Not long ago, market competition was seen in terms of functional product categories. Marketing textbooks told you that Barnes & Nobles competed with Borders (bookstores), Delta competed with United (airlines), and McDonald’s competed with Burger King (burger & fries). Many marketers persist in sprinkling these competitive sets onto their 1960s-era positioning maps.

But a huge shift has taken place in consumers’ choices and the fluidity with which they move between them. Nowadays, McDonald’s is as likely to compete with Starbucks for a diner’s time and dollar as with another burger joint (“Do I want a quick bite with fries? Or maybe a sandwich and latte?”). New York–to–DC commuters are not just picking between Delta and United, but considering the Acela train as well. And book lovers can skip the bookstore altogether for Amazon.com (or skip the book itself, opting for RSS, podcast, or a Kindle). Companies compete not in functional product categories, but within the contexts of consumer needs and experiences: a casual meal, a productive commute, a thoughtful read.

This was the argument put forward by Sirius satellite radio to the Dept. of Justice in its current bid to acquire XM, its sole competitor in the field of satellite radio.

From a traditional view of competition, this would be an open-and-closed case of free trade infringement. If Sirius buys XM, it will be the only satellite radio game in town. Zero competitors equals zero choice for consumers, and an anti-competitive monopoly, right?

But Sirius argued that its real competition is not XM, but all the other options consumers have for incorporating audio and media into their drive time: from hi-def radio, to mP3 players (my 2007 car came with a plug where my iPod fits right in), to cellphones and backseat DVDs.

Today, the DOJ announced that it had accepted Sirius’s argument and is greenlighting the acquisition (still to weigh in: the FCC). Anti-trust regulation is still vital to preserving competition, but for many areas of the market, the scope and dynamics of competition have expanded greatly. Watch out Stabucks: even McDonald’s is starting to offer lattes of its own.

-David Rogers