SAN FRANCISCO — The U.S. Federal Trade Commission (FTC) has approved Broadcom Ltd.'s $5.9 billion acquisition of Brocade Communications Systems Inc. after Broadcom agreed to establish a "firewall" to prevent Brocade from accessing proprietary information about Broadcom customer Cisco Systems Inc.'s fibre channel switches.

The FTC said Monday (July 3) that it voted 2-0 to accept Broadcom's proposal and allow 30 days for public comment. The FTC will decide after Aug. 2 whether to make the proposed consent order final, it said.

Broadcom announced in November it would acquire Broadcom for $5.9 billion to add Broadcom's fibre channel switches to round out its network storage business. The deal calls for Broadcom to subsequently sell Broadcom's Ethernet networking business for an expected $1-2 billion.

The FTC said concerns arose because Broadcom is the ASIC supplier to both Brocade and Cisco, the only two competitors in the worldwide market for fibre channel switches. A complaint issued by the FTC expressed concern that the acquisition could enable Broadcom to use information about the market to unilaterally exercise market power or to coordinate action among Brocade and Cisco, increasing the likelihood that customers would pay higher prices for fibre channel switches and potentially stifling innovation, the FTC said.

The U.S. FTC is a five-member independent agency of the U.S. government charged with promoting consumer protection and the prevention of anticompetitive business practices. However, the commission has had just two members since its former chair, Edith Ramirez, resigned in January.

 - Dylan McGrath is editor-in-chief of EE Times.