Yesterday Sirius and XM Satellite Radio announced a "merger of equals" to form a single $13 billion dollar company. The new company will also now have 14 million combined subscribers and consumers might now be able to get specialty radio from Howard Stern, Nascar, Oprah Winfrey, Bob Dylan and Major League Baseball from a single satellite provider. The merger's "single satellite provider" result, upon a cursory look, will raise some concerns of monopoly and general antitrust issues. However, it should be obvious that the companies do not simply compete in the "satellite radio provider" market, which is a critical question under the antitrust laws.

While antitrust is a complex body of law, there are some general principles that shed some light on what antitrust regulators (either the Federal Trade Commission or Department of Justice) will look at when considering the merger. Generally speaking, regulators look to see whether a combination of merged companies will "substantially lessen competition" in "any line of commerce in any section of the country." The first quoted phrase refers to what is known as "market power." But, before regulators can assess market power, they must first determine what the market actually is. Market definition can be hotly contested and typically, as noted, includes both a product and a geographic component. In this case, given satellite radio's nationwide coverage there likely won't be much wrangling over the geographic aspect. What will see some legal jujitsu is the product definition of the market.

Foreseeing potential arguments against the merger, XM and Sirius announced their view of the relevant market in their merger press release stating "in addition to existing competition from free "terrestrial" AM and FM radio stations "as well as iPods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies." Thus, XM and Sirius say the product here is all radio and all media listening devices, including iPods. While there is an interesting academic argument as to whether iPods should be included in the market definition, it probably shouldn't be relevant to the final question of approval.

There is no doubt in my mind that the market should not be limited in this case to just "satellite radio providers" and should include all forms of radio. Indeed, terrestrial stations now brand themselves as "free radio", which is an implicit admission that they compete with the pay subscription model of satellite. As we know, traditional radio has some very large corporate players who will make it nearly impossible for the newly merged companies to "substantially lessen competition" in the radio market. While admittedly oversimplifying the legal analysis for this confined space, I nonetheless contend that once regulators acknowledge this economic reality there should be little hindrance to approving the merger from an antitrust perspective.

Beyond the FTC or DOJ antitrust review, there is another regulation obstacle at the Federal Communications Commission. That is something outside my former practice area so I won't comment on that hurdle. However, it is clear that the companies believe they can overcome any objections under FCC rules or they would not have otherwise announced their agreement.

Now, if this does get approved and prices don't rise for a device or subscription, I'd seriously think about signing up. I've hated having to choose between the two and to date have declined to do so. Combined they have a strong enough line up, which will likely continue to expand, to at least consider a subscription.