ComCom way outside its remit in NZME/Fairfax merger rejection, say submissions

The Commerce Commission has strayed far beyond its governing legislation by making what amount to "social policy" judgments in its draft rejection of the proposed merger between New Zealand's two largest news publishers, NZME and Fairfax New Zealand, say submissions in response to the rejection.

In a joint submission on the shock draft determination to turn down the merger, NZME and Fairfax say the commission's concern about 'media plurality' - the desirability of a range of differing viewpoints in news media coverage - is not permitted under the Commerce Act, which requires decisions based on economic efficiency and outcomes most likely to promote economic growth.

"Media plurality and independence are matters well beyond the scope of the competition focus of the Commerce Act and the commission's functions," says the joint legal submission from NZME/Fairfax, which cites an explicit change to the Act in 1986 that removed the ability to consider the potential for news company mergers to have an impact on public opinion or media diversity.

In a separate submission, an Auckland Law School faculty member, An Hertogen, says the commission's draft decision is unprecedented for allowing unquantifiable detriments to outweigh quantifiable economic benefits that would flow from the merged entity having a better chance of commercial survival in the current, disrupted environment for news media.

"I have not found an example in existing case law where non-quantifiable detriments were used, let alone to override a net quantified benefit as is proposed in the draft determination," she said, citing previous cases in which the courts have urged the commission not to "rely on intuitive judgment to justify a conclusion that detriments in fact exceed quantified benefits".

Fairfax and NZME argue their biggest competitors are global content aggregators and social media platforms, such as Google and Facebook, and that the quantifiable benefit of the merger is to give them scale by merging to compete and continue funding the production of New Zealand news, which their international competitors don't do.

The publishers say "the (Commerce Act) does not enable the commission to consider any factor it considers to be a detriment and take it into account".

"Otherwise, it could equally consider environmental effects, employment effects and other wide ranging issues, which are acknowledged to be outside the categories of detriments appropriately considered under the commission's efficiency-focused mandate."

The concerns over media plurality "do not amount to relevant factors in the commission's analysis".

The publishers, backed by numerous personal submissions from senior executives at both companies, also argue that media plurality is more likely to be preserved by allowing a merger.

The joint submission stresses that even the creation of a monopoly is not contrary to competition law it allowing would "support economic growth by ensuring the maximum efficiency in use of resources".

Hertogen says that "forcing competition law bear the burden of protecting media plurality, in this case by the unprecedented move of refusing authorisation based on non-quantifiable information, may be too much for competition law to bear, no matter how laudable the goal of ensuring media plurality in a democratic society, assuming that ownership safeguards can indeed safeguard plurality".

(BusinessDesk)