Loss of diversity in rejected media merger 'virtually irreplaceable'

NZME and Fairfax New Zealand appeal of the Commerce Commission's rejection of their merger has been rejected. Picture / Jason Oxenham.

The loss of diversity of voices in a merger of publishers NZME and Fairfax New Zealand would be "virtually irreplaceable" and the Commerce Commission was within its rights to weigh up that issue in rejecting the deal, the High Court found.

Justice Robert Dobson and lay member Professor Martin Richardson rejected the dominant publishers' appeal to overturn the regulator's decision, saying the commission was within the law in leaning on the loss of media plurality in turning down the transaction and agreeing that a substantial loss of that diversity of voice would be "virtually irreplaceable".

"We cannot be certain that a material loss of plurality will occur because of the factors we review that would hopefully assist in maintaining it," the judgment said.

"However the risk is clearly a meaningful one and, if it occurred, it would have major ramifications for the quality of New Zealand democracy."

NZME, which owns the New Zealand Herald, and Fairfax tried to argue the reliance on the loss of media plurality was outside the regulator's legislative framework, and that even if it was within it, the quantifiable benefits of the deal were such as to warrant approval.

Justice Dobson disagreed, saying the statute didn't constrain the regulator and that a balanced approach was needed in weighing up the benefits against the detriments.

The judge and lay member accepted that there would probably be "a material extent of retrenchment of journalistic and editorial resources" if the merger was rejected, but that the presence of competition influenced that downsizing.

By approving a dominant media player in New Zealand's market, there was a "larger risk" that "financial imperatives will pressure a significant loss of plurality" against the aspirations of the editorial staff, the judgment said.

That would ultimately lead to a lower quality of news production as the merged entity sought to cut costs, and would create a "significant unquantifiable detriment".

What's more, the $200 million of quantifiable benefits wouldn't be available to New Zealand "in the sense that it accrues for the public good and could somehow be committed, if necessary, to provide substitute forms of media plurality by way of public broadcasting initiatives".

Justice Dobson and Professor Richardson said unquantifiable costs and benefits couldn't be weighed against their quantifiable counterparts, and that "concerns for the preservation of media plurality as a support for a strong democracy, when measured as to its impact on the whole economy, has a significance that outweighs the significant quantifiable benefits that have been acknowledged."

Weighing that up, they found the likely loss of plurality and the prospect of lower quality content justified "greater weight than the quantifiable and unquantifiable benefits we have identified".