No one in the computer industry creates more drama than Oracle (NASDAQ:ORCL) CEO Larry Ellison. On his best days, he's giving it to someone when he's feeling feisty. Yesterday wasn't one of his best.

The Department of Justice and seven states said they would sue to block Oracle's proposed $9.4 billion merger with business software provider PeopleSoft (NASDAQ:PSFT). The database giant has vowed to fight the ruling.

In calling the deal anti-competitive, the DOJ brought forth images of Microsoft's (NASDAQ:MSFT) antitrust troubles. Indeed, PeopleSoft CEO (and interestingly, former Oracle exec) Craig Conway greeted the news by saying in a statement that the "antitrust day of reckoning has arrived."

If Conway's comments feel like comeuppance, it probably is. When Ellison announced Oracle's bid for PeopleSoft last June, Conway shot back that it was "atrociously bad behavior," citing the fact that the offer came less than a week after his company's own pitch for Denver-based JD Edwards. Published reports indicate there's no love lost between the two, much like Ellison's rivalry with former lieutenant Tom Siebel of Siebel Systems (NASDAQ:SEBL).

The battle will now play out in the courts. Oracle had been bracing for a proxy fight at PeopleSoft's March 25 annual meeting. On Tuesday, Oracle mailed presentations to PeopleSoft shareholders urging votes for directors that it had nominated to the board. Last night, it withdrew its nominations and retreated from the proxy battle while extending the deadline for its tender offer of $26 per stub from March 12 to June 25.

PeopleSoft stock closed the day down nearly 2%, to $21.78. At that price, Oracle's offer represents a 16% premium, sweetening the deal for investors.

As much as I hate how global governments have been trampling on capitalism at what seems like a record pace, I have to admit the DOJ has a point with its suit. Post-acquisition, the only other major player in packaged business software would be market-share leader SAP (NYSE:SAP).

But it's also not that simple. The Web has created alternatives to such software. Some vendors are taking advantage of this by carving out small but lucrative niches in the space, such as privately held Salesforce.com. There's also debate over whether the method by which DOJ reviewed the merger broke new legal ground.

Let's face it, there are a number of good reasons for this case to go to court. Top of my list is to help define what antitrust standards should be for future mergers. It's only a matter of time before there's another big-name takeover bid.

Hard as it may be to believe, there's a very serious side to this sideshow.

Can Oracle pull it off? Will PeopleSoft manage to stay independent? Is the Justice Department overreaching? All this and more at the Oracle and PeopleSoft discussion boards. Only at Fool.com.

Fool contributor Tim Beyers isn't for sale. He has no stake in any of the companies mentioned here.