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

Rule:

Section 7 of the Clayton Act, 15 U.S.C.S. § 18, makes it illegal for two companies to merge where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. Whenever the Federal Trade Commission (FTC) has reason to believe that a corporation is violating, or is about to violate, § 7 of the Clayton Act, the FTC may seek a preliminary injunction to prevent a merger pending the an administrative adjudication of the merger's legality. Section 13(b) of the Federal Trade Commission Act, 15 U.S.C.S. § 53(b). However, in a suit for preliminary relief, the FTC is not required to prove, nor is the court required to find, that the proposed merger would in fact violate § 7 of the Clayton Act.

Facts:

Defendants Staples, Inc. and Office Depot, Inc., were both corporations that sold office products. Staples was the second largest office superstore chain in the United States; Office Depot was the largest office superstore chain in the United States. OfficeMax, Inc., was the only other office supply superstore in the United States. In Sept. 1996, defendants entered into an "Agreement and Plan of Merger." Plaintiff Federal Trade Commission ("FTC") filed an action against defendants in federal district court seeking a preliminary injunction pursuant to § 13(b) of the Federal Trade Commission Act, 15 U.S.C.S. § 53(b), to enjoin the merger pending final disposition before the FTC of administrative proceedings to determine whether the merger would substantially lessen competition in violation of § 7 of the Clayton Act, 15 U.S.C.S. § 18, and § 5 of the Federal Trade Commission Act, 15 U.S.C.S. § 45. The merger was postponed pending the court's decision on the motion for a preliminary injunction.

Issue:

Did the FTC establish the likelihood that it would succeed in proving, after a full administrative trial on the merits, that the effect of a merger between Staples and Office Depot would be substantially to lessen competition, or to tend to create a monopoly in violation of § 7 of the Clayton Act?

Answer:

Yes.

Conclusion:

The court granted the FTC a preliminary injunction against the proposed merger of Staples and Office Depot. The court ruled hat the FTC showed a reasonable probability that the proposed merger would substantially impair competition and raised serious questions going to the merits so serious as to make them fair ground for thorough investigation and determination by the FTC and ultimately by a federal appellate court. The preliminary injunction was found to be in the public interest.

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