"The market" is small, with PLX #1 and IDT #2. That is a monopoly and the barriers to entry are significant for how small the TAM is. The FTC does not care about who could become a player.
INTC and AMD are not considered competitors.
That said, I still am surprised this is being held up. PLX and IDT could combine and they will not have the power to jack up the price. They sell to big companies who dictate to them. If IDT was insistent upon increasing prices after the merger, that would push these big companies into finding an alternative.
There was MSFT monopoly and then there is IDT/PLX monopoly. One is much less sinister than the other.
But I am guessing the FTC does not get to consider these things in their decisions. One set of rules for all should apply, regardless of market size.