A US judge on Thursday blocked fashion group Tapestry's $8.5 billion deal to buy Capri, which owns luxury brands including Michael Kors and Versace, citing a potential loss of competition.
The deal, seen as an attempt to create a new global fashion giant to compete with European powerhouses, was halted by a court in New York after the US Federal Trade Commission (FTC) sued to prevent it earlier this year.
"The Court finds that the merging parties are close competitors, such that the merger would result in the loss of head-to-head competition," court documents read, after seven days of testimony.
Tapestry owns brands including Coach and Kate Spade.
Among concerns were that the companies could have an incentive to reduce discounts and increase prices if the merger went through.
The ruling is seen as a victory for the FTC, an independent agency whose current chair was appointed by President Joe Biden.
It also comes ahead of the US presidential election on November 5, in which heightened costs of living have been a key voter concern.
Both the FTC and the Department of Justice's antitrust division have ramped up action against corporate mergers in recent years.
Capri shares plunged by around 50 percent in after hours trading.
Tapestry shares were up by more than 11 percent.
In court documents Thursday, the companies argued that the ruling effectively blocks the merger permanently.
The takeover had aimed to boost sales by combining customer data streams, broadening geographic reach and achieving some $200 million in annual cost savings within three years of the deal closing, the two companies said last year.
The acquisition would have given Tapestry an upscale portfolio with multiple brands focused on shoes and handbags, as well as a strengthened apparel offering with Versace and Kors, a celebrity favorite.
Tapestry and Capri did not immediately respond to requests for comment.
In pushing to block the deal this year, the FTC argued the proposed merger threatened to "deprive millions of American consumers of the benefits of Tapestry and Capri's head-to-head competition."
Earlier this year, JetBlue and Spirit Airlines pulled the plug on a merger weeks after a federal judge ruled that it violated US antitrust law.
At the time, Biden lauded the decision, saying the merger would have forced higher fares and fewer choices on US consumers, calling it a success that his administration blocked it.
