The WSJ had a wonderful Reply-All (think a techy version of Econoblog) yesterday on the subject of whether the XM-Sirius merger would be good for consumers. Mark Cooper, a consumer advocate, said no; Donald Russell, a former DoJ lawyer, said yes. If you want to see a really strong debate on both sides, go check it out.
Before I read the debate, I was on Russell’s side, but Cooper is very persuasive. And as I was reading it, another thought occurred to me. Russell makes a big deal of the fact that XM and Sirius are both losing money, and that consumers would benefit from the lower costs of a merged company.
But what happens if the companies don’t merge, and continue to lose money? Eventually, presumably, some kind of bankruptcy or restructuring, which would allow the company concerned to get out from under its enormous debt burden, not to mention the huge contracts they’ve been signing with the likes of Howard Stern and Oprah Winfrey. Presto — a competitive company again, without having to go through an illegal merger!
I’m reminded of federal bailouts of US airlines, such as the one following 9/11. It’s not the job of the government to save companies who have racked up too much debt, either by bailing them out with cash or by allowing them to merge and create a monopoly. Why not let bankruptcy work its magic?