The Federal Trade Commission will likely approve Broadcom’s $5.9 billion acquisition of Brocade, but with conditions to prevent “anticompetitive effects.” The FTC is concerned that once Broadcom owns Brocade’s fibre channel switches, it will essentially have a monopoly on the market that provides the ASICS for those types of switches.

“The worldwide market for fibre channel switches is highly concentrated, consisting of a duopoly between Brocade and Cisco,” states an FTC document entitled "Analysis of Agreement Containing Consent Order to Aid Public Comment."

Broadcom supplies Cisco with ASICs for its fibre channel switches. And it will soon own Brocade’s fibre channel switch assets for which it supplies ASICs. The FTC is concerned that Broadcom will use its massive market share to “substantially lessen competition,” or “by increasing the likelihood of coordinated interaction between the two competitors.”

It also noted that the fibre channel market has been flat to slowly declining over the past several years, so it’s unlikely a new competitor will emerge.

To try and thwart any antitrust activity, the FTC is requiring that Broadcom separate its fibre channel ASIC business with Cisco into a walled-off group that would have separate facilities and a separate IT system. And all Broadcom employees working in the Cisco fibre channel ASIC group must sign a non-disclosure agreement, as well as an agreement to not work for the Brocade fibre channel ASIC group for twelve months.

The FTC is also requiring a monitor to oversee compliance with these conditions. The monitor will be appointed to a five-year term, and the FTC may extend the term up to 10 years.

The commission is giving interested parties 30 days to make comments about these conditions. In early August, the FTC will make its final determination on Broadcom’s acquisition of Brocade.