The deal is also being examined by the Federal Communications Commission, which is expected to follow Justice's lead. The deal would combine the only two providers of satellite radio in the United States.

The XM-Sirius combination has been closely followed by the U.S. auto industry because nearly every automaker has an exclusive contract with one or the other satellite radio firms. A few automakers have contracts with both.

The deal, announced in February 2007, would combine the only two providers of satellite radio in the United States.

"After a careful and thorough review of the proposed transaction, the (antitrust) division concluded 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 department said in a statement.

The traditional radio industry, consumer groups and some U.S. lawmakers had criticized the deal as anticompetitive, but the satellite radio companies argued that they faced competition from traditional radio and personal audio players.

Further emergence of high-definition (HD) radio programming could represent a competitive threat to the combined Sirius-XM alliance.