US states sue EchoStar-Hughes deal

WASHINGTON: U.S. antitrust enforcers have gone to court to block EchoStar Communications Corp.'s proposed purchase of Hughes Electronics Corp. dismissing a last-ditch offer by the satellite TV companies aimed at winning approval of the deal.

The U.S. Justice Department and 23 states filed suit in federal court against the $19.5 billion merger saying it would harm consumers in the pay television market.

"This merger would give EchoStar control of the skies for the provision of video programming by satellite, leaving customers to suffer from the resulting reduction in competition," Charles James, head of the department's Antitrust Division, said in a prepared statement.

The decision comes three days after attorneys for EchoStar and Hughes made a last-ditch effort to win over the department by offering concessions in a meeting with James. To placate competition concerns, the companies had offered to sell some of their satellite capacity to entertainment conglomerate and seventh-largest cable television operator, Cablevision Systems Corp.

But attorneys at the antitrust division concluded that Cablevision's satellite service "was unlikely to become a sufficient replacement for the vigorous competition that now exists between Hughes and Echostar within a reasonable period of time."

Hughes and its parent, General Motors Corp., said they were disappointed with the Justice Department and FCC positions. "We will consult with Echostar to jointly determine our next steps," they said in a joint statement. EchoStar's acquisition of Hughes would reduce the number of pay-television competitors in most U.S. markets, including satellite and cable, from three to two. In rural areas with no access to cable television, the deal would create a monopoly.

© Reuters