NZME and Stuff appeal failed merger bid

NZX-listed NZME, which owns the New Zealand Herald, and Stuff, the New Zealand arm of ASX-listed Fairfax Media, applied to amalgamate in 2015. Photo / Sarah Ivey

Lawyers for NZME and Stuff are re-litigating the attempted merger of New Zealand's dominant newspaper publishers in the Court of Appeal, arguing that the Commerce Commission overstepped its authority when it refused the tie-up.

Last May, the Commerce Commission declined to clear or authorise the merger, arguing it would concentrate too much media influence in one entity.

The subsequent appeal by NZME and Stuff, heard in the High Court in October 2017, was unsuccessful when Justice Robert Dobson and lay member Professor Martin Richardson found that the regulator was entitled to place significant weight on the loss of media plurality if the merger went ahead.

The current appeal is focused on the regulator declining to authorise the merger "against a backdrop of very large quantified net benefits", which the High Court found to be between $133 million and $209m, the media companies' lawyer David Goddard QC said this morning.

NZX-listed NZME, which owns the New Zealand Herald, and Stuff, the New Zealand arm of ASX-listed Fairfax Media, applied to amalgamate in 2015, arguing the merged entity would be more able to survive the global competition for local advertising dollars from online search and social media giants such as Google and Facebook.

In March, the publishers said they will renegotiate the terms of the merger if they successfully appeal due to business changes, with Stuff having agreed to close or sell a third of its New Zealand mastheads in the elapsed time.

This morning, Goddard said the Commerce Commission should "stick to its knitting" and its role was to regulate business, not the media, so it shouldn't have made a decision based on whether there would be a loss of diverse media viewpoints.

"The focus of the [Commerce] Act, ... of the commission's task, is on the wealth of New Zealand," Goddard said.

"It's on how to make New Zealand as wealthy, as economically prosperous as possible. It's not the commission's job to say, 'Well, having identified an opportunity to advance New Zealand's available resources by over $100 million, we think it would be good for New Zealand to spend that on some more plurality'. That's an essentially political choice of the kind which should be made by elected governments and by Parliament."

The Commerce Commission was attempting to use a hammer to solve a complex problem, Goddard said, and should not have considered the issue of plurality as it was not a public benefit under the legislation, but a political goal. Beyond that, the regulator has an obligation to determine the likelihood of possible detriments and did not in this case, he said.

"It's in many ways a public law argument about the legitimacy of the commission in that sort of decision," Goddard said.

Goddard said a merger wouldn't lead to worse coverage of important news, as media organisations would continue to cover important news as that attracted attention and, consequentially, advertising dollars, but would mean less "lifestyle" coverage such as that on home interiors or cars.

He said the New Zealand Herald, which announced in February it was planning to put up a paywall around premium journalism on its website, could do so by paywalling its own premium business content or by paywalling journalism syndicated from paid sites overseas, such as the New York Times.

The case is set down for four days, with Goddard set to continue tomorrow before the Commerce Commission's lawyers begin their arguments.