Chase Independents – made up of councillors and representatives from Labour, the Green Party and the Lib Dems – was formed with the aim of taking control of Cannock Chase Council.
But the group's attempts to register the name were thrown out by the Electoral Commission, who said it could be confused with local estate agent Chase Independent, run by Mark Francis.
The Commission’s adjudication said: "We came to the decision that a voter is more likely than not to be misled into thinking that the effect of a vote for "Chase Independents" (Chase Independents, Bringing Our Community Together) was a vote for ‘Chase Independent’ or a political movement connected with it.
"On that basis we refused the applied-for party name."
The group's formation last month prompted a furious response from Cannock Chase Council's Labour leader, Councillor George Adamson, who accused them of disrupting the authority's efforts to fight the coronavirus pandemic.
Councillor Adamson said today: "It’s remarkable that as firms across Cannock Chase deal with the devastating financial impact of lockdown, one of them also had to face the prospect of their business’s name being hijacked.
"This opportunistic manoeuvring was always a political game, where the people of Cannock Chase were an afterthought.
"But ignoring valid concerns and forcing Chase Independent estate agency to defend its identity underlines these individuals’ disregard for the consequences of their actions.
"This is the right decision by the Electoral Commission and those councillors involved should now reflect on why such a regrettable episode was ever allowed to go this far."
The group say they formed in a bid to make politics "truly local", claiming residents were "always being ignored" by mainstream parties.
It is led by former Green Party group leader, Councillor Paul Woodhead, and includes councillors' Claire Wilkinson, Stuart Crabtree and Mandy Dunnett – who have all quit the Greens – as well as Councillor Andrea Layton, who has resigned from Labour.
A spokesperson for the group said: "Our discussions with both Mr Francis and the Electoral Commission are ongoing.
"We are confident we can resolve Mr Francis’ concerns and complete the registration of our group without the intervention or comment of the Labour Party.
"Their political opportunism and mud-slinging here demonstrates exactly why our group is needed: to move the district away from bullying and negative politics and refocus the energies of councillors towards truly serving the people of Cannock Chase."
According to records from Companies House, Chase Independent Estates Ltd, which has its base on Wolverhampton Road, was formed in January 2009.