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NZME, Fairfax NZ merger in trouble in ComCom draft decision

Tuesday 8th November 2016

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The Commerce Commission's draft view is that it should reject a merger of NZME and Fairfax New Zealand, which it says would "result in an unprecedented level of media concentration for a well-established liberal democracy" with the potential loss of multiple media voices a major part of the decision. 

The competition regulator's preliminary view is that the merger of the country's two biggest newspaper and online publishers would substantially lessen competition in a number of markets, including premium digital advertising, Sunday newspaper advertising, and community newspaper advertising, it said in a statement. The commission also expects the merged entity would raise subscription and retail prices for Sunday papers and introduce a paywall for at least one of its websites. 

Chairman Mark Berry said the company would own about 90 percent of the country's print media, which would "the second highest level of print media ownership in the world, behind only China", while its online audience would be more than four times larger than the next largest rival. On top of that, it would own one of the country's two largest commercial radio networks, all of which "would result in an unprecedented level of media concentration for a well-established liberal democracy." 

The regulator's draft view is that competition wouldn't be enough to constrain the organisation, with potential for one editorial view, and that removing the existing competitive tension would undermine the country's news content both online and in print, which could potentially flow on into television and radio. 

"We recognise that the merger would achieve net financial benefits through organisational efficiencies. However, while we cannot quantify the detriments we see with respect to quality and plurality of the media, we consider that detriments resulting from increased concentration of media ownership in New Zealand would outweigh the quantified benefit we have calculated," Berry said. "In particular, the potential loss of plurality has weighed heavily in our draft decision." 

High levels of indebtedness put the Australasian media companies in precarious positions over the past decade, forcing them to sell assets and cut the size of their newsrooms in an effort to shore up their balance sheets. The proposed merger of Fairfax and NZME's assets is seen as a way they could start competing online where the likes of Google and Facebook dominate advertising revenue. 

The publishers have talked down the proposition put forward by broadcasters Television New Zealand and MediaWorks that a merged entity would have market power in the national ad market, calling such a claim "demonstrably false" with online giants Google and Facebook a "significant competitive constraint".

The companies are seeking Commerce Commission authorisation for the deal, a higher threshold to cross than a clearance in that it claims an anti-competitive transaction can drive enough public benefit to outweigh any reduction in competition. The regulator had already delayed its final decision until March next year, saying the deal was complex and it needed more time to assess the impact on both news content and the advertising market.

The commission is seeking submissions on its draft determination, which are due by Nov. 22, and may hold a conference to discuss the merger, with one currently scheduled for Dec. 6-8.

BusinessDesk.co.nz

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