16 Oct 2017

Media merger saga goes to court

From Mediawatch, 12:00 am on 16 October 2017

New Zealand's two biggest publishers of news go to court today to try and overturn the competition watchdog's refusal to green-light a merger.

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Photo: RNZ

Fairfax Media and NZME declared themselves "surprised and disappointed" in May when the Commerce Commission rejected their proposed merger.

While the Commission concluded Fairfax Media - recently rebranded as Stuff - and NZME could save money and extend the life of some publications, it said one joint company would concentrate ownership of newspapers to an "unprecedented" extent.

It also said other major media outlets would not be able to compensate for the reduction in "plurality", or diversity of voices.

NZME owns the New Zealand Herald, Herald on Sunday, several North Island daily papers and several radio networks including Radio Sport, ZM and Newstalk ZB.

Fairfax Media New Zealand owns The Dominion PostThe PressThe Sunday Star Times, several magazines and the country's most-visited news website Stuff.co.nz.

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

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

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 said 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.

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.

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

Google, Facebook, competition for ad revenue

Fairfax and NZME also insist the Commerce Commission was wrong to characterise platform publishers - such as Google and Facebook - as mere distributors of news rather than direct competitors for revenue.

Their 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 granted confidentiality to third parties. They say these amount to "breaches of natural justice".

Since proposing the merger in 2015, Fairfax Media and NZME have stressed their financial positions makes the merger urgent. Many pundits predicted the cost of an appeal and the time it would take would dissuade them from pursuing one, but the companies lodged an appeal just a few days before the deadline.

The Commerce Commission considered the arguments in its draft determination last November, in subsequent submissions from Fairfax and NZME and at a special conference including both companies last December.

It is effectively asking the High Court to overturn the Commission's most significant conclusions and its interpretation of the Commerce Act.

Fairfax lawyer Sarah Keene 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.

Ten days have been set down for the hearings in the Wellington High Court.

David Goddard QC is representing both media companies.