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Fairfax exploits Canterbury market share to shut out local paper, Chch Star says

Thursday 21st July 2016

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Star Media, the Christchurch-based publisher of giveaway local newspapers, says Fairfax Media uses its community paper for predatory advertising pricing and shuts The Star out of advertising deals.

In its submission to the Commerce Commission critical of the proposed merger of Fairfax and NZME, Star Media says Fairfax is dominant in Canterbury and uses that position to undercut its competitor. 

Star publishes titles The Star, Nor'West News and Pegasus Post.

"Fairfax are aggressive in locking down advertising with special pricing that demands Star Media is excluded from any advertising schedules," the company said. "They exploit their market share and use predatory package pricing, selling The Mail (a Fairfax community title) well below cost to keep business from us. They also impose unwritten rules on advertisers that discourage them from advertising with us, or sometimes by openly including it in their agreements."

The submission included examples which were redacted from the public version. Star Media said while their examples merely touched the surface, "they do make clear that where there is a position of Fairfax dominance such as in Canterbury, the statement by the parties in their application that they will 'remain constrained ... by the strong countervailing power of advertisers' is wrong in fact and in practice."

Fairfax commands 86.4 percent of the newspaper advertising market in Canterbury with $43.5 million in revenue in 2014, Star Media said, while NZME took half of the radio advertising market, which had sales of $10.8 million that year. 

"The merged group will control 75.8 percent of this market, i.e., a very substantial increase on what is already a dominant market share," Star Media said. 

The submission was critical of Fairfax's and NZME's pivot to prioritising digital media over print and warned the merged company would fire hundreds of staff if the merger is allowed.

"NZME and Fairfax have made a choice to devalue their printed products and to pursue a digital first strategy," Star Media said. "The numbers show this clearly is not working for them, so it would appear they are resorting to an uncompetitive merger to make up for their own strategic errors."

The companies want to stop printing newspapers to cut staff costs, the submission said, and would raise subscription prices and implement a paywall for premium content if the merger goes ahead, following the National Business Review's success. 

The commission is considering, among other issues, how to regard the interplay between the print and online advertising markets.

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