Antitrust Lawyer Blog Commentary on Current Developments

DOJ APPROVES XM/SIRIUS MERGER

On March 24, 2008, the Department of Justice (“DOJ”) approved a proposed merger between XM Satellite Radio Holdings, Inc. (“XM”) and Sirius Satellite Radio, Inc. (“Sirius”), the only two satellite radio service providers in the United States. The DOJ stated despite a merger to monopoly that the merged companies would not increase prices to satellite radio customers because of alternative services for consumers and future technological changes that are going to provide consumers with more alternatives.
The DOJ explained that there are two channels that satellite radios are sold: through car manufacturers, which build them into their new cars, and through mass-market retail stores that sell automobile aftermarket equipment. Initially, XM and Sirius used to compete for the rights to distribute their products. Since then XM and Sirius have entered into long term sole source contracts with the major automobile manufacturers. These contracts have fixed the amount of subsidies that indirectly reduce the equipment prices paid by car buyers to obtain a satellite radio through 2012 and beyond. Evidence also does not show that competition between the satellite radio companies would have any affect on their decision to buy a certain brand of car.

As of now, XM radio programs cannot be utilized on Sirius satellite radios and vice versa causing subscribers to rarely switch between XM and Sirius. From the evidence gathered by the DOJ, no such interoperable radio is on the market and such a radio likely would not be introduced in the near term. The DOJ could not define a market with just two satellite radio firms and stated that both companies compete with firms that manufacture traditional AM/FM radio, HD radio, MP3 players and other audio offerings. Furthermore, the DOJ stated that there are a number of new platforms under development that would provide consumers with new or improved alternatives to satellite radios. The DOJ cited the introduction within several years of next-generation wireless networks that would allow consumers to listen to Internet radio on their mobile devices.


Andre Barlow

(202) 589-1834
abarlow@dbmlawgroup.com