The US government has filed a lawsuit to prevent Halliburton from acquiring Baker Hughes, alleging that the deal would eliminate competition and increase the prices in the oil services sector.
The lawsuit reduces the possibility of the completion of the merger of the top two players, though Halliburton wants to challenge it.
The US Department of Justice said that the deal would make the merged entity and Schlumberger as only two dominant players in the global well drilling and oil construction services industry, resulting in unhealthy competition in the sector.
US Attorney General Loretta Lynch said: "The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers.
"Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws."
The complaint alleges that the acquisition, valued at $34bn when it was first announced in November 2014, would combine two of the three largest oilfield services companies in the world.
The combination would eliminate "important head-to-head competition" in markets for 23 products or services in the sector.
US justice department argued that the divestitures offered by Halliburton to lessen the impact of the merger would allow it to retain the more valuable assets from either company while selling less significant assets to a third party.
Justice Department’s Antitrust Division head Bill Baer said: "This transaction is unprecedented in the breadth and scope of competitive overlaps and antitrust issues it presents.
"Halliburton and Baker Hughes are two of the three largest integrated oilfield service companies across the globe, and they compete to invent and sell products and services that are critical to energy exploration and production. We need to maintain meaningful competition in this important sector of our economy."
Disagreeing with the department’s claim, Halliburton said: "The companies believe that the DOJ (Justice Department) has reached the wrong conclusion in its assessment of the transaction and that its action is counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing."