEOs of both Staples and Office Depot were slated to testify; instead, Judge Sullivan began hearing closing arguments.

Arguing that the FTC has the burden to define the market in which the merger would allegedly harm competition, Staples described the government’s attempt to carry that burden as an “utter failure.”  According to Staples, the FTC defined the relevant market too narrowly by including only customers that purchase at least $500,000 in office supplies annually.  Moreover, Staples argues that the FTC “cherry-pick[ed]” the particular consumable office supplies to be included in the product market, as the FTC’s definition includes pens, notebooks, and paper but excludes printer ink and toner.  Indeed, Judge Sullivan called the FTC’s exclusion of these supplies a “huge issue.”

The decision by Staples to rest its case without calling witnesses is a classic trial-time decision, though one more frequently seen in criminal cases than in the merger context.  Here, it likely signals Staples’s confidence that the FTC has not offered a viable market definition.

The FTC rejected a new settlement offer by Staples last week.  Staples has offered to freeze prices for three years following a merger with Office Depot.

The parties are ordered to return to court on April 19, 2016 for a final round of arguments.  Judge Sullivan encouraged the parties to work toward a settlement in the meantime.  Stay tuned.