With government regulators poised to block the deal, Barnes & Noble Inc. yesterday called off its proposed $600 million merger with the country's largest book wholesaler, abandoning a union that could have reshaped the retail book industry.

The New York-based chain announced plans in November to acquire Ingram Book Group, a Tennessee company that sold and distributed $1 billion worth of books last year to stores nationwide. Independent retailers and electronic commerce vendors vehemently opposed the combination, arguing that it would force them to buy books from a subsidiary of an arch-rival -- a little like forcing Burger King to buy its french fries from McDonald's.

The Federal Trade Commission agreed. On Monday, staffers at the agency reportedly had decided to recommend challenging the planned merger in court, arguing that it could lead to higher book prices and prevent new players from entering the fast-growing Internet bookselling market.

"If Ingram was in the hands of a main competitor, you had to be concerned about that," FTC Chairman Robert Pitofsky said in an interview yesterday. "You have to be concerned about where the next party that wants to get into the market is going to buy its books."

The FTC is signaling that it will continue to cast a skeptical eye on vertical mergers -- those between suppliers and retailers. Throughout the Reagan era, not a single vertical merger was challenged by antitrust regulators, Pitofsky said, but the Justice Department and the FTC during the Clinton administration have either blocked or forced changes to four, including one between Lockheed Martin Corp. and Northrop Grumman Corp.

"This isn't the initiation of an offensive," Pitofsky said. "But vertical mergers aren't off the table the way they were in the 1980s."

Officials at Barnes & Noble and Ingram said yesterday that the FTC had erred by accepting the sometimes emotional objections of independent booksellers. But facing the prospect of a protracted legal fight, the companies opted to walk away from the deal rather than spend time and money on what could have been a losing battle.

"Ultimately, we don't think the consumer was served," Leonard Riggio, Barnes & Noble's chief executive, said in an interview yesterday. "Here we are selling books at 10 percent, 20 percent, 50 percent off list price and the FTC is supporting a group which largely sells those same books at list price. What's happening here?"

The fight over Ingram was considered a life-or-death struggle by some independent booksellers, many of which have been squeezed by national chains and the growth of Internet merchants such as Amazon.com. An all-out lobbying war against the proposed deal, led by the American Booksellers Association (ABA), a trade group, swamped the commission with letters and e-mail.

Many stores planned to sever their relationship with Ingram if the deal went through, and some had already begun to reduce their orders from the company. The stores fretted that Ingram would give preferential treatment to Barnes & Noble, either by divulging sensitive credit information to the book giant or by increasing its inventory of bestsellers at the expense of more obscure titles in which they specialize.

"We worried that Ingram would grow to reflect what Barnes & Noble carried, which are the more commercial books, and we'd no longer be able to get the small-press offerings that are our bread and butter," said Barbara Meade, co-owner of Politics and Prose, a Washington bookseller that buys about 30 percent of its books from Ingram.

The controversy stirred by the Ingram deal also highlights the race now underway among big players in the Internet book business to build quick and reliable systems to send books across the country. The warehouses must be situated near the hubs of overnight carriers such as Federal Express Corp. and be capable of handling multitudes of small orders from individual, rather than corporate, customers.

By buying Ingram, which owns 11 warehouses nationwide, Barnes & Noble would have expanded its network fast and bolstered its fledgling online site, Barnesandnoble.com. Now, company executives say they will build two centers on their own, saving money but losing valuable time in their efforts to compete with Amazon.com. and other electronic retailers.

"It was a shortcut way to get a competitive advantage over its rivals," said John Glass, an analyst at BT Alex. Brown, a Baltimore investment firm. "Ingram wasn't critical to their success but now they need to go out and build warehouses on their own."

Officials at Amazon.com said yesterday they were pleased that the Ingram deal was dead, but contended that it won't affect their own strategy. The Seattle company is busily trying to diversify its supplier base and had announced plans to open four distribution centers even before Barnes & Noble's play for Ingram.

"Rather than have something as important as shipping handled by someone outside of the company, we want to focus on that ourselves," said Amazon spokesman Bill Curry. "And the best way to do that is to have Amazonians handling everything related to the transaction."