NEW YORK, Oct 24 (Reuters) - A U.S. judge blocked the

pending $8.5 billion merger of U.S. handbag and accessories

maker Tapestry and Capri on Thursday, a victory

for the U.S. Federal Trade Commission in an industry where

merger challenges are rare.

The FTC argued at an eight-day trial in New York that the

merger would eliminate fierce head-to-head competition between

the top two U.S. handbag makers and create a massive company

with the power to unfairly raise prices for consumers.

Tapestry fought those claims, saying the deal was spurred by

an intensely competitive U.S. handbag industry and was needed to

fight back against European players like Gucci, which are

increasingly grabbing market share.

The ruling in effect permanently blocks the proposed deal,

Tapestry's lawyers said in court documents. There is scant

precedent for merger challenges in the fashion industry, which

tends to be too fragmented and competitive to foster traditional

monopolies.

The decision is a win for the Biden administration ahead of

the Nov. 5 presidential election, in which rising consumer

prices have figured as a key issue.

Had the deal proceeded, it would have brought six brands

under one roof. Those brands are: Tapestry's Coach, Kate Spade

and Stuart Weitzman; and Capri's Versace, Jimmy Choo and Michael

Kors.

Tapestry and Capri had also argued before U.S. District

Judge Jennifer Rochon that reviving the Michael Kors brand,

investing in all Capri brands using Tapestry's greater resources

and selling more handbags would actually increase competition in

the industry, rather than reduce it.

The ruling follows approval of the merger by regulators in

Japan and the European Union earlier this year.