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WASHINGTON/ATLANTA, Mar 18 (Reuters) U.S. Justice Department antitrust staff lawyers are opposed to Whirlpool Corp.'s proposed acquisition of rival Maytag Corp. as the deadline for a decision nears, a source close to the matter said on Friday.

Lawyers in the department's antitrust division ''have made it clear'' to the antitrust chief, Thomas Barnett, that they believe the $1.7 billion deal would hurt competition, said the source, speaking on the condition of anonymity.

Barnett has not yet made his decision on whether to challenge the acquisition, the source said. And it was not clear whether the staff lawyers had given him a formal recommendation.

The proposed deal would form the world's largest appliance maker and give the combined company a large share of the U.S. market for washing machines and dryers.

Justice Department lawyers have been seeking sworn statements from competitors and retailers about how the combination of the companies would affect competition.

''We continue to believe the (Justice Department) will oppose the merger based on the potential for anti-competitive pricing by the merged entity,'' Prudential Equity analyst Nicholas Heymann said in a research note on Friday.

The department is expected to meet with lawyers from Whirlpool and Maytag as soon as next week, several sources familiar with the deal said.

A Justice Department spokeswoman said the investigation into the deal was ongoing and declined further comment. A Maytag spokesman declined to comment and Whirlpool officials were not immediately available for comment.

Last month, Whirlpool and Maytag extended to March 30 a deadline for the government to complete its antitrust probe.

Lawyers for the companies have argued that the deal will bring new efficiencies that will benefit customers. They have said it would not harm competition because a combined company would still have to hold its own with overseas manufacturers, and because key retailers can provide a check on pricing.

Should the Justice Department file a lawsuit to halt the deal, Whirlpool could fight it in court, or walk away and pay Maytag a $120 million reverse breakup fee.

While Whirlpool, which had better-than-expected profits in 2005 and recently forecast 2006 earnings well above Wall Street estimates, can compete on its own, the weaker Maytag would likely see sharp stock declines and could be forced to close plants if the deal fails, analysts and lawyers said.

''The (Justice Department) is kind of between a rock and a hard place,'' said Laura Champine, an analyst with Morgan Keegan. ''It can approve the deal or see Maytag continue to deteriorate or be taken over.'' For two years, Maytag has posted net losses as it grappled with a slump at Hoover, restructuring costs and competition from rivals such as LG Electronics of South Korea.

Last year, retailer Best Buy Co. stopped selling Maytag washers and refrigerators, saying consumers preferred other brands. Home Depot Inc. introduced LG, increasing the competition Maytag products face on that sales floor.

''Maytag can no longer compete,'' said Jerry Reisman, a partner at Reisman, Peirez&Reisman in Garden City, New York.

Champine, the Morgan Keegan analyst, said other bidders may emerge if the deal fails but they would likely offer to pay less than Whirlpool. She also said that Maytag could face a liquidity crisis if earnings don't improve substantially.

''You'd see a double-digit percentage decline in the (Maytag) stock,'' dropping to the single digits, Champine said.

Of three companies that expressed interest in Maytag last year, Whirlpool made the highest bid at $21 a share. Ripplewood Holdings, a private equity firm, offered $14 a share. A group led by Chinese appliance maker Haier mulled a $16-a-share bid for Maytag but pulled out after Whirlpool entered the fray.

On Friday, Maytag shares closed down almost 6.9 per cent to $16.71 on the New York Stock Exchange while Whirlpool shares dropped almost 1.5 per cent to $86.25.

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