It’s not often that antitrust regulators say that allowing the only two large companies in a sector to merge will not hurt consumers. But that is exactly what the US Department of Justice ruled on Monday when it gave the green light to plans by XM Satellite Radio to combine forces with Sirius, the other big provider of satellite radio, to create an operator with 17m customers.
The 13-month wait for approval was one of the longest in US history and the Federal Communications Commission still has to weigh in. But the DoJ had been seen as the toughest obstacle to this particular deal.
The approval gives further ammunition to those who believe the DoJ has taken an anything-goes approach under President George W. Bush. Yet it is also evidence of a larger tendency towards redefining sectors in order to make mergers possible. In the Sirius-XM decision, both companies are heavily indebted and struggling for survival.
Though consumer advocates argued that the rivalry had restrained advertising and subscription price increases, the DoJ rejected that view. It found that a dominant satellite radio provider would be held in check by having to compete with traditional AM/FM radio, audio offerings to mobile phones and even MP3 downloads.
Merger-friendly US courts have taken a similar approach. Last summer a federal judge waved through a plan by organic grocery chain Whole Foods to snap up its next largest competitor, saying that regulators should redefine the relevant market to include conventional supermarkets that sell organic products. That reduced Whole Foods and Wild Oats to bit players that were free to combine.
The European Union has generally been more sceptical of large combinations but, under Neelie Kroes, the competition commissioner, it too has expanded market definitions while allowing some mergers through. Such flexibility may be warranted when technology is rapidly changing but most customers would prefer to have genuine choices rather than theoretical competition.
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