Fran O'Sullivan: Online giants escape regulatory probe

Facebook and Google have disrupted the traditional media market.

The Commerce Commission should invite its hot shot Queen's Counsel Jim Farmer to draft terms of reference for an investigation into the disruptive effects of online giants on New Zealand media.

It's one area where the Australians have it all over New Zealand.

The Australian competition regulator (ACCC) announced earlier this month that it will investigate whether Facebook and Alphabet Inc's Google have disrupted Australia's news media market and whether that has disadvantaged traditional publishers.

But on this side of the Tasman the reaction has been muted.

When the commission issued its final decision blocking the NZME/Fairfax NZ merger earlier this year, chairman Mark Berry told the Herald, "what we face at the moment is a really dramatic change in the market in that 80 per cent of advertising revenue now goes offshore to Facebook and Google.

"That inevitably is putting a lot of financial pressure on the applicants."

Clearly the Berry-led commission hadn't helped things much.

First, it blocked the two companies from becoming a mega-NZ publisher with more clout to compete for the advertising dollar. Second, unlike competition authorities in Europe, Germany, Australia and elsewhere which are investigating the online behemoths' dominance and alleged anti-trust behaviour, our Kiwi commission appears to have lacked teeth.

Now that it is "two zip" to the commission — after the High Court adopted its argument the NZME and Fairfax NZ merger would result in a loss of diversity of voices which it said would be "virtually irreplaceable" — it is time for some conversations with the more "progressive" members of the new Government.

High Court judge Robert Dobson said yesterday the commission was within the law in leaning on the loss of media plurality in turning down the merger transaction.

But the commission (and the court) have focused on just one side of the equation. Plurality matters.

But so too does revenue.

The commission earlier said a key focus in the NZME/Fairfax case was to reach a view on what "we considered was the most likely outcome without the merger".

"Ultimately we considered it was likely that they would continue to compete as separate entities. We found that both parties would increasingly focus on their online news offerings (stuff.co.nz and nzherald.co.nz), and that their print publications would be likely to diminish in frequency and comprehensiveness over time."

The commission acknowledged that Facebook and Google compete for digital revenue on the advertising side of the market and that the significant share of digital revenue they currently obtain poses significant challenges to news media.

But both the commission and the court have missed the point when it comes to arguing that the online giants act only as distributors.

Yesterday's decision does not address the obvious problem posed by the predatory behaviour of Facebook and Google.

Labour Cabinet Ministers Kris Faafoi (Commerce) and Clare Curran (Broadcasting) brand themselves as "progressives" when it comes to dishing out taxpayer funds for "public" media. But they have shown little appetite so far for bolstering the ability of NZ's commercial media to survive.