The European Commission has given the green light to the proposed Oracle acquisition of PeopleSoft, European Union Competition commissioner Mario Monti said.
The commission said that it was unable to find "sufficient evidence of competitive harm" to the market for enterprise software from the potential merger.
The ruling by the commission removes the remaining regulatory obstacle to Oracle to proceed with its hostile takeover of PeopleSoft.
It said that large companies that use software to automate their financial management systems and their human resource processes had other suppliers to serve their needs beside Oracle, PeopleSoft and SAP.
Following an in-depth investigation into the effects of the merger on the enterprise software market, in particular for business functions such as financial planning and reporting and human resources processes, the commission found that even though the proposed merger would reduce the number of big players from whom companies could source software from three to two, the market would remain competitive.
In particular, the commission found that customers usually invited various suppliers to bid for enterprise software projects and that other suppliers had won bids for large and complex enterprises in competition with Oracle, PeopleSoft and SAP.
Even Microsoft, which is a relative newcomer to the business application software market, managed to win bids in the enterprise segment and therefore appeared to offer additional competition, the commission said.
The commission, the EU's executive arm and its antitrust regulator, reached its conclusion after analysing hundreds of bids for human resources and financial management software projects.
It found that Oracle's bidding behaviour was not affected by whether PeopleSoft or SAP were rival bidders, suggesting that any discounts offered by Oracle were not determined simply by a desire to outbid competing bids from PeopleSoft or SAP.
The commission also said that the product differences, the different size of the various players' market share and a lack of price transparency suggest that there was no market co-ordination.
In reaching its decision, the commission said it worked in close cooperation with the US Department of Justice (DOJ), which was opposed to the merger. A federal judge in San Francisco last month rejected the DOJ's effort to block Oracle on antitrust grounds. The commission, however, said that its investigation took into account the evidence made available during the US case.
PeopleSoft issued a statement after the commission's announcement, saying its board of directors will review the decision's implications. The company reiterated that PeopleSoft's board "has carefully considered and unanimously rejected each of Oracle's offers", including the current offer of $21 (£11) a share.
Simon Taylor writes for IDG News Service