Broadcom (NASDAQ:AVGO) stock is dipping lower on Friday following allegations from the U.S. Federal Trade Commission (FTC) that it operates an illegal monopoly.

broadcom (AVGO) logo outside office building

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According to the complaint from the FTC, Broadcom has entered into loyalty agreements with OEMs and service providers for three types of semiconductor components. These are used by OEMs and service providers, which in turn provide them to customers seeking internet and television services in the U.S.

The FTC claims that these loyalty agreements don’t allow for OEMs or service providers to acquire components from the company’s rivals. This makes it so that these customers have to source components from AVGO on “an exclusive or near exclusive basis.”

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The announcement from the FTC also includes how Broadcom can stop being an illegal monopoly. That includes not signing into exclusive loyalty agreements with customers seeking parts for set-top boxes, as well as DSL or fiber broadband internet devices.

Holly Vedova, the acting director for the FTC’s Bureau of Competition, said this in the statement dropping AVGO stock.

“America has a monopoly problem. Today’s action is a step toward addressing that problem by pushing back against strong-arm tactics by a monopolist in important markets for key broadband components. There is much more work to be done and we need the tools and resources to do it. But I have full confidence in FTC staff’s commitment to this effort.”

AVGO stock is seeing heavy trading following today’s FTC news. As of this writing, more than 2.5 million shares of the stock have changed hands. That’s quite the jump from the company’s daily average trading volume of about 1.8 million shares.

AVGO stock was down close to 1% as of Friday afternoon.

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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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