The US Department of Justice has filed a lawsuit to block Oracle's attempted hostile takeover of PeopleSoft.
If the takeover took place, it would eliminate competition between two top providers of enterprise software, resulting in higher prices and fewer choices for customers, the DoJ said.
The agency said it saw Oracle, PeopleSoft and SAP as the only companies that sell enterprise applications meeting the needs of large organisations.
DoJ officials recommended earlier this month, in a preliminary decision, that the agency move to prevent the acquisition.
Executives from Oracle, which maintains that the enterprise software market is highly competitive, said they would work to change the agency's mind. The company had indicated that if the DoJ moved to block the acquisition, it would consider fighting the DoJ's decision in court.
Oracle representative Jim Finn called the DoJ's decision one "without basis in fact or law". He suggested that the DoJ was influenced by an "aggressive lobbying campaign" by PeopleSoft's management.
Finn added that an Oracle/PeopleSoft combination would benefit both companies' employees and shareholders.
Oracle will argue that the enterprise software market extends beyond its three largest suppliers.
Smaller ERP companies, including Lawson Software and SSA Global Technologies' Baan unit, integrators such as IBM and Accenture and new entrants including Microsoft compete for many deals and affect industry pricing, Oracle said.
The DoJ said it is confident it has a strong case to take to trial, and denied that its decision was improperly influenced by either company's management. The DoJ has ample data to back its antitrust argument.
PeopleSoft chief executive officer Craig Conway responded to the DoJ's lawsuit with a call for Oracle to abandon its bid.
Calling the decision "the antitrust day of reckoning", he encouraged both companies to devote their energies to serving their customers and competing in the market.
Oracle's takeover campaign began in June when the company submitted to PeopleSoft's shareholders an unsolicited tender offer for control of the company. The all-cash offer has been raised twice and is now valued at $9.4bn.
Stacey Cowley writes for IDG News Service