Peoplesoft's management and staff are fighting Oracle

Lawyers for the monopoly watchdog said the move should be halted because it would hurt competition in the industry.

Oracle, however, predicted its $9.4bn (�5bn; 7.4bn euros) offer will be accepted by investors and regulators.

Shares in Peoplesoft, which has fought all of Oracle's advances, dropped about 2% during extended trading in New York.

Early days

The recommendation is preliminary and both Oracle and Peoplesoft are expected to use the coming weeks to fight their corners.

The Department of Justice is expected to give the government its final report by March 2.

The bid also will need approval from anti-monopoly watchdogs in Europe.

Last week, Oracle boosted its offer for Peoplesoft ahead of a crucial shareholder vote scheduled for next month.

Peoplesoft rejected the new deal, saying that even though the price was well above market value, it still undervalued the company.

Oracle's offer values Peoplesoft at $26 a share. In New York on Tuesday, Peoplesoft shares closed at $21.69.

Final offer

Oracle has warned it will not sweeten the deal again.

Peoplesoft shareholders, meanwhile, will be asked to vote on a new board of directors for the company at a meeting on 25 March .

Oracle has put forward five new candidates in an attempt to gain control of the board.

Peoplesoft's resistance to the takeover attempt is supported by its staff, some of whom have set up a website promoting the benefits of keeping the firm independent.