More media lay-offs a certainty as merger case comes to a close

The Commerce Commission is forcing NZME and Stuff to spend up to $200 million of their own money to protect the diversity of voices in the media by blocking a merger, but job losses are a certainty, the companies' lawyer told the High Court in his closing argument.

The nine-day hearing in Wellington's High Court concluded this afternoon with the judge reserving his decision. The case follows the commission's ruling in May rejecting a proposed merger between the country's two biggest newspaper publishers, saying it would have too detrimental an impact on media 'plurality' - the number of competing sources of reporting and opinion - that it argued was essential to the media's role as an important element of a well-functioning democracy.

In its submissions, the Commerce Commission has said it is well within its jurisdiction to consider plurality as it is required to consider all negative consequences including public benefits or detriments. It said this is borne out by previous cases, the language and purpose of the Commerce Act, and the legislative history of the act.

David Goddard QC, the lawyer for both companies, said the New Zealand news media was sensible and ethical, and that wouldn't change if the two were able to merge, so concerns about diminishing numbers of outlets could be managed in other ways.

The lawyer said television news had greater reach than the two on a daily, weekly and monthly basis, while Radio New Zealand also has significant reach both on radio and online. He said it was unfair for the commission to prevent the companies from realising between $100 million and $200 million in economic benefits they have said the merger would bring them, even if the merger led to lower quality media coverage, as competitive constraints mean "there won't be a large reduction in quality".

"Any unquantified detriments are substantially outweighed by the net quantified benefits," Goddard said. "It's not the commission's role to sacrifice large economic welfare gains to pursue its conception of wider public policy goals ... It's not the commission's role to say let's spend the $100 to $200 million of New Zealand's scarce resources on pursuing plurality by refusing this merger."

Preserving the quality of media coverage could be better ensured by increasing funding to public broadcasters, or through stronger media regulation, if necessary, Goddard said.

The commission had interviewed a number of former industry players but had failed to place weight on an interview done with Radio New Zealand chief executive Paul Thompson, he said. Instead, the commission heavily referenced an interview with Gavin Ellis, former editor-in-chief of the New Zealand Herald and media commentator who left the industry in 2004, Goddard said.

While the interview with Thompson was confidential, Goddard said Thompson had talked about the competition which existed between journalists at the Evening Post and The Dominion when the two Wellington dailies - which combined in 2002 - were in existence and owned by the same producer, Independent Newspapers.

Goddard said this competition, as discussed by Thompson, showed that journalists would still be driven to perform if the two companies are allowed to merge, as a competitive dynamic would continue. However, the media companies didn't use the contents of the interview in their application to the commission, as it was confidential and they didn't ask for it.

In its submission, the Commerce Commission said reduced competition following the merger would mean there was a lesser incentive for journalists and editors to produce high-quality news, and fewer safeguards on negative changes to editorial approaches.

The merger would also reduce incentives to invest in journalist and editorial resources, the regulator said. Goddard said the media companies are already cutting costs and jobs, and will continue to do so whether or not they are permitted to merge.

While the numbers of expected job cuts, and the areas from which they will be cut, was not discussed in court due to confidentiality, the lawyer said that without the merger "there will be cuts, and there is a real prospect they will be quite far-reaching".

"The amounts having to be saved every year are large compared with the total budgets," Goddard said. "There's no reason to think it will be materially different from what will happen in the counterfactual [if the firms do not merge]."

Additional to that, Goddard said a lot of those journalists "are not producing material that contributes to a healthy democracy in New Zealand. A healthy democracy, contrary to what some commentators think, does not depend on the clothes you're wearing."

Justice Robert Dobson reserved his judgment. The judge said that when it is released, a results judgment will be issued with the reasoning behind it embargoed for 48 hours so that the lawyers have time to check for confidentiality issues.

(BusinessDesk)