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XM-Sirius Merger Gets Antitrust OK

Justice Department signs off on merger; FCC action still pending

By Truman Lewis
ConsumerAffairs.com

March 24, 2008 

The department said the combined company won't be able to raise prices excessively because of competition from other entertainment media, including broadcast radio and MP3 players.

There wasn't enough evidence the merger "would substantially lessen competition or harm consumers," Justice antitrust chief Thomas Barnett said.

But the deal's not done yet. The companies are still awaiting approval by the Federal Communications Commission.

FCC Chairman Kevin Martin has said the agency is close to a decision and said the FCC staff has been instructed to draft "various options."

The deal has come under fire from critics who say it would reduce competition. The critics have also questioned whether existing receivers will be able to receive what proponents have said will be greatly expanded programming options.

Among the opponents of the merger is the state of Wisconsin, whose attorney general, J.B. Van Hollen, said the proposed merger is anti-competitive and anti-consumer. He said its impacts will be felt in Wisconsin, particularly in rural communities, where he predicts a significant reduction in the availability of sports and other programming.

“The proposed merger would eliminate competition in the satellite radio industry and the combined XM-Sirius companies would be free to raise prices, stifle innovation, and reduce program diversity,” Van Hollen said late last year, when he wrote to Barnett asking that the merger be blocked.

The proposed merger got a boost last September when former Federal Communications Commission chairman Mark Fowler said the deal would enhance competition. His comments came in a column in the New York Sun, whose parent company, Hearst Corporation, owns a stake in XM.

"In spite of the fact that satellite radio constitutes only 3.4 percent of radio listening today, traditional over-the-air radio operators have understood the potential threat and have had no choice but to compete, and have been dragged, albeit kicking and screaming, into the digital age," Fowler wrote.

The main argument that may prevent the current commissioners from allowing the merger is that it would create what critics say would be a monopoly. The National Association of Broadcasters (NAB), an industry group that lobbies on behalf of terrestrial radio broadcasters, has been by far the most vehement opponent.

"The national satellite radio market currently is a two-company duopoly trying to become a government-sanctioned monopoly," NAB president and chief executive officer David Rehr said at a House hearing in March. "The fact is, this monopoly would reduce innovation for services and equipment for consumers since there will be no competition in their defined market."

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