26 May 2017

Media merger moves to court

From Mediawatch, 11:21 am on 26 May 2017

Why are media companies Fairfax Media and NZME challenging their merger knockback in court?

no caption

Photo: RNZ

The two biggest publishers of news in New Zealand declared themselves "surprised and disappointed" earlier this month when the competition watchdog decided not to green-light their proposed merger. 

All along, the companies also stressed their financial positions made the merger urgent, so pundits predicted the cost of an appeal and the time it would take would dissuade Fairfax and NZME from pursuing one.  

But just a few days to before the deadline for an appeal, Fairfax and NZME have decided to challenge the decision in the High Court.

The Commerce Commission said on 2 May one joint company would concentrate ownership of newspapers to an "unprecedented" extent.

While the Commission concluded the companies could save big money and extend the lifespan of some newspapers, it also said other major media outlets - such as RNZ, TVNZ and Mediaworks - would not be able to compensate for the reduction in "plurality" because it would diminish the diversity of coverage available to New Zealanders.

Fairfax and NZME believe the Commerce Commission gave too much weight to "plurality," which was referenced more than 300 times in the Commerce Commission's decision document earlier this month. 


It certainly irritated NZME boss Michael Boggs, who pointed out there seemed to be a plurality of news media outlets pointing cameras at the Commission's chair Dr Mark Berry when he announced the thumbs-down for the merger on May 2.

The companies argued (PDF) any loss of plurality should not be considered to be a detrimental effect, and in any case, The Commerce Act 1986 did not give the Commission scope to determine the extent of it.

Putting it in writing

Fairfax New Zealand and NZME say the commission made "errors of fact and law."

In their notice of appeal filed with the High Court, the companies also say the Commerce Commission was wrong to conclude there were separate markets for online news, Sunday newspapers and community newspapers - and that competition would be substantially reduced.


The Notice of Appeal filed to the High Court by Fairfax and NZME.

The Notice of Appeal filed to the High Court by Fairfax and NZME. Photo: screenshot


They say the Commission failed to give sufficient weight to "the number, variety and nature" of small and large outlets providing news to New Zealanders - including the National Business Review, Otago Daily Times, and Bauer Media which owns the bulk of New Zealand's magazines.


It also cited small online operators like Scoop Media, The Spinoff, Newsroom, the Ashburton Guardian and Tauranga-based SunMedia Limited, which recently launched Newsie, a website aggregating local news from independent newspapers around the country. 


The Notice of Appeal also points out that agencies such as Business Desk, and Australian news agency AAP also offer news on a syndicated basis to clients.


"Bloggers, businesses, government entities, local and national politicians and other individuals and entities all provide news and commentary online," the companies say.


Fairfax and NZME also insist the Commerce Commission was wrong to characterise platform publishers - such as Google and Facebook - as merely distributors news and not direct competitors for revenue.


The notice of appeal says New Zealanders get a growing proportion of news on those platforms which are also "taking the large majority of the total online advertising revenue".


The companies also argue the decision process was unfair because the Commission considered anonymous submissions and confidentiality to third parties. They say these amount to "breaches of natural justice."


Chances of success?


The Commerce Commission considered all these arguments in its draft determination last November, in subsequent submissions from Fairfax and NZME and at a special conference including both parties last December. It is effectively asking the High Court to overturn almost all of the Commission's significant conclusions and interpretation of the Commerce Act.


On Twitter, former NZME chief editor Tim Murphy - and now co-editor of rival publisher Newsroom - was dismissive:



Plurality was first flagged as a stumbling block in a draft determination last November. 


Back then, lawyer Sarah Keene  - a partner for Russell McVeagh representing Fairfax  - argued plurality was not the Commerce Commission's business.


The 1975 Commerce Act had a public interest test which was applied in consideration of media mergers, she said, but the current Commerce Act passed in 1986 effectively revoked that.

"We say [protecting plurality] is the role of the government. Ultimately, the government can look at a range of behaviour in the market to figure out whether plurality is protected, including editorial charters . . . and New Zealand On Air funding," said Sarah Keene.

Andy Glenie, competition law specialist at the Anderson Creagh Lai firm, says the issue of plurality and the Commerce Act is key.


"There is good case law suggesting the Commission can take (plurality) into account and should. But if the appellants are able to tip over that part of the calculation it will be hard for the High Court not to overturn the Commission's decision," he said.

The case is unlikely to be heard until late this year and a decision could take more than a year.


"It's not going to happen soon. It's not going to be easy. Watch this space," says Andy Glenie.


The media industry, and the overseas bidders currently lining up to by Fairfax Media in Australia, will certainly have their eyes on it.