Staples and Office Depot Not Entitled to FTC Notes

(CN) - Staples and Office Depot cannot compel the release of information gathered an anti-trust investigation of the companies' proposed 2015 merger, a federal judge ruled.

In February 2015, Staples announced that Office Depot shareholders had overwhelmingly approved its offer to buy the rival office supplies retailer for $6.3 billion.

The transaction valued Office Depot at $11 per share, which shareholders would receive in cash and Staples stock.

But the Federal Trade Commission filed an administrative complaint blocking the deal in December, claiming that the merger would significantly reduce competition in the office supplies market, leading to higher prices and lower quality.

The complaint remains under seal, but the FTC explained its reason for intervening in the deal in a news release.

"The commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies," FTC Chairwoman Edith Ramirez said in the release. "The FTC's complaint alleges that Staples and Office Depot are often the top two bidders for large business customers."

The FTC also believes that expansion into the market by other office supplies venders would not be likely to counteract the anticompetitive effects of the merger, according to its statement.

On Jan. 21, U.S. District Judge Emmet Sullivan denied Staples and Office Depots' motion to compel the government to turn over 850 documents related to its investigation of the defendants' proposed merger, as well as the 2013 investigation of the Office Depot-Office Max merger.

The FTC claims the documents are attorney notes and internal memoranda privileged under the attorney work-product doctrine.

After an in camera review, Sullivan confirmed that the documents are privileged, and found that Staples and Office Depot have not established they will suffer undue hardship without them.

"Defendants clearly need to gather factual information about third parties in order to competently defend this case. However, such a generalized need is not equivalent to the substantial need and undue hardship that must be shown in order to compel production of opposing counsel's work product," Sullivan said.

Staples and Office Depot have agreed to an aggressive discovery schedule, and have issued over 200 subpoenas.

"This understandably places tremendous pressure on defendants, as they do not have the benefit of completing a year-long investigation into the matter like Plaintiffs. While this disparity is not sufficient to infringe on Plaintiffs' work product, the Court will consider any modifications to the discovery schedule sought by defendants," the judge concluded.

An administrative trial is scheduled to begin in May 2016.

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