Apparently, the U.S. premium ice cream market is under attack. Or, at least, the "pro-business" administration in the White House forgot to inform the folks who approve mergers and acquisitions.

That was the message yesterday when the Federal Trade Commission (FTC) voted unanimously to block a transaction that would have allowed Nestle, which owns Haagen-Dazs, to take over Dreyer's(Nasdaq: DRYR), makers of Edy's, Godiva, Dreamery, and the Starbucks(Nasdaq: SBUX) premium ice creams. A statement from the Bureau of Competition yesterday stated, "This merger, as structured, would likely raise prices and reduce choice for consumers..."

What?! The cost to Dreyer's shareholders has been fast and furious, with the company losing $600 million of its market cap within minutes of the news.

One might ask why the FTC felt the need to block a merger in such a narrow market as super-premium ice creams. They aren't essential goods (although, they're reeaally good), and there are plenty of substitutes. If Nestle and Unilever(NYSE: UN), owner of Breyer's and Ben & Jerry's, were to try to limit choice and raise prices, there are plenty of other ice cream brands. Yes, yes -- perish the thought of giving up your Chubby Hubby. But if Ben & Jerry's decided to charge $8 per pint, you might shop for alternatives.

Cheaper ice cream brands? Check. Italian ices? Check. Jell-O? Oh, yeah. The result of "raised prices and reduced choice?" A collapsing market. This is not a market without alternatives; its demand is elastic. That keeps the suppliers honest, because it's in their best interest to generate the optimal total profit, not profit per unit.

Ah, but no. The FTC decided instead that the market forces in premium ice cream are insufficient to keep the market honest. Apparently, we're all too cowed by our jones for top-shelf ice cream to resist or choose, should companies jack prices to the sky.

Nestle and Dreyer's have committed to making the merger go through. The FTC should send shareholders coupons for free ice cream to make up for their investment losses.