The Federal Trade Commission (FTC) is planning to block the purchase of PLX Technology by Integrated Device Technology.
The proposed deal between the two computer component manufacturers, which includes the PLX Technology (PLX) buyout price of $330 million, would result in the merger having almost a complete monopoly on some hardware.
Both PLX Technology and Integrated Device Technology (IDT) manufacture a number of computer components, including integrated circuits known as PCI Express switches. PCIe switches are used in consumer and industrial products in order to provide different connectivity functions in electronic devices.
"PCIe switches are important components in many computing, communications and consumer products. The combination of IDT and PLX would hurt competition and lead to higher switch prices, lower innovation in the marketplace, and reduced customer service," said Richard Feinstein, director of the FTC's Bureau of Competition.
The FTC said that the combined firm would have an 85 percent marketshare in the global PCIe switch market, which is worth approximately $100 million.
The FTC's complaint states that merging the two firms would result in removing "beneficial" rivalry, which has given consumers the opportunity to play both firms off against each other, and this has created lower prices, better customer service and innovation in the past.
In addition, the complaint states that the purchase of PLX by IDT would lead to an increase in pricing power for the sale of PCIe switches. IDT and PLX also are the only firms currently offering 3rd generation PCIe switches.