Aug. 8 (Bloomberg) -- A federal judge heard objections to the settlement of a lawsuit by Sirius XM Radio Inc. subscribers who claimed the satellite radio broadcaster broke the law when it raised prices after merging with its only rival.
U.S. District Judge Harold Baer in Manhattan made no decision today on approving the accord after subscribers argued at a hearing that the agreement gives them too little and the lawyers too much.
Subscriber Carl Blessing of Florida sued Sirius XM in 2009, claiming it violated federal antitrust and state consumer-protection laws when it raised prices and levied a music royalty fee after Sirius Satellite Radio and XM Satellite Radio completed their merger in 2008. Blessing said in his complaint his monthly rate jumped 40 percent to $27.88 after the merger.
“I rely on satellite radio every day for weather and news,” Marguerite Willis, a subscriber from South Carolina who commutes 180 miles a day for work, told the judge. “I have no alternative. Combining Sirius and XM created a firm with monopoly power in rural South Carolina.”
The subscribers said New York-based Sirius XM broke promises it made to win approval of the merger from the U.S. Federal Communications Commission and Justice Department. Sirius XM said the increases were imposed to cover higher costs.
Baer in March let the federal antitrust claim proceed as a class-action, or group, lawsuit, on behalf of Sirius XM subscribers. He denied class-action status on the state-law claims.
The class and Sirius XM reached a pretrial settlement, and Baer gave preliminary approval to the agreement in May.
“The settlement is appropriately scaled to the scope of the case,” John Marjoras, a lawyer representing Sirius, told the judge today. “There were hard-fought negotiations. We fully expected to go to trial.”
The accord, valued at $180 million, provides that prices for basic service and Internet access, as well as the music royalty fee, will remain at current levels through the end of the year. Subscribers who canceled can reconnect without paying a fee. Those whose plans expire after Dec. 31 can renew before that time at current rates. Subscribers will get no cash.
“The expectation was that the price would increase $2 a month” after a cap imposed by the FCC expired in July, Joseph Sabella, a lawyer representing the class, told the judge. He said there were 67 objections to the settlement out of 15 million class members.
Objectors argued that Sirius XM never said it would raise prices before year-end. Some objected to language in the accord that would release Sirius from further claims. They also objected to the $13 million Sirius would pay for fees and expenses to the lawyers representing the class.
Sabella said “$13 million, considering the value conveyed on the class, is certainly justified.” He added that if the judge reduced the fees, the money would go back to Sirius, not the class members.
Sirius dropped 24 cents, or 12.7 percent, to $1.65 at 4:30 p.m. New York time in Nasdaq Stock Market trading. The shares have risen 1.2 percent this year. The company said it had 21 million subscribers as of June 30, 8 percent more than the previous year.
Sirius XM provides 135 channels of commercial-free music as well as talk shows featuring Howard Stern and Martha Stewart, which carry advertisements, and professional sports.
The basic monthly charge is $12.99. In 2009, Sirius XM increased the rate a subscriber paid to get service on an additional radio to $8.99 a month from $6.99. The class also complained about a $2.99 charge for Internet access, which had been free. The music charge, assessed after new royalty rates with record companies were set, amounted to $1.98 a month.
The case is Blessing v. Sirius XM Radio, 1:09-cv-10035, U.S. District Court, Southern District of New York (Manhattan).
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