ComCom went outside its role in rejecting StuffMe merger, court hears

The Commerce Commission overreached its statutory mandate when it rejected a possible merger between New Zealand's two largest print media companies, Wellington's High Court has heard.

David Goddard, QC, the media companies' lawyer, said the regulator placed an emphasis on the importance of plurality in media in its decision to reject the merger, as it was concerned it would lead to a reduced number of voices and viewpoints discussing important issues, but that is not within its statutory function under the Commerce Act.

The act is an economic statute concerned with the economic welfare of New Zealanders as consumers, not as citizens, he said.

"Those detriments fall outside the scope of the Commerce Commission's sphere of responsibility," Goddard said. "It has neither the mandate to take that into account, nor the ability to do so. It's not the sort of analysis the Commerce Commission should be undertaking."

Mr Goddard accepted diminishing quality of news coverage would be under the Commerce Commission's remit to consider but said there would be strong pressures on the merged firm to maintain and enhance the quality of its content for it to sustain its readers' attention.

Even if the legislation were broad enough for the regulator to consider plurality in the way that it has, the commission's approach had been "essentially speculative" and not supported by the evidence, Mr Goddard said.

He outlined the media companies' arguments on the three markets which the regulator had competition concerns about – online coverage, Sunday newspapers and 10 community papers where the two companies overlap.

Mr Goddard reiterated concerns about the shrinking advertising market for online news websites, as they struggle with Facebook and Google "eating their advertising lunch," and said it was "not for it to sit in judgment and say consumers should be reading more about Winston Peters and his decision this week and less about the Kardashians."

Social media has led to a radical change in the way most people read news, Mr Goddard said, with many clicking through from their Facebook feed but returning to Facebook afterward, rather than staying on the news website.

On the prospect of a paywall, which the commission discussed in its decision, Mr Goddard said the regulator had been wrong to find there was any real prospect of one being introduced on the New Zealand Herald website and not on Stuff.

"There was absolutely no supporting evidence of a New Zealand Herald-wide paywall," Goddard said. "The cost of doing that in terms of foregone reader attention was too great."

Mr Goddard said news media overseas have had unhappy experiences with paywalls, and no organisations would set up a paywall that cost more in reach than it brought in revenue. If a paywall were put up, such as one for a specialised subsection such as business, it wouldn't result in any real lessening of competition but would just be a rebalancing of prices, he said.

The case continues this afternoon. Before the lunch break, Goddard said he wanted to play a video to show the court how a modern news consumer reads news, although the Commerce Commission's lawyers intend to argue it shouldn't be shown.

(BusinessDesk)