Oracle has vowed to fight the US Department of Justice's (DoJ) opposition to its $9.4bn hostile bid for ERP vendor PeopleSoft, saying that the government's case is "without basis in fact or in law".

The database giant has also withdrawn its slate of proposed directors for elections due to be held at PeopleSoft's annual general meeting on 25 March.

Yesterday the DoJ and the attorney generals of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota and Texas filed a 17-page civil antitrust lawsuit in the US district court to block Oracle's bid for PeopleSoft.

The DoJ said the combination of Oracle and PeopleSoft would result in "higher prices, less innovation and fewer choices" for users.

It added that only Oracle, PeopleSoft and SAP were considered capable of supplying large enterprises and institutions with integrated human resources management and financial services software.

"We believe this transaction is anticompetitive - pure and simple," said R. Hewitt Pate, the DoJ's assistant attorney general in charge of its antitrust division.

"Under any traditional merger analysis this deal substantially lessens competition in an important market."

The seven states co-signing the suit had previously been conducting independent investigations into the proposed bid and its impact on public sector PeopleSoft users.

"Oracle's hostile takeover bid is bad for competition and that will hurt everyone's bottom line," said Tom Reilly, attorney general for Massachusetts, in a statement.

PeopleSoft called on Oracle to withdraw its bid, saying "both companies should now devote all their energy to competing in the marketplace".

But Oracle will continue to fight in the courts. In a statement, the firm criticised the DoJ's "unrealistic" assessment of the market as being between just three firms, and described it as "highly competitive, dynamic and rapidly changing".

"We believe the government's case is without basis in fact or in law, and we look forward to proving this in court," said Jim Finn, Oracle spokesman.

Oracle has again extended its internal deadline for the bid from 12 March to 25 June - more than a year later than its original bid - to allow for legal proceedings.