Oracle has decided to fight the US Department of Justice's decision to sue over its attempted hostile takeover of rival PeopleSoft.

The enterprise software giant said in a statement it would "vigorously challenge" the lawsuit and withdrew the nominees it had put forward for election to PeopleSoft's board, explaining that it expected the resulting litigation to extend beyond PeopleSoft's shareholders' meeting on 25 March.

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

Meanwhile, PeopleSoft CEO Craig Conway called on Oracle to abandon its plans: "Now that the antitrust day of reckoning has arrived and the Justice Dept. has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the company. Both companies should now devote all of their energy to competing in the marketplace to provide better products and services for customers."

At the end of last week, the DoJ came good on predictions that it would come down against Oracle and launched a lawsuit in which it claimed Oracle's acquisition of PeopleSoft would reduce the market to just two players, resulting in less choice and higher prices for consumers.

Oracle has already made it clear it believes there are parallels to be drawn between the DoJ's 2001 attempt to block SunGard Data's acquisition of Comdisco, which was rejected by a federal judge, and its own case. The company will attempt to argue that the ERP software market extends beyond the top three vendors to smaller companies like Lawson and Baan, as well as Microsoft.

However, even if Oracle wins against the DoJ, it still faces PeopleSoft's "poison-pill" anti-takeover provisions and, of course, must persuade a majority of PeopleSoft shareholders to accept its $26-per-share bid. That could take months or even years.