The Federal Trade Commission (FTC) is investigating whether chipmaker Broadcom Ltd engaged in anticompetitive tactics in negotiations with customers, the company said on 18 January.
The investigation comes as Broadcom pursues a hostile takeover of Qualcomm in a $103 billion deal. Since the FTC would likely review any merger for anticompetitive practices, the current probe could make regulatory approval more challenging.
Broadcom has recently issued subpoenas that seek an extensive amount of information, according to the Wall Street Journal, which was the first to report the probe on 18 January.
The focus of the concern has been that Broadcom has changed some contracts to require customers to buy a percentage of its production of items rather than a certain number, the paper reported.
“This FTC review is immaterial to our business, does not relate to wireless and has no impact on our proposal to acquire Qualcomm,” Broadcom said in a statement.
Broadcom shares were up slightly on 18 January afternoon, trading at $265.81.
The FTC, which investigates actions that might break antitrust law, declined to comment.
Chipmaker Qualcomm is fending off a takeover bid by Broadcom. In November, it rejected Broadcom’s $103 billion cash-and-stock bid, saying it dramatically undervalued the company. In December, Qualcomm rejected Broadcom’s 11 director nominees.
US antitrust regulators will likely take a close look at any deal since a combined Broadcom-Qualcomm would become the dominant supplier of chips used in the 1.5 billion or so smartphones expected to be sold around the world. It would raise the stakes for Intel Corp , which has been diversifying from its stronghold in computers into smartphone technology by supplying modem chips to Apple Inc .