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Post date: October 31 2002

Justice Department And States Sue To Block Satellite Tv Merger

Attorney General Spitzer said today that New York State has joined the U.S. Justice Department and 22 other states in a lawsuit to block the proposed merger between the only two nationwide satellite television providers.

The antitrust case, filed in U.S. District Court in Washington, D.C., seeks to prevent EchoStar Communications Corp., which owns the DISH satellite business, from buying its only satellite-based competitor, DirecTV. The companies, which have a combined estimated 20 million subscribers, had argued that the proposed merger would make their operations more efficient. However, the Justice Department and the states contend that under the deal, most consumers would have their television programming options reduced to one satellite company and one cable company.

"DISH and DirecTV are the only real players in the satellite business," Spitzer said. "If the merger went through, millions of Americans who live in areas not served by cable would be dependent on a satellite monopoly."

Spitzer said he rejected the argument made by DISH and DirecTV officials that their companies did not compete with each other. He noted that both companies offer special packages of channels as well as discounts on services, installation and equipment, DISH and DirecTV compete to entice consumers to switch from cable, and to switch from one satellite service to the other. Without the competition of two satellite providers, the incentive to offer lower prices and better customer service would be reduced, Spitzer said.

On October 10, the Federal Communications Commission announced its decision preliminarily to deny the application of DISH and DirecTV for a broadcast license transfer. While that ruling also was based on concerns about reduced competition, it did not end the transaction and was separate from today's lawsuit, which seeks to bar the acquisition altogether under the federal Clayton Act. Both the federal antitrust authorities and the state attorneys general may challenge mergers where the transaction's effect "may be substantially to lessen competition, or tend to create a monopoly."

Echostar recently suggested fixing the anti-competitive consequences of the deal by offering to sell DISH satellite and spectrum assets to Cablevision, which has announced plans to launch its own broadcast satellite early next year. Spitzer said the federal and state antitrust enforcers' decision to sue does not stop the parties from continuing to explore and refine their effort to overcome the antitrust hurdles posed by the transaction, as reflected in the Cablevision option. He noted that many questions remain about the viability of the proposal, questions that may be answered in the near term.

The states joining the lawsuit are New York, Arkansas, California, Connecticut, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Massachusetts, Mississippi, Missouri, Montana, Nevada, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Vermont, Washington and Wisconsin, in addition to the District of Columbia and the Commonwealth of Puerto Rico.

The matter is being handled in Spitzer's office by Assistant Attorneys General Richard Grimm and James Yoon, and Director of Economics Hampton Finer of the AG's Antitrust Bureau, which is under the direction of Bureau Chief Jay L. Himes.