DOJ approves Sirius/XM merger

The Department of Justice today issued a statement that it had closed its investigation of the Sirius -- XM Radio merger without taking action, finding that there was no evidence that the merger would substantially reduce competition. It found that the parties did not substantially compete with each other with respect to existing customers (because each customer has a sunk cost of the equipment he has installed in his car). With respect to new customers, the Department stated:

"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."

Most important, it found that the market for retail competition was not limited to the providers of satellite radio. It said:

"In the retail channel, where the parties likely would continue to compete to attract new subscribers absent the merger, the Division 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."

The merger still has to gain the approval of the Federal Communications Commission.