Last updated: April 23, 2008 - 2:55pm
JUSTICE APPROVES XM-SIRIUS MERGER
After a review of the proposed XM-Sirius merger, the Department of Justice has concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers. The Department reached this conclusion because the evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers for several reasons, including: a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time; and efficiencies likely to flow from the transaction that could benefit consumers. The Department's investigation indicated that the parties are not likely to compete with respect to many segments of the satellite radio business even in the absence of the merger. Because customers must acquire equipment that is specialized to the satellite radio service to which they subscribe, and which cannot receive the other provider’s signal, there has never been significant competition for customers who have already subscribed to one or the other service. For potential new subscribers, past competition has resulted in XM and Sirius entering long-term, sole-source contracts that provide incentives to all of the major auto manufacturers to install their radios in new vehicles. The car manufacturer channel accounts for a large and growing share of all satellite radio sales; yet, as a result of these contracts, there is not likely to be significant further competition between the parties for satellite radio equipment and service sold through this channel for many years. In the retail channel, where the parties likely would continue to compete to attract new subscribers absent the merger, the Department found that the evidence did not support defining a market limited to the two satellite radio firms that would exclude various alternative sources for audio entertainment, and similarly did not establish that the combined firm could profitably sustain an increased price to satellite radio consumers. Substantial cost savings likely to flow from the transaction also undermined any inference of competitive harm. Finally, the likely evolution of technology in the future, including the expected introduction in the next several years of mobile broadband Internet devices, made it even more unlikely that the transaction would harm consumers in the longer term.
* Sirius plan to buy XM gets antitrust approval
The Federal Communications Commission must determine whether the XM-Sirius is in the public interest, and whether to enforce its 1997 order barring either satellite radio company from acquiring the other. A source at the FCC said FCC Chairman Kevin Martin has yet to make a proposal either approving or opposing the XM-Sirius combination, but has asked the agency's staff to draft documents for different possible outcomes. This source said the FCC could be strongly influenced by the Justice Department accepting the satellite radio companies argument that they face stiff competition from traditional AM/FM radio, high-definition radio, MP3 players and audio delivered by mobile phones.
* Justice Dept Approves XM-Sirius Merger (Associated Press)
"We are astonished that the Justice Department would propose granting a monopoly to two companies that systematically broke FCC rules for more than a decade," said National Association of Broadcasters Executive VP Dennis Wharton. "To hinge approval of this monopoly on XM and Sirius's refusal to deliver on a promise of interoperable radios is nothing short of breathtaking."
MEMBERS OF CONGRESS RESPOND TO XM-SIRIUS DECISION
1) Sen Herb Kohl (D-WI), the chairman of the Senate Antitrust Subcommittee, told the Federal Communications Commission it should not allow XM Satellite Radio and Sirius Satellite Radio to merge, saying that it would create a satellite-radio monopoly. He said, "We believe the elimination of competition between XM and Sirius is contrary to antitrust law and the interests of consumers. We urge that the FCC find the merger contrary to the public interest and exercise its authority to block it. We are particularly disturbed by this decision given the Justice Department's record in recent years of failing to oppose numerous mergers that reduced competition in key industries, resulting in the Justice Department not bringing a single contested merger case in nearly four years." 2) Sen Byron Dorgan (D-ND) called the Department of Justice decision to approve the merger "another disappointing example of this administration's blatant disregard for the public interest with regard to media ownership." He said "the American consumer will pay the price" if the merger ultimately eliminates competition in satellite radio. 3) House Telecommunications & Internet Subcommittee chairman Ed Markey (D-Mass.) said the Department of Justice's approval of the XM Satellite Radio-Sirius Satellite Radio merger without conditions was par for the course, but he told the Federal Communications Commission it should aim for more. “If the Federal Communications Commission, after completing its analysis and consideration of the proposed merger, decides to approve it, I urge the FCC to appropriately condition any such approval to ensure consumer welfare with respect to long-term service plans and pricing, as well as equipment compatibility and pricing,” he said.
* Kohl: FCC Should Block XM-Sirius Merger
* Dorgan: XM-Sirius Approval Shows 'Blatant Disregard' Of Public Interest
* Markey Tells FCC XM-Sirius Merger Needs Conditions
* Public Knowledge Asks FCC For Conditions on XM-Sirius Merger
1) The new company should make available pricing choices such as a la carte or tiered programming; 2) The new company should make 5% of its channel capacity available to noncommercial educational and informational programming over which it has no editorial control; 3) The new company should agree not to raise prices for its combined programming package (as opposed to each individual company’s current programming package) for three years after the merger is approved; and 4) The new company should make the technical specifications of its devices and network open and available to allow device manufacturers to develop, and consumers to use, any device they choose without interference. Pursuant to Commission rules, these devices must be certified by the FCC for receiving signals on the frequencies licensed to the merged entity and be subject to a minimum “do-no-harm” requirement.
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* Merger of XM and Sirius gets go-ahead
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