Broadcom Under Investigation for Antitrust Practices

The Federal Trade Commission (FTC) is investigating whether chipmaker Broadcom Ltd. engaged in anticompetitive tactics in negotiations with its customers, the company said on Wednesday.

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.

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.

The probe by the Federal Trade Commission is "immaterial" to the semiconductor maker’s business, Broadcom said in a statement Wednesday. The FTC declined to comment.

Broadcom has become one of the world’s largest chipmakers through a string of acquisitions over the past few years. The expansion has also made it one of the biggest providers of components for smartphones, including Apple Inc.’s iPhone. The company is seeking to extend that reach even further with a $105 billion hostile bid to purchase rival Qualcomm Inc., in what would be the biggest technology acquisition ever.

Broadcom said the FTC review has "no impact" on the proposal to buy Qualcomm, and isn’t related to the company’s wireless business. In resisting Broadcom’s offer, Qualcomm has said the deal would struggle to pass antitrust scrutiny, a contention that Broadcom disputes.

Besides making components for smartphones, Broadcom is one of the biggest suppliers of chips to the communications industry, where its semiconductors play a key role in wired infrastructure. Its switch processors are used to send data around computer networks in data centers. San Jose, California-based Broadcom is also one of the largest providers of chips used in computer storage.

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