As reported by ICN sister publication Energy News earlier in the week, the DOJ’s action had been widely expected, and follows concerns expressed about the deal by Australian and Brazilian regulators, delays in achieving a decision from European authorities, and opposition from big oil companies to the proposal, led by Total.

The DOJ says Halliburton’s takeover of Baker Hughes, proposed in November 2014, threatens competition and should be blocked.

The regulator said the deal would create a duopoly with market leader Schlumberger, which just this week ended a six-month merger with Cameron International.

Analysts said that if Halliburton agrees to sell even more assets, up from $US7.5 billion to $10 billion to resolve competition concerns, there was a chance the merger could be allowed to go ahead, and both Halliburton and Baker Hughes say they plan to battle on.

That’s despite DOJ anti-trust tsar Bill Baer describing the deal as “unfixable” and “the most complicated array of piecemeal divestitures and entanglements” that he has ever seen.

Speaking with the media on filing the suit, Baer said that competition in the oil field services industry was critical to the US economy.

"Competition leads to safer ways to extract oil and gas, to more efficient methods for drilling and it keeps down the cost of producing a barrel of oil. The American public cannot be asked to bear the risk that these benefits will be lost."

"At the end of the day, Halliburton’s purported settlement would eliminate a formidable rival – Baker Hughes – and replace it with a smaller, weaker rival that is not the equivalent of Baker Hughes today," Baer said.

GMP Securities says the drillers shouldn’t fight the government, but that Baker Hughes should just take the $3.5 billion breakup fee and walk away.

In a joint statement, however, the two drillers said the marriage would benefit their customers and help them reduce costs.

"The companies believe that the DOJ 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 US and global energy industry are currently experiencing," they said, calling the legal action “counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing.”

If the deal is finally over, what now?

Assuming they carry on separately, Halliburton and Baker Hughes are expected to start picking off smaller rivals such as ROV firm Oceaneering and frac fluid innovator Flotek Industries.

Some market watchers have speculated that GE Oil & Gas could make its own bid for Baker Hughes, given it had been tipped as the most likely buyer for some of Halliburton’s cast-offs.

As the Schlumberger and Cameron deal showed, regulators are not averse to mergers when the two parties work in different parts of the oil patch.