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Sidak and Singer Brief FCC Staff on Why Harm to Competition Requires Blocking XM-Sirius Merger
October 9, 2007
Criterion Economics met on October 3, 2007 with staff from the Federal Communications Commission (FCC) to discuss the Third Supplemental Declaration of J. Gregory Sidak, filed on October 1, 2007. In their two-hour presentation before the FCC’s Media Bureau, which is tasked with reviewing the proposed merger, Criterion founder J. Gregory Sidak and Criterion President Hal J. Singer critiqued the recent FCC submission by Charles River Associates ("CRA") filed on behalf of XM and Sirius. The meeting covered a wide range of topics, from market definition to the price-fixing allegation surrounding XM’s and Sirius’s a-la-carte offering.
Upon conclusion of the presentation, the only questions for which the FCC requested elaboration concerned how XM-Sirius could profitably raise the number of minutes of commercials. That request was answered by the six-page ex parte letter filed with the FCC on Monday.
In the ex parte letter, Sidak and Singer demonstrate that the only plausible way for Sirius to achieve such an increase in advertising revenues is to increase the number of minutes of commercials per hour. The economists were "highly skeptical that XM-Sirius could achieve significantly higher advertising revenues per subscriber either from converting minutes devoted to self-promotional messages to minutes of paid commercials or from increasing advertising rates," as had been suggested by some FCC staff in the October 1 meeting.
During the meeting, Sidak and Singer requested that the FCC order XM-Sirius to release secret data that underlies an economic model used in the CRA report to defend the proposed merger. To date, lawyers for XM-Sirius have not shared the data with the FCC, and they have refused an explicit request to give the public an opportunity to review and comment upon it. Moreover, XM and Sirius filed the CRA report on the last possible day of the FCC’s pleading cycle for the merger, effectively denying the public any opportunity to comment on the report during the designated pleading cycle.
"It is reasonable to infer that facts having considerable antitrust significance could be established if the FCC had access to the data that XM and Sirius have thus far shielded from public evaluation," said Professor Sidak. "It would be highly inappropriate for the Commission to vote on this merger application without ever having ordered XM and Sirius to hand over the secret data that are the cornerstone of their argument that the merger will not harm consumers. 'Just trust us' would be an arbitrary and capricious application of the Communications Act that would get shot down immediately in the Court of Appeals."
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