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By Andrew Noyes
© National Journal Group, Inc.
The Justice Department this afternoon cleared Sirius Satellite Radio's estimated $14 billion merger with rival XM, finding that the proposed pairing is not likely to substantially lessen competition or harm consumers.
The department's antitrust division said evidence did not show that the merger would let the parties hike subscription prices, partly because they do not compete in important segments of the market. It also cited the widespread availability of alternative services like Internet radio and iPods.
Sirius and XM each obtained stockholder approval in November 2007 and the deal is still subject to FCC approval.
Justice Department antitrust division chief Thomas Barnett defended his agency's approval of the merger, saying in a conference call with reporters that there was insufficient proof that consumers would be harmed. Barnett also rejected critics' widespread belief that the transaction amounted to a government-sanctioned monopoly.
The agency launched its examination of the merger plan more than a year ago and analyzed millions of pages of documents, large amounts of data on satellite radio sales and subscriptions, and interviewed scores of industry stakeholders, officials said.
The merger had friends and foes on Capitol Hill and within the consumer watchdog communities and its ultimate fate is still to be decided by the FCC.
Senate Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., said in a statement that he was "very disappointed" with the news.
"We believe the elimination of competition between XM and Sirius is contrary to antitrust law and the interests of consumers," Kohl said, urging that the FCC find the merger contrary to the public interest and to block the transaction.
Kohl said he was "particularly disturbed" given Justice's recent record of "failing to oppose numerous mergers which reduced competition in key industries."
Barnett responded by saying he was "quite comfortable that we're vigorously but appropriately enforcing antitrust laws" and said his relationship with Congress will remain a good one.
Rep. Steve Chabot, R-Ohio, a member of the House Judiciary Committee, said the merger "demonstrates how technology has changed the marketplace" and "highlights the complexity of traditional antitrust tensions such as protecting consumers yet facilitating free market ideals in the age of constantly advancing technology."
Those issues were "thoroughly addressed" in the Justice Department's review, he said.
Analysts for Stifel Nicolaus said they believed Sirius and XM will win FCC clearance but they expect a series of conditions "in a process that could still take a number of weeks."
They said the National Association of Broadcasters will likely ask the commission to strengthen its rules limiting the new firm from offering local programming. NAB spokesman Dennis Wharton said he was "astonished" that Justice blessed the union of "two companies that systematically broke FCC rules for more than a decade."
Gigi Sohn, president of the nonprofit public interest group Public Knowledge, said the merger should be approved with some conditions, including the establishment of a tiered or a la carte pricing model and a moratorium on price increases for three years.
The new company should also make 5 percent of its channel capacity available to noncommercial programming and make technical specifications of its devices available so device manufacturers can develop new offerings without interference, Sohn said.
In a speech at the National Press Club last summer, Sirius CEO Mel Karmazin pledged to "give consumers the power to choose satellite radio packages, channel by channel to suit their tastes and their budgets." Under one plan, subscribers could choose 50 channels for $6.99 a month -- a 46 percent decrease from the current base subscription rate of $12.95. Other proposed subscriptions would cost $9.99, $14.99 and $16.99.
The Consumer Electronics Association lauded Justice "for acting in the public interest to provide clarity in the marketplace and confidence to consumers." Consumers that might have been awaiting a decision before purchasing a satellite radio "can now move forward with confidence," the trade group said.
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