Antitrust Argument Against Oracle Won't Be an Easy Sell

But proving that the combined company would have an unfair competitive advantage would require showing that it has a market share of more than 50% or 60%, said Stanton. And that raises another question: market share of what?

PeopleSoft doesn't offer database software, and while Oracle has some strength in application software, it is far from a dominant player.

SAP(SAP Quote) is the leader in enterprise resource planning (ERP) software, applications for manufacturing, order entry, accounts receivable and payable, particularly for manufacturing companies, while Siebel Systems(SEBL Quote) holds the lead in customer relationship management (CRM) software, applications that manage call centers, sales force and marketing automation and so on. PeopleSoft's greatest strength is in software to manage human resources functions.

According to IDC, a market researcher, SAP's share of the ERP market is 18.1%, larger than the combined shares of Oracle, PeopleSoft and J.D. Edwards(JDEC Quote), which PeopleSoft hopes to buy in a friendly acquisition.

Connecticut's complaint alleges that the market for enterprise financial applications, enterprise human resources and enterprise software is already "highly concentrated" by the standards of the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration used by the federal Justice Department and the Federal Trade Commission. A combined Oracle-PeopleSoft company would be significantly more concentrated, the complaint states.

Analyst Patrick Walravens of JMP Securities came to a different conclusion after he analyzed the combined market share of PeopleSoft and Oracle using the HHI. Walravens found that the HHI index for the combined company would be increased from 411 to no higher than 526, far below the threshold of 1000, the level at which the government says a market is concentrated.

"Our analysis suggests that the merger of Oracle and PeopleSoft results in an unconcentrated market, which ordinarily would not be challenged by the Agency," he wrote in a note to clients.