Some legal cases never die.
A class-action complaint that was originally filed against Sirius XM Radio
The certified case that lives on involves three price hikes that the satellite radio provider introduced shortly after the merger between Sirius and XM.
- Sirius XM began charging $8.99 a month -- a $2 increase -- to activate additional receivers under the same primary account in March 2009.
- Sirius XM also improved the quality of its Web-based streaming at the time, charging an additional $2.99 a month for access. The original lo-fi streams used to be included with monthly receiver plans.
- A few months later, most accounts began paying an extra $1.98 a month to cover higher music royalties going out to record labels, musicians, and publishers.
The hikes weren't insignificant. A subscriber paying $12.95 a month would now be paying for a pair of activated receivers would now be paying 38% more with the music royalty fee and streaming access. Then again, no one was forcing them to pay up.
Subscriptions dipped during the first two quarters of 2009, but it's hard to pinpoint how much of that was a backlash to the rate increases. The country was clawing its way out of the recession, and new car sales were slumping.
Sirius XM bounced back after the lull, posting sequential subscriber growth in the six subsequent quarters.
The satellite radio giant isn't violating the terms of its merger that called for at least a three-year freeze in primary rates, though this lingering case may lead to regulators thinking twice about giving Sirius XM open pricing access as we approach the deal's third anniversary this summer.
In Sirius XM's defense, the case that was allowed to proceed essentially alleges monopolistic abuse. It's won this argument before. Sirius XM wouldn't even be here as a combined entity if it had fallen short on that front. It should have an easier time to clear antitrust hurdles now given the wider proliferation of smartphones and dashboard connectivity.
Thanks to Bluetooth, USB ports, and audio jacks in many new cars, it's no longer a choice between terrestrial and satellite for fresh programming. It's not just about Pandora and Slacker for music or Stitcher for talk. Terrestrial radio is stronger than it used to be now that stations are no longer limited to local transmitter towers. Clear Channel (OTC BB: CCMO.PK), CBS
Sirius XM may have cornered the market when it comes to satellite radio, but the class-action suit is going to have an uphill battle on the antitrust allegations.
Do you think Sirius XM will prevail in this case? Share your thoughts in the comment box below.
Longtime Fool contributor Rick Munarriz is a subscriber to both Sirius and XM. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.