Corporate & Securities Law

Barnett on Sirius-XM

The Washington Post is reporting that the long-embattled Sirius/XM merger has received DOJ approval (FCC approval still pending) (HT: David Fischer).  About time, I’d say (it’s been two years).  See all of the ToTM posts on the topic here. 

Opposition to this merger has been rooted in what, to me, is a tortured conception of market definition:  If satellite radio doesn’t compete with terrestrial radio (to say nothing of Internet radio, podcasts and much more), then I’ll eat my hat (a ToTM tradition).

I do want to draw attention to something in the WaPo article, however, which I find quite disturbing (and, I hope, taken out of context).  WaPo reports,  

The Justice Department, in a statement explaining its decision, said the combination of the companies won’t hurt competition because the companies are not competing today. Customers must buy equipment that is exclusive to either XM or Sirius, and subscribers rarely switch providers.

“People just don’t do that,” Assistant Attorney General Thomas Barnett said in a conference call with reporters.

Excuse me?  Did the Assistant AG just seem to say that, because people who subscribe to Sirius rarely switch to XM and vice versa that the two companies don’t compete?  I’m pretty sure this must be a misquote.  Surely Barnett has read Demsetz and knows about “competition for the field.”  Even if no user ever switched between providers, competition between providers for each new user’s allegiance–to say nothing of competition for dominance in a network industry–would exert just as much competitive pressure as if users changed their service regularly. 

I agree with the result here, but if it was reached based on the premise that XM and Sirius simply don’t compete–rather than on the premise that they compete vigorously and with myriad other competitors in a properly-understood market–then it was wrongly decided.   

Full post as published by Truth on the Market on March 24, 2008 (boomark / email).