Antitrust Suit Against Sirius XM Gets Class Action Status
Sirius XM was hit with more lawsuit news today when a federal judge approved Class Action status for an antitrust trust against the company. Judge Harold Baer dismissed consumer protection claims brought by 20 states at the same time. This is the second legal matter in a recent news surrounding Sirius XM. Howard Stern filed a suit last week alleging that he is owed bonus money.
In my opinion Sirius XM stands a decent chance of defending at least part the suit successfully, but the issues raised my carry an impact on the pending FCC decision on whether or not Sirius XM can raise prices. The suit alleges that the company abused their monopoly power by increasing prices 30% with a music royalty fee, charging for Internet use, as well as a higher family plan rate.
The FCC and the DOJ (Department of Justice) approved the royalty fee charge and other price actions as part of the merger, and allowed the company to collect retroactive music royalty fees. In part this was due to the fact that the CRB (royalty board) had announced that higher rates would go retroactive in their decision that was announced during the merger process of Sirius and XM. The satellite radio company added a $1.99 music royalty fee that stayed in place until the retroactive portions were recovered. In December of 2010 the fee went down to $1.49.
Ironically Sirius XM is right now in the process of trying to get a 3 year price freeze removed by the FCC. The company agreed to freeze prices for 3 years as one of several concessions that were put in place to approve the merger. With the suit gaining class action status, the FCC will certainly consider pricing decisions carefully. If the FCC removes the price freeze condition, Sirius XM will be free to raise prices. If the freeze is kept in place, the company will still be under the thumb of the FCC.
The Class includes any subscriber from July 2008 forward. There have been many who claim that the prices have been raised substantially due to these fees. One chief complaint of consumers has also been no family plan pricing for people with both a Sirius and XM account. In contrast there are also consumers who still see tremendous value in the service they receive despite the higher costs. Certainly the case will take time, but the litigation is yet another cloud on the company.
Position – Long Sirius XM
If you look at the ruling, Most of the issues/claims in the suit were dismissed so this isnt really a big deal…as of now…
What monopoly!? There are tons of alternatives to xm including FM, pandora, last.fm, and other internet music services that keep popping up and that can be run on smartphones.
I disagree. Not going to set Sirius XM prices. Voluntary price freeze. Public comment part is procedure, and a complete joke. FCC has no right to mandate pricing(that was sirius xm throwing them a bone to be allowed to merge), and if they do, then they arent in violation of any anti trust suit, as they are a federally regualated company.
Lose one, win the other.
Basically Spencer, their FCC promise has NO LEGAL AUTHORITY TO BE ENFORCED. NONE. 🙂
Actually they do have the authority because Sirius XM volunteered it to the FCC by agreeing to allow the agency to freeze prices for three years and then review that freeze once the three years is up.
The FCC needs no “LEGAL” authority when the company allowed them to have this power.
Really. Then if sirius is a federal regualated company, let me know. They arent. Voluntary means voluntary. No, ur 100% wrong. They have NO legal authority to set sirius xm’s prices. Go read the comment section on the freeze. Go look up what voluntary means. FCC wasnt letting them merge unless they agreed. What the FCC did was dumb. Opened up a can of worms by doing that.
Without that stupid agreement, there is no trial. Everything is thrown out.
Judge screwed up, no basis for a trial here, by law.
The company is indeed regulated:
1. They do not do local advertising as a condition of getting the spectrum.
2. The government has a say in ALL spectrum. It is how it has always been.
3. You are confusing the lack of censorship with regulations.
4. The company voluntarily gave up certain rights. It does not mean that they can then step away from the concession any time they want.
5. people volunteer for the military every day. It does not mean they can walk away whenever they want.
6. The company offered up the concessions….The FCC did not require it.
On the HS suit, he has to prove Best of was intentionally invented to screw him XM Sub money. He has a poor case, cause of all that is offered on best of other than HS. I give HS a 5% chance or something like that of convincing a judge of that. Legally, sirius xm seems covered completely here. Mel’s lawyers were smarter than HS’s lawyers. Lawyer battle. Morality/Legally HS has no case. Already over paid.
I would disagree that Mel has “better lawyers”. Buchwald and Stern certainly have representation as good as Sirius XM.
O really. They merged legally AFTER HS’s bonus years ended. Best of denied him money. Mel won. This case has no chance in court either. 2011 is offical merge year. XM subs didnt count until 2011. Nice Mel. Why your the CEO.
BUT…..
The possibility of a merger was discussed with the ORIGINAL deal. That is just one issue the company has. Best of subs had access to programming….even without a merger, people had access to Stern.
I like Mel, but he does not walk on water.
On the HS suit, he has to prove Best of was intentionally invented to screw him XM Sub money. He has a poor case, cause of all that is offered on best of other than HS. I give HS a 5% chance or something like that of convincing a judge of that. Legally, sirius xm seems covered completely here. Mel’s lawyers were smarter than HS’s lawyers. Lawyer battle. Morality/Legally HS has no case. Already over paid.
Spencer,
Looking for to your March OEM breakdown by Leading, Point of Sale and Trailing….hopefully this weekend.
You have any preliminary SAAR, as or better than expected and any flavor on April from carmakers ?
Don’t get me wrong, I’m a huge fan of satellite radio. However, with that being said, aren’t you guys disappointed with the company charging you to listen to content online, higher secondary rates for radios? Also, Xm/Sirius services never consolidated with purchasing best of packages. Reflecting on the merger, I wish it never happened.
Spence,
The lawsuit’s claim that by compensating HS for allowing his program to be broadcast over XM is a reason that XM subs should counted as part of the Sirius subs is actually the exact argument that Sirius lawyers will use to show that Sirius and XM subs are separate.
If by merging XM subs were “acquired” by Sirius, then there would have been no reason/need to further compensate HS for that, other than the stock reward he claims he is owed.
In fact Sirius did not acquire XM subs. It was a merger of equals. Siruis no more acquired XM subs than XM acquired Sirius subs. They called the company Sirius XM and keep the two systems separate by necessity, not just the two companies. More members of the XM board moved over to Sirius XM than those from the Sirius board. XM shareholders got a larger share of the company than Sirius shareholders. XM bondholders held a larger portion of the debt of Sirius XM than Sirius bondholders.
Mel was chosen to run the merged company because the boards of Sirius and XM thought he would be the best to do so.
The new merged company could have just as easily been called XM and the stock symbol XMSR. How many subs would have Howard argued that he help Sirius acquire then?
Stern has no case. The reason Stern sued is because he was pissed off that Mel and others in management got bailed out with new stock/options after the Malone refinancing. Stern felt he deserved to also, not because the contract said so, but because he felt he was just important as some of those execs that got new stock. Stern has said he thought he would get rich from Sirius stock. He sees that Mel will in fact get rich, but he (Stern) will not.
Note that the lawsuit even says the Stern didn’t say anything about wanting the additional stock reward until after the Malone bailout.
Stern has no case. The only question is whether Mel will give Stern some stock to keep him happy and make the lawsuit go away without taking it though the courts.
I do not believe their is any law suit their at all because the FCC and Department of Justice approved of collecting music royalties fees, if the fees were not paid by the customers then how does the artist get paid for their rightfully owned music. I don’t see any suit here, if you were an recording artist with a major label, you just don’t give your music out for free, their are fees to broadcast the music. The Satellite radio companies were right in charging that fee so they in turn can pay that to the RIAA (Recording Industry Association of America). Also the online channels of the SirusXM took time, effort, and money to come up with a system to make it work, if you did your best in making something that someone else may use, why would you give it out for free, the same applies to the radio company. And as for the price freezing increments I think the radio company is rightful to increase their cost at any time. If the radio company does not increase their cost with time, then how are they going to compensate for newer technology as in better broadcast satellites, newer channels, I think this suit needs to take a look from the business end of the spectrum not for subscribers that just want to whine about anything possible that is wrong with anything in your view. I understand that you are paying for a service, but I wouldn’t complain because I think it is a heck of a deal to get commercial free music instead. Regular FM and AM channels have the same deal they have to also pay music royalties to play their music and the stations use commercials to pay for the royalties, but instead the satellite radio just assesses the fees to the listeners. When you buy a copy of a artists works like an music album you cannot broadcast that music for free, understand that when you purchase a copy the music, the music rights are not released to you they can release you the rights of the music if you want to play it on a radio station, but for a fee, that is how the royalties.