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“Today’s court ruling is great news for business customers in the office supply market. This deal would eliminate head-to-head competition between Staples and Office Depot and likely lead to higher prices and lower quality service for large businesses that buy office supplies,” Debbie Feinstein, the director of the Federal Trade Commission bureau of competition, said in a statement.

The proposed merger was fraught from the beginning. The deal would have combined the country’s largest office supply retailer, Staples, with the second largest, Office Depot.

Regulators had stopped Office Depot and Staples from merging nearly two decades ago. But the companies argued that the competitive landscape had changed dramatically since then. More business functions are now done online and there is declining demand for paper-based office supplies. Staples and Office Depot have also faced increasing competition from retail giants such as Amazon and Wal-Mart.

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Some industry analysts had noted that regulators did not prevent Office Depot from buying rival OfficeMax in 2013 in what many saw as a signal that the emergence of new e-commerce players had changed the office supplies market.

But the FTC sued to block the deal in December and asked U.S. District Judge Emmet G. Sullivan to issue a temporary injunction to prevent the companies from moving forward.

Staples and Office Depot argued the FTC failed to properly account for changes in the industry when the agency decided to oppose the deal. The companies seemed confident enough in their case that after the FTC spent two weeks arguing its side, they didn’t even put on a defense.

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But Sullivan, in a brief ruling Tuesday, sided with the FTC.

“The Court finds that Plaintiffs have met their burden of showing that there is a reasonable probability that the proposed merger will substantially impair competition in the sale and distribution of consumable office supplies to large Business-to-Business,” Sullivan wrote in his ruling.

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The companies were quick to call off their deal.

“We are extremely disappointed that the FTC’s request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case,” Ron Sargent, Staples’ chairman and chief executive officer, said in a statement.

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Staples must pay Office Depot a $250 million “break-up fee” with the deal’s collapse. It also said it would call off a separate $550 million transaction to sell some assets it had offered to shed to satisfy regulators.

The collapse of the deal will force both companies to develop new strategies. Office Depot’s revenue fell 11 percent last year, while Staples saw sales tumble 7 percent.

“As the Staples merger process comes to an end, we look forward to re-energizing our business,” said Office Depot chairman and chief executive Roland Smith.

Office Depot’s stock price plummet in after-market trading when the decision was announced. It fell about 27 percent. Staples’ stock fell about 10 percent.