16 Oct 2017

ComCom failed to consider online media - lawyer

6:51 pm on 16 October 2017

A Commerce Commission ban on a large scale media merger was the target of a high intensity challenge at the High Court in Wellington today.

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Photo: RNZ

If approved, the merger would create a gigantic media company comprising the New Zealand Herald, Dominion Post, The Press of Christchurch, Newstalk ZB and many other radio stations and provincial and weekly newspapers.

The commission has already banned that merger, which would incorporate NZME and Fairfax, now re-branded as Stuff, because it would centralise too much media power.

But those companies turned up with a five-strong legal team at the High Court, saying they had to combine to survive, and the commission veto should be overturned.

There were another five lawyers defending the Commerce Commission side, and even a professor of economics from Australia, seated alongside the judge, ready to provide technical advice.

It will take at least three days for NZME's lawyers to even complete their first submission, and two weeks in total for the case.

But the lead lawyer, David Goddard QC, wasted no time in getting started, saying established media was under attack from the internet, and had to move fast to counter that threat.

"The appellants do not have the luxury of waiting until there is a crisis and then responding," he said.

"They need to address it now."

And Mr Goddard went on to produce a colourful metaphor for what needed to be done.

"A pole vaulter has a much better chance of clearing the bar if they take a run-up rather than standing beneath it and attempting to leap."

In banning the merger proposal last May, the commission said the outcome would be an unprecedented concentration of newspapers in New Zealand, risking harm to democracy and to the New Zealand public.

But Mr Goddard told the court there were many other sources of information besides the merged venture - and he cited RNZ and TVNZ to prove there would still be many voices in the media.

He said the commission made its decision on a snapshot taken at the time of the application - when what was needed was a moving picture of a fast changing industry.

And he cited the United States President as an example of how the internet is undermining traditional media.

"I don't often find myself quoting President Trump," he said.

"But he said recently that having a Twitter feed was like owning the New York Times but without the losses."

Arguing further, Mr Goddard said Google and Facebook were claiming the lion's share of online advertising.

This caused constraints on the quality of existing media, because bills and wages in the industry still had to be paid, but advertising money was not coming in to meet it.

And he cited figures to reveal the extent of the problem.

"As a result of the move online, print is no longer the main source that people turn to for information," he said.

"In any given week, 54 percent of consumers' news content is derived from online sources, 21 percent from TV and 13 percent from traditional newspapers."

Despite that, it was still possible to attract advertisers to newspapers if their content made people want to read them - but that required steps to make sure the financial model for papers was workable.

This merger would help achieve that, and Mr Goddard cited the value of commercial gains from the deal at between $40 million and $200 million.

Finally, Mr Goddard scotched any idea that a merged company would make people pay if they want to read its content, saying the idea of a paywall for the New Zealand Herald had been rejected by managers because it would lose more money than it gained.

Mr Goddard's submissions are expected to be followed by counter submissions from Jim Farmer QC for the commission later in the week.

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