Monday the US Department of Justice approved the proposed merger/buyout of Sirius and XM Satellite Radio companies. The proposed merger is really a Sirius take over of XM, to the tune of $5 billion.

This proposal has been in the works since the beginning of last year. The Department of Justice Antitrust Division had to approve the merger before it could take place, in order to determine the effect it might have on consumers. The main concern being the creation of a monopoly with no competition. The DOJ determined that although the merger would create a situation in which only one satellite radio company would exist in the US market, there would be sufficient competition from other technology sectors to protect consumers.

After a careful and thorough review of the proposed transaction, the Division concluded that the evidence does not demonstrate that the proposed merger of XM and Sirius is likely to substantially lessen competition, and that the transaction therefore is not likely to harm consumers. The Division reached this conclusion because the evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers for several reasons, including: a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time; and efficiencies likely to flow from the transaction that could benefit consumers.

Further into its report, the DOJ gets specific about where this competition is coming from. When the report says “The Parties” it is referring to Sirius and XM.

The parties contended that they compete with a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (e.g., iPods®), and audio offerings delivered through wireless telephones. Those options, used individually or in combination, offer many consumers attributes of satellite radio service that they may find attractive. The parties further contended that these audio entertainment alternatives were sufficient to prevent the merged company from profitably raising prices to consumers in the retail channel.

And the DOJ agreed.

Interestingly, it seems the National Association of Broadcasters agrees as well, and they’re not happy about it. The LA Times is reporting that

The National Assn. of Broadcasters, which opposes the deal because it would improve satellite radio’s ability to compete with traditional radio for listeners, said it was “astonished” by the ruling.

DOJ approval isn’t the end of the process though. The deal must still be approved by the Federal Communications Commission (FCC). Analysts are quite certain that the FCC will approve the deal, they’ve never ruled in opposition to the DOJ previously, but FCC approval could possibly come with some stipulations and conditions.

…the agency could demand that the company follow through on a-la-carte pricing plans that Sirius and XM have already proposed.

That according to Alden Mahabir, an analyst at Utendahl Capital Partners, as reported by MarketWatch.com yesterday.

The problem lies in the fact that the FCC issued the two licenses in 1997, along with the stipulation prohibiting either company from owning both licenses. This was done to prevent a merger, and ensure “sufficient continuing competition.”

With the DOJ ruling that competition exists from other technologies, the FCC will likely overturn it’s original ruling and allow the merger to go forward, but that waits to be seen.

An FCC ruling is expected within the next few weeks.