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Sirius XM Radio to Face Antitrust Claims at Trial

MANHATTAN (CN) - Sirius XM Radio, the nation's largest satellite radio provider, will face an antitrust class action claim that it runs a monopoly to the tune of $89 million a year through small increases in fees and services.

U.S. District Judge Harold Baer certified the class action and dismissed the radio stations' arguments to dodge the antitrust action as "creative" on Tuesday.

Before merging with its only competitor XM, Sirius promised the Federal Communications Commission in 2007 that "no satellite radio subscriber will have to pay more as a result of the merger," the class claims.

In his December 2009 complaint, named plaintiff Carl Blessing said that Sirius broke this promise within six months of the 2008 merger, increasing its multiradio subscription price by 30 percent and instituting new Internet access charges.

"In spite of the FCC's attempts to forestall the inevitable impact of combining the only two companies in the market, the merged entity has already exhibited anti-competitive behavior that has harmed consumers," Blessing claimed.

One of the new, post-merger charges at issue was Sirius XM's U.S. Music Royalty Fee (MRF), which the class claimed was a misleading tactic to make revenue.

Judge Baer tossed parts of the class action related to consumer-protection claims, saying that that he was not convinced in a 10-page order filed on March 29.

"Plaintiffs fail to show that the MRF recovers monies beyond Sirius XM's increased royalty costs," Baer wrote. "Indeed it is reasonable to conclude that, consistent with the MRF explanation, if more customers meant more royalty costs, those royalty costs would be passed along."

Even if Sirius sought to profit from the royalty fees, Baer added that it would be unreasonable to suggest that the company violated its consumers' rights.

"Even if some plaintiffs would have 'threatened to cancel' their subscriptions had they been aware of the way the MRF was calculated, nothing suggests that such a course would be the choice of the reasonable consumer," Baer wrote.

"Courts have recognized that ordinary consumers make purchasing decisions based on the price they must pay and the value they expect to receive - not on what the seller does with the money it receives," he added.

Sirius XM was less successful in convincing the judge that it had immunity as a FCC-regulated entity.

Baer wrote the argument falls flat because Sirius is, in fact, unregulated.

"Unfortunately for Sirius XM, it is unable to show that it is a 'regulated entity' subject to the FCC's rate-making authority," Baer wrote. "Sirius XM does not argue that it is a common carrier; it claims it is nonetheless subject to FCC authority because the FCC approved the MRF. This argument, while creative, misses the point because the FCC did not in fact approve the MRF."

The judge added that the radio station's own position on the matter has been inconsistent.

"Strange as it may seem, Sirius XM has itself taken the position that the FCC has no rate-making authority over its rates," Baer wrote.

The class action will go to trial in May.

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