Sirius XM subscriber hearing ends without decision on accord
Bloomberg News
A federal judge declined to rule from the bench on the settlement of a lawsuit by Sirius XM Radio Inc. subscribers who claimed the satellite radio broadcaster broke the law when it raised prices after merging with its only rival.
U.S. Judge Harold Baer in Manhattan reserved a decision on the accord after subscribers argued at a hearing today that the agreement gives them too little and the lawyers too much.
Subscriber Carl Blessing of Florida sued Sirius XM in 2009, claiming it violated federal antitrust and state consumer- protection laws when it raised prices and levied a music royalty fee after Sirius Satellite Radio and XM Satellite Radio completed their merger in 2008.
“Since the merger, Sirius XM has abused its monopoly power by increasing prices above competitive levels, breaching subscriber contracts and making false and misleading statements to subscribers and the public,” Blessing said in his complaint. He said his monthly rate jumped 40 percent to $27.88 after the merger.
The subscribers said New York-based Sirius XM broke promises it made to win approval of the merger from the U.S. Federal Communications Commission and Justice Department. Sirius XM said the increases were imposed to cover higher costs.
Baer in March let the federal antitrust claim proceed as a class action, or group lawsuit, on behalf of Sirius XM subscribers from July 29, 2008, to July 5, 2011. He denied class-action status on the state-law claims.
Preliminary Approval
The class and Sirius XM reached a pretrial settlement, and Baer gave preliminary approval to the agreement in May.
The accord, valued at $180 million, provides that prices for basic service and Internet access, as well as the music royalty fee, will remain at current levels through the end of the year. Subscribers who canceled can reconnect without paying a fee. Those whose plans expire after Dec. 31 can renew before that time at current rates. Subscribers will get no cash.
Objectors called the settlement of “dubious value” because Sirius XM hadn’t ever said it would raise prices before year-end anyway. They objected to the $13 million in fees to be paid to the lawyers representing the class.
Sirius dropped 16 cents, or 8.5 percent, to $1.73 at 12:33 p.m. in Nasdaq Stock Market trading. The shares rose 16 percent this year before today. The company said it had 21 million subscribers as of June 30, 8 percent more than the previous year.
Commercial-Free Music
Sirius XM provides 135 channels of commercial-free music as well as talk shows featuring Howard Stern and Martha Stewart, which carry advertisements, and professional sports.
The basic monthly charge is $12.99. Sirius XM increased the rate a subscriber paid to get service on an additional radio to $8.99 a month from $6.99. The class also attacked a $2.99 charge for Internet access, which had been free. The music charge, assessed after new royalty rates with record companies were set, amounted to $1.98 a month.
The case is Blessing v. Sirius XM Radio, 1:09-cv-10035, U.S. District Court, Southern District of New York (Manhattan).