NEW YORK (The Deal) -- Staples (SPLS) and Office Depot (ODP) - Get Report have set a timeline for closing the $5.7 billion merger of the office supply companies pending a decision by competition regulators, and the deal continues to trade like it could be blocked.

The big-box office retailers said Friday they certified substantial compliance with the Federal Trade Commission regarding a second request in March. The companies agreed not to close the merger before 45 calendar days expire, which adds 15 days to the standard 30-day statutory timeframe.

The Office Depot merger with Office Max had a seven-month-long antitrust review by the FTC before the commission unanimously approved the transaction in 2013.

In that decision, the FTC concluded pricing at office supply superstores was no longer driven by local superstore presence, but by non-superstore competitors and other major retailers such as Wal-Mart Stores (WMT) - Get Report and by online retail.

This isn't the first time Staples and Office Depot have attempted to merge. A 1997 court decision that blocked their previous proposal to join up cost risk arbitrageurs invested in that deal dearly. So the current deal trades at a substantial spread. The deal Monday had a spread of $2.42, or 30%. If the merger closed Oct. 31, roughly after the 45-day waiting period, the deal offered an annualized return of about 180%.

The deal has shareholder approval and has cleared other competition authorities, including the Ministry of Commerce in China.

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In the Office Depot-Office Max transaction analysis, the FTC concluded that price zones and retail pricing are no longer dictated by the number of local office superstores but priced either nationally or, if priced locally, with the competition of nonsuperstores taken into account.

The arb market clearly is still reluctant to assume that the FTC will allow the brick-and-mortar office superstore players to go from two to one, which could be a precedent in antitrust enforcement. Similar reviews that have been blocked have ended poorly for the competing retailers, such as the failed attempt of Blockbuster to acquire Hollywood Entertainment in 2005. After the FTC frustrated Blockbuster's attempt to build scale with a Hollywood deal, the company went bankrupt. The industries may not be parallel, as Internet streaming of video is not the same as the delivery of staples.

If the FTC follows its logic with Office Max, the deal should be approved, an antitrust attorney said. In a sense, the agency really has to decide whether the brick-and-mortar retail days are over from a pure competitive standpoint, he said. 

But the FTC could back down from the Office Max position by relying on the troublesome "market share" of a combined Staples-Office Depot or by defining the experience of shopping at a superstore as distinct from a WalMart, the attorney said. 

The logic of Office Max says the deal should be cleared, but it will still be a surprise if the FTC lets it pass, the attorney said. 

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