Class Action Suit Settlement to Extend Sirius XM Rate Cap
Sirius XM will keep its subscription rate at $12.95 per month through the end of the year as part of a class action suit settlement, the company said in an SEC filing on Monday. The lawsuit had accused Sirius XM of violating antitrust law. The settlement, which awaits the approval of the U.S. District Court in Manhattan, coincides with the FCC’s ongoing review of the rate freeze, which was an FCC condition of approving the combining Sirius and XM. The FCC is in the process of deciding if it should let the cap expire as planned on July 28. The settlement agreement was reached Thursday, according to the filing.
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Sirius XM didn’t admit to any wrongdoing through the settlement, it said. “Despite our belief that the claims asserted by the plaintiffs were untrue, we entered into this agreement because we believe it was in the best interest of our stockholders to avoid further legal expense and inconvenience and eliminate the distraction of this protracted litigation,” the company said. Sirius XM also agreed to pay up to $13 million in legal costs and not to raise its music royalty fee or decrease its multiradio discount, it said. Sirius XM didn’t return a request for comment.
Carl Blessing, a Sirius XM subscriber, filed the suit last year, eventually receiving class-action status, in the U.S. District Court for the Southern District of New York said Sirius XM had violated antitrust law by raising some of its prices. The basis for the claims were that Sirius XM raised several fees that likely would not have been raised had the two companies not merged, such as multi-subscription costs. The suit also alleged that Sirius XM had used an inaccurate figure for its royalty payment fee and was charging too much.
The settlement isn’t expected to change the FCC’s path on rate cap, said an industry executive. If anything, it could make relaxation of the rate cap easier since the rates wouldn’t change even after the expiration, the executive said. The agency was expected to let the rate cap expire even before the settlement was announced. Analysts from Stifel Nicolaus had a similar take in a research note to investors. While a rate extension wasn’t expected, “the FCC might have concerns about the optics if Sirius were to jack up the rates immediately following their expiration,” the analysts said. “Consequently, we believe the Sirius commitment not to raise its rates through the end of the year could provide some comfort to the FCC, albeit for only a little more than five months.”
Lawyers for the plaintiffs previously filed in the Sirius XM rate proceeding in docket 07-57, saying they intended to give the Media Bureau some documents gained through discovery related to the Blessing case that would help the agency make its decision. The plaintiffs’ lawyers ended up not providing the documents “out of an abundance of caution as it relates to compliance with the Blessing Court’s protective order, and in recognition of Sirius XM’s position that such documents may not be “shared” (even if they become matters of public record),” a later filing said.