FTC seeks block on computer component firm deal

FTC seeks block on computer component firm deal

Summary: The Federal Trade Commission hopes to block a deal between PLX Technology and Integrated Device Technology which would create a near business monopoly for some computer components.

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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.

Topics: Hardware, Enterprise Software, Government

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  • FTC is not needed

    The antitrust laws need to be repealed. If two companies want to merge, they should have the absolute right to do so. They violate nobody's rights by doing so, and it is a violation of their rights to prevent them from doing so. There are no governmental barriers to entry in the computer component market. If this merged company raised prices, it creates an opportunity for other firms to compete, threatening the entire 85% market share of the merged firm. This is why so-called "free-market monopolies" are not a problem. The threat of competition is as important as competition itself in keeping prices under control.

    Remember the Alcoa case? Alcoa was punished for being so efficient and keeping prices so low that nobody could compete with them.

    The anti-trust laws give lots of lawyers a way to make a ridiculously good living, but they are both unnecessary and a violation of the property rights of the businesses that the FTC hound dogs choose to pursue, and they drain wealth from some of the most productive companies in the world and hand it over to lawyers and weaker competitors with political pull. It's time to pull the plug on this gravy train, if you can excuse the mixed metaphor.
    FDanconia