Staples (SPLS) and Office Depot (ODP) - Get Report may soon know if their hoped-for merger will be approved. If so, the merger will allow them to compete more effectively against online behemoth Amazon (AMZN) - Get Report . If not, they'll be forced to resume operating as bitter rivals with bleak futures.

According to Office Depot CEO Roland Smith, District Judge Emmet Sullivan is expected to announce a decision Tuesday on whether the two office supply giants will be allowed to proceed with their government-contested merger.

Sullivan oversaw some three weeks of testimony between lawyers for Office Depot and Staples and the Federal Trade Commission, which ended on April 21. The long-serving judge, who has a track record of being tough on government lawyers, challenged how the FTC prepared a witness statement, whether it shared certain information with the companies and why it didn't allege harm to consumers.

The FTC fired back that the merger would harm competition to corporate customers -- not retail consumers.

Investors took the position that Sullivan's tough questioning of the government indicated he would likely rule in favor of the merger. Shares of Office Depot and Staples rallied about 7.1% and 12.3%, respectively, during the three-week trial.

Should Sullivan green-light the merger, he would effectively be creating a office supply giant with a commanding presence of physical stores across the country. With a consolidated marketing and promotional budget, that sheer size could be a big asset that drives more profitable and consistent sales.

Further, as the two companies consolidate their online infrastructure, the company could drop its web prices to better compete with Amazon and Walmart (WMT) - Get Report , both of which have started to offer a larger selection of office supplies.

A combined company would likely move aggressively to cut over $1 billion in expenses, raising the prospect for solid earnings and cash flow that could be used to pay down debt.

If Sullivan squashes the merger, however, both retailers may see continued poor top- and bottom-line results owing to fierce online competition.

Office Depot's first-quarter earnings missed Wall Street's forecasts for the second straight time. First-quarter earnings excluding one-time items came in at 10 cents a share, down from 13 cents a year earlier, and short of Wall Street's estimates of 12 cents. Same-store sales declined 1% year over year at the company's more than 1,500 North American retail stores, due mostly to sluggish traffic to its stores.

Meanwhile, sales at the company's business solutions segment, which primarily ships office supplies under contract to businesses, declined 7% when excluding the impact of the strong U.S. dollar.

Office Depot reiterated that the sales drop was due to "substantial business disruption" related to the pending acquisition by Staples.

Staples hasn't announced its first-quarter results yet, but it's hard to imagine trends improved much from a lackluster holiday season.

The company's fourth-quarter same-store sales plunged 5% amid weak demand for business machines, technology accessories and mobile devices. Online sales increased a meager 1%. For the first quarter, Staples expects sales to decline vs. last year, and earnings to come in at 16 cents a share to 18 cents a share compared to 17 cents a share a year ago.