A £12 billion merger of Sainsbury's and Asda has been blocked by the Competition and Markets Authority.
The regulator said it would result in higher prices for consumers in stores, online and in petrol stations.
The watchdog also claimed the deal would have resulted in a "substantial lessening of competition" at both a national and local level.
Stuart McIntosh, chair of the CMA's inquiry group, said after the publication of its report on Thursday: "It's our responsibility to protect the millions of people who shop at Sainsbury's and Asda every week.
"Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers.
"We have concluded that there is no effective way of addressing our concerns, other than to block the merger."
Sainsbury's boss Mike Coupe immediately hit back, saying the decision takes £1 billion out of customers' pockets. The companies had promised to invest £1 billion in lowering prices by the third year of the deal completing.
"The specific reason for wanting to merge," Mr Coupe complained, "was to lower prices for customers.
"The CMA's conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market.
"The CMA is today effectively taking £1 billion out of customers' pockets."
Roger Burnley, the Asda boss, said that he was "disappointed" by the CMA's decision.
The deal has now been formally terminated by the companies.
