Commission proposes to decline NZME/Fairfax merger

Media Release

Issued 8 November 2016
Release No. 49

Commission proposes to decline NZME/Fairfax merger

The Commerce Commission has today published its draft determination on NZME and Fairfax’s application under the Commerce Act seeking authorisation to merge their media operations in New Zealand. The Commission’s preliminary view is that it should decline to authorise the merger.

The proposed merger would bring together New Zealand’s two largest newspaper networks and two largest news websites. The Commission has assessed the impact of the merger on competition in both advertising and reader markets for a number of media platforms as well as the overall impact on quality and plurality (diversity of voices).

The Commission’s preliminary view is that the merger would be likely to substantially lessen competition in a number of markets, including the markets for premium digital advertising, advertising in Sundaynewspapers and advertising in community newspapers in 10 regions throughout New Zealand. It also considers the merged entity would be likely to increase subscription and retail prices for Sundaynewspapers and introduce a paywall for at least one of its websites.

Chairman Dr Mark Berry said the merger would result in one media outlet controlling nearly 90% of New Zealand’s print media market. This would be the second highest level of print media ownership in the world, behind only China. The merged entity would also control New Zealand’s two largest news websites – nzherald.co.nz and stuff.co.nz – which together have a population reach more than four times larger than the next biggest domestic news website. Further, the merged entity would own one of New Zealand’s two largest commercial radio companies. All this would result in an unprecedented level of media concentration for a well-established liberal democracy.

“Our preliminary view is that competition would not be sufficiently robust to constrain a multi-media organisation, potentially with a single editorial voice, that would be the largest producer of national, regional and local news by some margin in New Zealand,” Dr Berry said.

“NZME and Fairfax each play a substantial role in influencing New Zealand’s news agenda. Competition between the parties drives content creation, increases the volume and variety of news available in New Zealand and assists with objectivity and accuracy in reporting. Our view is that the removal of this competitive tension would likely lead to a reduction in the quality and quantity of New Zealand news content both online and in print, with potential flow-on effects in 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. In particular, the potential loss of plurality has weighed heavily in our draft decision. On this basis, we propose to decline the application.”

As this remains a live process, the Commission cannot comment further at this time.

A public version of the draft determination is available on the Commission’s website.

The Commission is seeking submissions on its draft determination by the close of business on Tuesday 22 November 2016.

Please send submissions to registrar@comcom.govt.nz with the reference Fairfax/NZME in the subject line of your email or to PO Box 2351, Wellington 6140. Submissions will be posted on the Commission's website. If your submission contains confidential information please also provide us with a public version.

Under the Commerce Act, the Commission may determine to hold a conference prior to making a final determination. We have currently scheduled a conference in respect of this matter for three days in Wellington: Tuesday 6 - Thursday 8 December 2016. Further information and venue details will be posted on our website shortly.

Background
Authorisation applications follow a two-step process under the Commerce Act. The Commission must first assess whether the merger would be likely to substantially lessen competition in a market.

We assess whether a merger is likely to substantially lessen competition in a market by comparing the likely state of competition if the merger proceeds, with the likely state of competition if it does not. If we are satisfied that the merger is not likely to substantially lessen competition, then we would clear the merger at the first step.

If we cannot give clearance due to competition concerns, the second step is to determine whether the merger should be authorised applying the public benefit test. The public benefit test involves a balancing of the public benefits and detriments that would, or would be likely to, result from the merger. We must authorise a merger if we are satisfied that the merger will result in such a benefit to the public that it should be permitted.

The Commission can only accept structural undertakings, such as the divestment of assets, from parties to resolve competition concerns in a market. We cannot accept behavioural undertakings – where the parties agree they would or would not make specific business decisions post-merger in order to gain approval.

Our Authorisation Guidelines provide further detail on the process we use to determine authorisation applications.

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