Consumers Union on the merger

http://www.consumersunion.org/blogs/hun/2008/03/now_hear_this_electronic_newsl_21.html

Now Hear This Electronic Newsletter, March 27, 2008 Posted by Bob at 03/26/08 01:40 PM

This week the Justice Department's antitrust division gave its blessing to a pending merger between the country's only two satellite radio companies, XM and Sirius, arguing the resulting monopoly won't harm consumers.

Quick: Name a monopoly business that gives consumers great service, low prices, cutting edge technology, plenty of choices. Anyone? Anyone at all?

Okay, forget the "quick" part. Take all the time you need. We'll go make ourselves a sandwich.

Okay, we're back. Anyone?

The simple fact is that monopoly businesses - particularly unregulated monopolies - are by their very nature anti-consumer, no matter what the current Justice Department might think. The whole idea of a monopoly is to destroy all competition in the marketplace, cut services and choices, and then slap consumers with high prices. Everyone knows that's how it works - with the apparent exception of the Justice Department's antitrust division.

The antitrust division's official announcement okaying the deal - while fairly brief - still manages to present a mind-boggling mound of twisted logic, along with a heaping helping of hard-to-believe claims. You can read the whole thing by clicking here.

For a marvelous, point-by-point deconstruction of the dubious arguments presented by DOJ, you should take a look at this article by Washington Post business columnist Steven Pearlstein.

Along with a first-rate dissection of DOJ's nonsensical case for approving the deal, Pearlstein also raises some of the bigger implications for consumers beyond satellite radio.

"It took some doing -- and more than a year of "investigation" - for the Justice Department to come up with its undisclosed evidence and tortured logic to justify this strikingly anti-consumer decision," says Pearlstein. "As precedent, it could be used to justify the merger of ABC with both CBS and NBC, Clear Channel with the Bonneville radio network or even Coke with Pepsi. The message it sends to business executives is clear: If you find yourself in a tough competitive environment, the best strategy is not to find a way to offer better products and services at a better price, but rather to call your investment banker and negotiate a truce with your biggest rival."

We couldn't have said it better ourselves.

We were also particularly struck by just one sentence in the DOJ announcement which, by itself, speaks volumes about DOJ's "process" in scrutinizing the merger.

"During the course of its investigation, the Division reviewed millions of pages of documents, analyzed large amounts of data related to sales of satellite radios and subscriptions for satellite radio service, and interviewed scores of industry participants."

So let's get this straight: The chronically overwhelmed and overworked civil servants at DOJ's antitrust division "reviewed millions of pages of documents" on this one deal over the past year? We aren't sure exactly how the Justice Department pulled that off, but we did a few calculations on what it might take.

Say the total number of pages "reviewed" added up to just the absolute minimum allowed for "millions" - just two million. A "review" of two million pages would require at least 10 employees working on nothing else for a year, slogging through at least 800 pages a day each.

Put another way, the minimal number of those "reviewed" pages laid end-to-end would stretch more than 347 miles, roughly the distance between Baltimore and Boston.

At the same time, the antitrust division "analyzed large amounts of data related to sales of satellite radios and subscriptions for satellite radio services, and interviewed scores of industry participants."

If this really is an accurate reflection of what the antitrust division did in scrutinizing the merger, it is truly one of the bureaucratic miracles of our time. If they pulled off this Herculean task as described, each and every person involved is to be praised and held in awe.

The paperwork aside, we also couldn't help but notice that while DOJ bragged that it "interviewed scores of industry participants," we couldn't find any mention of it interviewing actual satellite radio consumers.

That's more than little odd, don't you think? Wouldn't you think you might want to interview some actual satellite radio consumers before concluding none of them will be harmed by this highly controversial deal that will turn the country's satellite radio industry into a monopoly enterprise?

But we digress.

With the blessing of the DOJ in hand, the only major stumbling block remaining for the XM/Sirius merger is approval from the Federal Communications Commission.

It should be noted that it was the FCC which cleared the way for XM and Sirius to get in the satellite radio business more than a decade ago, but with one very important caveat - the two companies could not merge.

FCC Chairman Kevin Martin has said the two companies face a "high hurdle" in gaining his agency's approval of their merger. We hope he is being sincere.

The FCC is clearly charged with protecting the public interest in its consideration of the proposed merger, but then so was the Justice Department. We hope the FCC takes that charge more seriously than the Justice Department did and rejects this merger as the anti-consumer travesty it is.