May 1 (Reuters) - Halliburton, the No. 2 oilfield services provider, is scrapping a $28 billion merger with smaller rival Baker Hughes, Halliburton said on Sunday.

The decision comes after the Justice Department filed a lawsuit in early April asking a court to stop the proposed merger, arguing it would leave just two big suppliers in the global well drilling and oil construction services industry, with Schlumberger NV being one of the two.

The deal was valued at $35 billion when it was announced in November 2014 but is now worth closer to $28 billion.

(Reporting by Shivam Srivastava in Bengaluru and Anna Driver in New York; Editing by Andrew Hay)