The Sirius Xm Merger And Antitrust Considerations

SGMT  6050  –  Case  Write-­‐Up   McCaw   Cellular  Communications:  The  AT&T/McCaw  Merger   Negotiation     Armin  Ezatagha     Student  Number  ⏐  205  576  707   eMail  ⏐  aezatagha12@schulich.yorku.ca     Schulich  School  of  Business   Tuesday,  March  05,  2013                                 Current  Telecommunications  Ecosystem     McCaw  Cellular  Communications  (MCC),  although  positioned

AT&T recently acquired DirecTV after the latter’s shareholders voted to endorse the acquisition or merger. The acquisition was first endorsed by the boards of these companies in May 2014 before being subjected to a review by anti-trust regulators in the Department of Justice and Federal Communications Commission (England-Nelson, 2014). The approval of the acquisition would result in the merger of the country’s largest wireless carrier with the biggest satellite TV provider in the country. The merger between these two firms is geared towards creation of a leading content provider across various platforms i.e. video, mobile, and broadband services. However, the acquisition was influenced by various factors and is associated with several significant effects in light of the organizational structure.

It is necessary for a firm to expand in order to gain profits or leverage in a market place. One of the ways firms can do this is by executing a merger. There are two types of mergers, horizontal and vertical mergers. There are many incentives for companies to perform either type of merger; however, both types of mergers will always raise suspicion when being executed because they are usually perceived as anticompetitive. In order to prevent an anticompetitive environment, our government established a federal agency called the Federal Trade Commission. Their job is to review the activity of any given firm and decide whether or not to allow them to continue. Presently, CVS and Etna are currently undergoing a vertical merger to gain profits and

Unknowingly, Antitrust began a cycle of Rule of Reason, which is the Lax Enforcement, and the Per Se Rule, which is the tight enforcement (Boyes 2013, p 249). Litigation of the Antirust law was not frequent, and that’s because between the years of passage 1890 and 1914, only seven cases were tried by the Supreme Court, in which they broke up monopolized companies like Northern Securities, and Standard Oil Co. of New Jersey; but also allowed the formation of major league baseball. This period of Lax Enforcement ended with the passage of the Clayton Antitrust Act and the Federal Trade Commission Act, and ushered in Per Se Rule. The changes to Antitrust laws gave a more clear definition to the law by guide lining the prohibitions of price discrimination, the creations of barriers to enter a market, outlaws mergers deemed unfair, and imbalanced methods of business; the Federal Trade Commission was also allowed to investigate into these practices. Since 1941, the FTC and it parent division, the Justice Department, had filed over 2,800 cases related to Antitrust, but it is the private sector that had an exponential amount lawsuits filed. Between the passage of these two laws and the Supreme Court Justice William Douglas, who prized the laws, any inkling of proof that a business could be monopolizing or engaging in unfair business practices, almost always lead to a guilty verdict that mostly results in a heavy fine, and in extreme

"Sirius XM Has a Monopoly on Satellite Radio, a Growing Subscriber Base, and Loads of Free Cash." Bamboo Innovator. 24 Nov. 2013. Web. 28 June 2015. .

In 1982, the Justice department ordered the separation of ATT into local subsidiaries. MCI was one of the main competitors of AT&T and the impact of this new competition on MCI was uncertain. In this case the financial impact of this increased competition will be analyzed.

The purpose of this paper is to discuss antitrust law with regard to federal regulations. In the form of a case study, this paper will examine the legal obstacles faced by the merger proposal between US Airways Group Inc. and American Airlines' parent corporation AMR. The focus of the paper is to examine the legal hurdles posed by antitrust laws used to block the merger and then briefly explore possible ethical issues associated with allowing US Airways Group Inc. and AMR to merge.

Our case study titled, The AT&T and McCaw merger negotiation, provides us with an opportunity to negotiate the terms of the merger between McCaw cellular and AT&T. McCaw was the largest competitor in the rapidly growing cellular telephone communications industry. AT&T was the dominant competitor in long-distance telephone communications in the United States, and one of the largest corporations. Prior to the negotiations, it had no position in cellular communications.

2. What are the differences among horizontal, vertical, and conglomerate mergers? Provide real-world examples of each type of merger. What policy do you think the US should follow toward mergers? Why?

Most everyone subscribes to some type of cable service. When Comcast announced plans to merge with Time Warner Cable back in February, Congress was quick to criticize the deal (Popelka). Many members of Congress were not in favor of the merger, and rumors of an antitrust review were imminent (Popelka). "This is a great example of how U.S. antitrust policy has turned into a political game"( Popelka). Politicians may gain supporters, but no one is going to decrease the cost of cable service to consumers (Popelka). Antitrust laws were put into place for a reason. "The Sherman Antitrust Act was created to prevent monopolistic activities that diminish consumer choice or competition" (Popelka). In this case, the merger between these two companies will not take away consumer choice because they operate in different geographies (Popelka). Cable companies are struggling to keep up with the demands of younger consumers who are interested in online services instead of cable (Popelka). Politicians who oppose this merger are using the "Herfindahl-Hirschman Index (HHI) to evaluate monopoly status" (Popelka). Comcast has found a way around this so they can stay "below a mythical 30 percent HHI market share threshold" (Popelka).

The predominant view in the United States is that The Sherman Antitrust Act of 1890 was passed with the intent to protect consumers from inefficient market forms, and predation by large corporations. The specific provisions of the Sherman Act, as well as the later Clayton Act of 1914, prohibit acts that are considered to be anti competitive such as cartels, monopolies, price discrimination, and predatory pricing. Mergers and acquisitions are also individually reviewed to ensure they won 't have an anti competitive effect on the market. We will look at each of these acts to try to determine their actual impact to the consumer. We will also

* XM Satellite Radio was founded by Lon Levin and Gary Parsons. It has its origins in the 1988 formation of the American Mobile Satellite Corporation (AMSC), a consortium of several organizations originally dedicated to satellite broadcasting of telephone, fax and data signals. In 1992, AMSC established a unit called the American Mobile Radio Corporation, dedicated to developing a satellite-based digital radio service; this was spun off as XM Satellite Radio Holdings, Inc. in 1998. Its planned financing was complete by July 2000, at which point XM had raised $1.26

FTC employed structural, documentary, statistical, econometrics and financial evidence to verify that the proposed merger of Staples and Office Depot will lead to increase in market concentration, market prices and stock prices, and thus support FTC’s contention that this merger will cause an anticompetitive effect on Office Superstore market. Staples and Office Depot made a plain and useless contradiction. Finally, the Court announced to agree with FTC, and granted a preliminary injunction on this merger. This paper mainly focuses on FTC’s evidence and analysis.

The General Electric (GE) and Honeywell International (HI) case illustrates the complexities of structuring mergers and acquisitions when the combined firms are capable of exerting market influence that threatens the competitive landscape. While General Electric's CEO, Jack Welch, characterized the deal as, "This is the cleanest deal you'll ever see," European anti-trust regulators were not so inclined to view the transaction as harmless to competition (Elliot, 2001).

6. In an era of global competition, what is the case for antitrust authorities to permit the formation of large domestic firms through mergers and acquisitions?