Semiconductor manufacturer Broadcom Ltd. (AVGO) must establish a firewall in order to receive antitrust approval for the company's $5.9 billion acquisition of Brocade Communications Systems Inc. (BRCD) .

The FTC is concerned that Broadcom's current access to the confidential business information of Brocade's major competitor, Cisco Systems Inc. (CSCO) , could be used to restrain competition in the global market for fibre channel switches.

Broadcom shares closed down 1.41% to $229.76 on Monday. Brocade shares were up 5 cents to $12.66.

Brocade and Cisco are the only two competitors in worldwide fibre channel switches, and Broadcom supplies both companies with ASICs to make fibre channel switches. ASICs are application-specific integrated circuits, microchips designed for a special application, such as a particular transmission protocol or a hand-held computer.

The FTC extended its review of the acquisition with a second request for information in February.

An FTC legal complaint filed along with the proposed settlement alleges that Broadcom has extensive access to Cisco's competitively sensitive confidential information and could use that information to harm competition either by unilaterally exercising market power or coordinating among Brocade and Cisco in a way that could lead customers to pay higher prices for fibre channel switches. 

The proposed consent order prevents Broadcom from using Cisco's competitively sensitive confidential information for any purpose other than the design, manufacturing and sale of fibre channel ASICs for Cisco. The Broadcom business group that makes and markets fibre channel ASICs for Cisco must establish information firewall protections that include separate facilities and a separate information technology system with security protocols that allow access only to authorized individuals. To assure compliance, the commission will appoint a monitor for five years, and the commission may extend the appointment for up to an additional five years.

If you liked this article you might like

Pret A Manger Takeover in the Works; Cisco's M&A Shackles Come Off - ICYMI

Market Signals Change of Direction: Cramer's 'Mad Money' Recap (Monday 9/18/17)

This Company Could Be a Fraud, Noted Short-Seller Andrew Left Says

John Chambers' Exit From Cisco Could Pave the Way for Big Moves

Chase Hires Amazon Customer-Service Exec as Digital's Rise Reshapes Branches