The Commerce Commission has declined the application from Fairfax and NZME to merge.
Following the release of the final decision today, the applicants now have 20 working days to decide whether to file an appeal with the High Court.
Mark Berry, chairman of the Commerce Commission, says that the Commission recognises NZME and Fairfax face a challenging commercial environment as they seek to transition from their traditional print products to a sustainable online model. However, the Commission disagreed with some of the scenarios they put forward about their respective futures without the merger.
He says, “Following our draft determination the applicants significantly altered their submission on what the state of the market would look like without the merger. The details of those submissions are confidential; however, we do not consider the scenarios presented to be likely outcomes. In our view, without the merger NZME and Fairfax will be increasingly focused on their online businesses as their print products diminish in number and comprehensiveness over time.
“We accept there is a real chance the merger could extend the lifespan of some newspapers and lead to significant cost savings anywhere between $40 million to around $200 million over five years. However, these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed.”
The merged entity would have direct control of the largest network of journalists in the country, employing more editorial staff than the next three largest mainstream media organisations combined. Its news media business would include nearly 90 per cent of the daily newspaper circulation in New Zealand and a majority of traffic to online sources of New Zealand news. Including its radio network, the merged entity would have a monthly reach of 3.7 million New Zealanders.
“This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy. The news audience reach that the applicants have provide the merged entity with the scope to control a large share of the news consumed by a majority of New Zealanders. This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand’s democracy and to the New Zealand public,” Dr Berry said.
“Having reviewed all the evidence, our primary concerns remain that this merger would be likely to reduce both the quality of news produced and the diversity of voices (plurality) available for New Zealanders to consume. Competition between NZME and Fairfax leads them to produce higher quality content than would otherwise exist with the merger. This competition incentivises investment in editorial resources, motivates journalists and editors in their day-to-day work and acts as a safeguard to plurality.
“In our view, 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. The extent of internal plurality is also discretionary on the part of the media owner and we do not regard promises to maintain current levels as a sufficient safeguard on future editorial decisions.
“While we cannot weigh in dollar terms the net benefits against the detrimental societal impacts we expect to see, in our assessment this is not a finely balanced decision. We decline to grant authorisation.”
Michael Boggs, chief executive at NZME, says, “We will be carefully reviewing the NZCC’s full written decision and over the next few weeks we will be considering our options.”
He says NZME’s strategic focus continued in six key areas: growing audience reach, retaining print revenue, returning radio revenue to growth, growing new revenue streams, ensuring effective cost management and developing people and talent. He says, “We have progressed a number of initiatives aligned with these priorities including implementation of the Washington Post Arc content management system, launch of the Salesforce singular CRM system, progressing the redesigned nzherald.co.nz site, and the nationwide launch of the new The Hits radio breakfast shows.”
NZME owns the NZ Herald, Herald on Sunday, nzherald.co.nz website, a range of regional newspapers, Newstalk ZB and entertainment radio stations. Fairfax owns stuff.co.nz, the Sunday Star-Times and other metropolitan and regional newspapers. NZME employs around 1800 fulltime staff and Fairfax about 1500.