Both companies make integrated circuits called PCIe switches, which perform critical connectivity functions in computers and other widely used electronic devices.

"The combination of IDT and PLX would hurt competition and lead to higher switch prices, lower innovation in the marketplace, and reduced customer service," said Richard Feinstein, director of the FTC's Bureau of Competition.

The combined firm would have a share exceeding 85 percent in the global PCIe switch market, the commission said.

Headquartered in San Jose, California, IDT makes a range of semiconductor components used in communications, computing, and consumer applications. It proposed buying PLX, headquartered in Sunnyvale, California, in April.

FTC said customers have traditionally used the competition between IDT and PLX to play one company against the other and achieve lower prices.

IDT closed at $6.92 per share, up 10 cents, on Nasdaq, and PLX Technology closed at $4.50, down 7 cents.

(Reporting By Ros Krasny; Editing by Bob Burgdorfer)

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