updated 2/26/2004 4:38:24 PM ET 2004-02-26T21:38:24

The Justice Department filed a lawsuit Thursday to block Oracle Corp.’s proposed $9.4 billion hostile takeover of software rival PeopleSoft Inc.

“We believe this transaction is anticompetitive, pure and simple,” said R. Hewitt Pate, assistant attorney general in charge of the antitrust division.

The lawsuit, filed in U.S. District Court in San Francisco, contends that the proposed merger between two top business software companies would lead to higher prices, less innovation and fewer choices for customers. Seven states joined the Justice Department in filing the lawsuit.

Oracle has indicated it intends to fight the Justice Department’s decision in court while continuing its efforts to acquire PeopleSoft, which has rejected its advances. Earlier this month, Oracle upped its all-cash offer by 33 percent in an attempt to put more pressure on PeopleSoft shareholders.

Oracle executives had hoped that Pate would reject a Justice Department staff recommendation that the deal be scuttled and clear the path for the Redwood Shores, Calif.-based company to make its case directly to PeopleSoft shareholders at a meeting scheduled March 25.

Jim Finn, an Oracle spokesman, called the Justice Department decision “inconsistent with the overwhelming evidence of intense competition in the markets we serve, and we believe it is without basis in fact or in law. A combined Oracle/PeopleSoft will significantly benefit all customers and shareholders involved.”

But Pate said that Oracle, Pleasonton, Calif.-based PeopleSoft and one other firm, SAP, are the only companies that compete with each other to develop and sell enterprise human resource management and financial services software for large businesses, government and nonprofit organizations.

The firms frequently engage in bidding wars to win these big contracts that helps ensure that customers benefit from the fruits of competition, Pate said.

“Blocking these deals protects competition that benefits major businesses, as well as government agencies that depend on competition to get the best value for taxpayers’ dollars,” he said.

Oracle in 2003 earned some $9 billion in revenue, including $2 billion from its enterprise software applications. PeopleSoft had $2 billion in revenue in 2003, all of it from enterprise software.

Joining the Justice Department in filing the lawsuit to block the deal are the states of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota, and Texas.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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