President Theodore Roosevelt and Sen. John Sherman might be surprised to see how antitrust laws and antimerger regulations are being used today in the radio industry: as a weapon for big business against smaller competitors.
The broadcast radio industry is lobbying the federal government to block the proposed merger of XM and Sirius satellite radio companies, who claim they might both fold without the merger.
While engaging in this high-priced lobbying campaign to inflict a possibly mortal woundto their competitor, the broadcasters accuse the satellite companies of “seek[ing] a government bail-out to avoid competing in the marketplace.”
The National Association of Broadcasters, an influential organization with a $20 million building in downtown Washington, D.C., and an $7 million annual lobbying budget, is leading the charge to block the proposed the merger, either through the Federal Communications Commission or the Department of Justice.
To make their case to DOJ that Sirius and XM should not be allowed to join, the broadcasters have hired the guy who used to run DOJ — former attorney general John Ashcroft. He was a Republican senator from Missouri before his appointment by President Bush as the nation’s top legal official.
Ashcroft and NAB assail the merger as creating a “monopoly,” but Sirius and XM hardly look like the 900-pound gorilla in this fight. Compared to the $1.49 billion in combined annual revenues of Sirius and XM, Clear Channel Communications, the largest member of NAB, pulled in $1.97 billion in revenues last quarter. Clear Channel boasts of 110 million listeners, while XM and Sirius combined have 12 million subscribers.
Although NAB, of which Clear Channel is by far the largest radio member, has come out against the merger, Clear Channel has yet to comment and did not respond to my query by press time. (Clear Channel, who is currently selling out to a private equity consortium, is at present a minority shareholder in XM.)
Both XM and Sirius are losing money, thanks in part to overspending (consider Howard Stern’s $100 million contract), and they argue they both might collapse if they can’t merge. Once the satellite companies announced their intent to merge, NAB issued a press release calling on federal regulators to prevent the union.
Because the merger would require a rule change by the FCC, NAB said the satellite companies’ plea to be left alone was a request for “a government bail-out to avoid competing in the marketplace.” It might be more accurate to say NAB is asking for government protection against competition.
The antitrust arguments against the merger have ambiguous merit — a Sirius-XM merger would undoubtedly yield a monopoly in satellite radio, but the companies respond that the merger will benefit customers by streamlining, reducing costs, and thus cutting prices.
As an example of increased efficiency through mergers, the satellite companies could point to Clear Channel, who through consolidating many radio stations in dozens of markets has been able to eliminate redundancy, cut extraneous jobs and take advantage of economies of scale.
The satellite companies argue that regulators should not look at their combined share of the satellite market, but their combined share of the entire radio market—where the company wouldn’t even be the largest, much less a monopoly. The broadcasters respond that the two markets are separate. They say the satellite companies don’t compete with broadcast companies.
The logical question, then, is: why do the broadcasters care so much about a powerful XM-Sirius if they are not in competition with XM-Sirius? It sure seems the NAB thinks a merger would harm their members, and a collapse of satellite radio would help their members — which provides pretty good proof that satellite radio competes with broadcast radio. Would NAB really pay top-dollar for such a well-connected lobbyist as John Ashcroft if they didn’t think the merger would affect their business?
Ashcroft’s role provides another interesting twist to this tale. A spokesman at XM told The Wall Street Journal that Ashcroft offered his services to the satellite companies, who declined.
Then the NAB retained Ashcroft and he wrote a letter to his successor, Attorney General Alberto Gonzales, bashing the proposed merger. While those facts suggest the former public servant is selling his firm beliefs to the highest bidder, Ashcroft’s spokeswoman says consulting with both sides of a dispute is standard practice in the world of Washington lobbying.
Whether or not the merger goes through, and whatever stance broadcast behemoth Clear Channel takes, it would have struck Teddy Roosevelt as odd to see the well-heeled NAB asking for federal protection from unprofitable companies they claim aren’t even competitors.
Examiner columnist Tim Carney is author of “The Big Ripoff: How Big Government and Big Business steal your money.”
