Commission unanimously rejects NZME merger with Fairfax NZ

Commerce Commission Chairman Mark Berry. Photo Lynn Grieveson

The Commerce Commission has delivered a unanimous and very strong final rejection of NZME's application to merge with Fairfax New Zealand, which would have created a company owning more than 90 percent of the nation's newspapers. It decided a merger would increase advertising prices for currently competing Sunday newspapers and community newspapers, increase subscription prices for Sunday newspapers, and reduce the quality or increase eventual subscription prices for online news.

The Commission’s preliminary view in November was that the merger would be likely to substantially lessen competition in advertising and reader markets – specifically Sunday newspapers, online news and community newspapers in 10 regions. It also indicated that the merger would not be of such a benefit to the public that it should be allowed. Those views remain largely unchanged, it said.

Chairman Mark Berry said the Commission recognised NZME and Fairfax faced a challenging commercial environment as they sought to transition from their newspapers to a sustainable online model, but he said the Commission disagreed with some of the scenarios they put forward about their respective futures without the merger.

"In our view, competition between NZME and Fairfax leads them to produce higher quality news than it would with the merger," Berry told a news conference.

"The NZME and Fairfax rivalry benefits the public," he said, adding a merger would reduce the quality and breadth of the news produced by the merged entity.

"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," he said.

“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."

The Commission said it could not accept any assurances about the merged entity not reducing quality or plurality, and the merger applicants had not proposed any sale of assets to obtain approval.