A federal judge has prevented Staples Inc., parent company of Top 40 distributor Staples Promotional Products (asi/120601), from merging with Office Depot, nixing a $6.3 billion union between the country’s first- and second-largest office supply retailers. U.S. District Judge Emmet G. Sullivan sided with regulators who argued that the merger would reduce competition and raise prices, especially in the business-to-business office supply sector. Both companies stated they would not appeal and have ended the deal.

“Today’s court ruling is great news for business customers in the office supply market,” said Debbie Feinstein, the director of the Federal Trade Commission (FTC) bureau of competition, in an official statement following Judge Sullivan’s decision this week. “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.”

A previous merger almost 20 years ago between Staples and Office Depot was also halted by regulators, but the companies have recently argued that the competitive landscape has changed dramatically, citing customers’ shift to online platforms, declining demand for paper-based office supplies and fierce competition from retail titans such as Amazon and Wal-Mart. They also claimed that the FTC did not account for industry changes when it moved to block the most recent merger process back in December by requesting that Judge Sullivan issue a temporary injunction that would do so.

“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.

Staples must now pay Office Depot a $250-million “break-up fee” with the abandonment of the deal, and also announced that it would cancel a $550 million agreement to sell assets in order to satisfy regulators.

“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,” said Ron Sargent, Staples’ chairman and CEO, in an official statement.

The Obama administration has become increasingly aggressive in its enforcement of antitrust rules. Last week, oil services companies Halliburton and Baker Hughes canceled a potential $34 billion merger that the Justice Department claimed would moderate competition and increase prices. Additionally, in December, General Electric abandoned a $3.3 billion sale of its appliance division to Electrolux in Sweden, after similar Justice Department opposition.

In morning trading the day after the ruling, shares in both companies fell dramatically. Office Depot shares tumbled 37.8% to $3.79, while Staples’ plunged 19.3% to $8.36. Last year, Office Depot’s revenue decreased 11% while Staples’ fell 7%. Staples Promotional Products, which acquired fellow Top 40 distributor Accolade Promotion Group (asi/102905) in April last year, ranks first on Counselor’s Top 40 list of distributors, after reporting 2014 North American promotional product sales of $447 million.