Mergers of Companies

Any mergers of companies are approved by the Department of Justice. Without the approval or without the committee or federal government organization, a bigger company could make bad use of mergers in order to increase its market share and control pricing which could harm consumers. Department of Justice therefore checks its possible outcome to consumers and economic effects of the merger when it decides to approve or not to.

In case of merger of Echostar and DirecTV, the Department of Justice should approve the merger for the following reasons.

People who might argue that the merger should not be approved as the merger is between two biggest leading companies in DBS industry, and the merger could bring less competiveness in the market and therefore would raise the price with lower outputs for consumers . However, it is critical for us to think whether DBS industry is competing only within its players. According to Robert D. Willing, professor of Economics and Public Affairs at the Woodrow Wilson School and the Economics Department of Princeton University, it makes better sense not to limit the market within in the DBS industry. Companies such as Echostar and DirecTV considers cable providers as their greatest competitors and worries theses provider’s price when calculating pricing. According to the definition of U.S Department of Justice and Federal Trade Commission’s market and market players, these merger should be seen as a merger between companies who does not

have significant market share (around 20%) in MVPD industry.

As the cable providers have more than 70% of the market share in MVPD market, the merger between DirecTV and Echostar can be a threat to the providers, induce these providers for lower price which could benefit consumers, offer substantial efficiency improvements in radio spectrum use and distinct benefit to rural TV households. Most importantly,