Court rejects StuffMe merger appeal

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The High Court has dismissed an appeal brought by NZME Ltd, Fairfax Ltd and Fairfax New Zealand Ltd (the appellants) against the Commerce Commission’s May 2017 decision refusing their proposed merger.

The media companies were told of the decision yesterday and the court has published a media release to ensure the market is fully informed. A full judgment will follow “as soon as possible” the court said.

In a key finding, the court upheld the Commerce Commission’s jurisdiction to consider non-economic or financial detriments in the relevant markets, particularly the damage arising from loss of media plurality.

The court’s judgment said: “On all the evidence before the commission, we consider it is appropriate to attribute material importance to maintaining media plurality. It can claim status as a fundamental value in a modern democratic society. We cannot be certain a material loss of plurality will occur because of the factors we review that would hopefully assist in maintaining it.

“However, the risk is clearly a meaningful one and, if it occurred, it would have major ramifications for the quality of New Zealand democracy. In our analysis of the clearance application appeal we have recognised material barriers to entry in the market for production of New Zealand news. We agree with the commission that a substantial loss of media plurality would be virtually irreplaceable. The court found the commission was also entitled to place significant weight on the prospect of reduced quality of the products produced by the merged entity.”

The decision rejects a core argument of the media companies’ appeal, which sought to persuade the court that the commission had strayed beyond its powers in considering the qualitative effects of their media dominance.

The High Court upheld the commission’s view that the merger would have produced a substantial lessening of competition in relation to four of six markets.

However, it decided the commission had not proved its case in the advertising market for Sunday newspapers and it also dismissed the prospect of one of the companies introducing a paywall for their online publication, post a merger.

NZME, the publisher of the New Zealand Herald and broadcaster of several commercial radio stations, sought clearance or authorisation from the commission in May 2016 to merge with Fairfax New Zealand, publisher of several news titles including the Stuff website and the Dominion Post.

The commission declined the merger in May this year, leading the companies to appeal.

The court indicated the commission was entitled to costs.

In a statement to the NZX, NZME chief executive Michael Boggs said he was disappointed by the court’s decision.

“While the Fairfax merger offered us benefits, we have not been resting on our laurels in the past 18 months as we pursued the transaction.

“We will continue to examine shareholder value enhancing strategic initiatives leveraging our strong brands and audience reach, while enhancing the competitiveness of content generation and distribution.”

NZME said it would review the court’s judgment when it was released and consider the option of a further appeal.

The court said the Commission would be entitled to claim payment from NZME and Fairfax for its costs.