NZME/Fairfax appeal merger rejection, choose QC from precedent case

Friday 26th May 2017

NZME and Fairfax New Zealand have hired the Queens Counsel whose Court of Appeal arguments helped secure the Commerce Commission's authorisation of competition-killing merger in the wool-scouring sector which the commission then used to justify rejecting the media merger.

The media companies have hired Queens Counsel David Goddard to appeal the commission's rejection of their planned merger, hoping his pedigree in the Cavalier wool-scouring authorisation will win the backing of the courts.

The media companies will today file papers in the High Court claiming the regulator was wrong in fact and in law in rejecting their planned merger on the grounds that the estimated financial benefit creating larger, merged entity to combat global competitors for advertising revenue, such as Google and Facebook, wasn't enough to outweigh the detriments of reduced media 'plurality', meaning the range of voices and views in New Zealand news reporting.

An appeal was required by May 30 on the May 3 commission decision.

David Goddard QC has joined Russel McVeagh in representing the media companies in their application, having successfully seen off opposition to the Commerce Commission's authorisation to create a national wool scouring monopoly. The media groups cited the long-running case extensively in their application to the regulator, which also drew on the ruling in its decision to reject the merger.

The media companies claim the regulator erred in law by concluding there were separate markets in online domestic news services, Sunday newspapers and community newspapers, and that there would be a substantial lessening of competition in those markets. They also claim the regulator failed to compare the deal against a likely counterfactual and didn't give enough weight to their submission, and were wrong to expect that a paywall would likely be introduced post-merger and in its quantification of detriments from the deal.

NZME and Fairfax NZ say the commission wasn't allowed to take plurality into account in rejecting their application, and that even if it could, it gave the issue too much weight.

The firms are also appealing on the grounds that the decision was procedurally unfair by granting anonymity to many submissions opposing the application and breached natural justice by not telling NZME and Fairfax in a timely manner how it would assess the deal against a likely counterfactual.

The regulator rejected the application earlier this month, saying "the merged entity’s competitors would not be able to constrain it in any real way from making cost-cutting decisions that reduce quality and plurality" and that it didn't "regard promises to maintain current levels as a sufficient safeguard on future editorial decisions".

The commission had already rejected the merger in a draft determination in December, prompting Fairfax and NZME to work overtime to try to convince the regulator it had got it wrong in their draft determination to reject the deal over fears their aggregated soft power wasn't worth the economic efficiencies from laying off staff, cutting duplication, and pooling their resources in a more targeted fashion.

(BusinessDesk)

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