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By Ted Mann in New York and Jens Hansegard in Stockholm 

General Electric Co. has abandoned a $3.3 billion agreement to sell its appliances business to Electrolux AB of Sweden, walking away from the deal in the middle of a courtroom fight with U.S. antitrust regulators.

The transaction was in jeopardy since the summer, when the U.S. Justice Department filed a lawsuit to block it, arguing that a combination would diminish competition and result in higher prices for kitchen appliances. "This deal was bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial," Justice Department lawyer David Gelfand said Monday.

The deal's collapse adds to an expanding list of transactions that have fallen at the hands of U.S. antitrust enforcers appointed by President Barack Obama. Last week, two major tuna producers called off a $1.5 billion merger in light of Justice Department antitrust concerns. Antitrust objections by the Justice Department earlier this year derailed Comcast Corp.'s bid for Time Warner Cable Inc.

The Federal Trade Commission won a ruling in June that blocked the $3.5 billion combination of food-distribution rivals Sysco Corp. and US Foods Inc. The agency could announce as soon as Monday whether it will challenge Staples Inc.'s proposed acquisition of Office Depot Inc.

Top executives from Electrolux and GE had testified during the appliances trial, which has been under way in Washington, D.C., since early November. Though the court handling the case had yet to render a verdict, GE used its right to terminate the sale after 15 months of talks, which was its first opportunity to walk away from the transaction and collect a breakup fee.

GE said Monday that it is entitled to a $175 million breakup fee. Electrolux, though, said it was reviewing the terms of the breakup fee.

Shares in Electrolux were off 14% in Stockholm late Monday afternoon, while GE shares were down less than 1% in New York at midday.

"The appliances business is performing well and GE will continue to run the business while it pursues a sale," GE said. The conglomerate said the collapse of the Electrolux deal represents only a hiccup in its company-wide shift away from retail goods and toward its high-tech, heavy-industry units. GE briefed investors last week on its plans for the power-equipment business it bought for $10.3 billion from Alstom SA of France.

Longbow Research analyst David MacGregor said it has been a good year in the appliances business. He added that GE would have other options as it seeks a buyer for the appliances business, including manufacturers and private-equity investors. Still unknown is whether another buyer would match the $3.3 billion price agreed to by Electrolux.

Overall appliance shipments in the U.S. are on track for a 6% increase, compared with 5% growth in 2014, he said. And because it was preparing for the Electrolux sale, GE has already begun some of the streamlining work that would make the appliances unit attractive to other prospective buyers. "It's probably a stronger business today than it was a year ago, " he said.

GE has long had confidence that it could find another buyer if the Electrolux deal fell through, according to people familiar with the company's thinking. During the company's third-quarter earnings call, Chief Financial Officer Jeff Bornstein said GE would have to adjust its projections if the appliances deal wasn't closed by year-end. But he said hanging on to a full quarter of earnings from the appliances business would offset some of the pain from not completing the sale.

Monday's decision by GE marks a setback for Electrolux, which had hoped to create an appliances seller capable of competing with Asian behemoths and Whirlpool Corp. of the U.S. "We are disappointed but we are certainly not defeated," Electrolux Chief Executive Keith McLoughlin said during a conference call.

At the trial, Mr. McLoughlin had testified that the GE acquisition was "absolutely critical" for Electrolux's business.

Mr. McLoughlin, a graduate of the U.S. Military Academy at West Point, said Electrolux would examine GE's demand to be paid the $175 million breakup fee. "We are going to review the conditions under which it is payable," he said.

With a strong balance sheet, Electrolux will continue to look for acquisitions, Mr. McLoughlin said.

The proposed acquisition of the GE business, a leading supplier of kitchen equipment to U.S. homes, was announced on Sept. 8, 2014, but it became clear in recent months that the companies might struggle to get regulatory approval.

The Justice Department sued Electrolux and GE in July, arguing the transaction would have left consumers with few competitive options for cooking appliances. It said the deal would have harmed home builders and others who buy appliances in bulk, as well as budget-minded consumers who needed lower-priced ranges.

The merged Electrolux-GE business would have had about one-quarter of the U.S. market last year, compared with roughly 30% for Whirlpool, and 13% and 11%, respectively, for South Korean rivals LG Corp. and Samsung Electronics Co., according to data from TraQline.

Electrolux said the settlement proposals it offered the Justice Department were reasonable and would have addressed competition concerns. "Unfortunately, these proposals were rejected," Electrolux said.

In his opening statement of the antitrust court proceedings, Justice Department lawyer Ethan Glass said competition between GE and Electrolux has benefited appliance consumers for a generation. If the acquisition wasn't stopped, Electrolux would sell two out of every three ranges sold in the U.S. and prices could rise 5% or more, he said.

Brent Kendall in Washington contributed to this article.

Write to Jens Hansegard at jens.hansegard@wsj.com

(END) Dow Jones Newswires

December 07, 2015 13:09 ET (18:09 GMT)

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