Rejecting NZME, Fairfax merger on plurality grounds 'illogical and incomplete'

The Commerce Commission has announced a delay on its decision on the NZME Fairfax merger proposal.

The Commerce Commission's concerns that a merger of dominant news publishers NZME and Fairfax New Zealand would stifle the number of voices in the media is a backward-looking assessment that would be "illogical and incomplete", the publishers said.

The regulator has pushed out making a decision on the merger for a third time after getting "further analysis and expert evidence" from the media companies and will now rule on May 2, it said in a statement. The media companies have taken aim at the regulator's counterfactual letter to them on March 6, saying it takes too narrow a view of plurality and is grounded more in market modelling that on the financial and economic realities they operate in.

NZME and Fairfax said the commission has the opportunity to show it understands the rapidly changing environment and follow the Australian Competition and Consumer Commission's own forward-looking decisions in recent Queensland and Western Australia media mergers.

"A backward looking (redacted) focus on 'external plurality' (number of shareholders) of news organisations, which does not also include a proper assessment of all these other aspects of media plurality and public benefits will be, and will be seen by any international observers to be, illogical and incomplete," they said in their latest submission. "It would also be seen as a retrograde step in comparison to other regulators internationally that have already identified these trends and their implications."

NZME and Fairfax said the extension reflected that the regulator "is taking an appropriately thorough approach to reviewing the information provided by the merger parties" and is "consistent with the NZCC's typical practices".

The commission's draft decision indicated the regulator would reject the merger because the financial gains by cutting staff numbers were outweighed by the impact on diversity of media coverage and the aggregation of soft power under one umbrella.

The publishers responded on March 21 to the regulator, which was released today, saying the commission couldn't simply adopt a 'worst case scenario' as its counterfactual, because a stronger entity would generate its own public benefits in a sustainable journalism organisation, citing a similar restructure announced by Television New Zealand which will also result in cuts to editorial staff.

"The counterfactual letter does not outline (redacted) will mean for journalistic quality and media plurality in the absence of the merger," the companies wrote. "Given the sole ground on which the commission indicated, in its draft determination, that it was minded to decline the merger was media plurality, that is a fundamentally relevant factor that is not discussed in the commission's counterfactual letter."

Among the anticipated benefits of the merger is providing enough financial heft for extending the longevity of the companies' print operations and giving it room to hunt out other revenue streams where it could "successfully exploit the combined customer databases and other intellectual property" which could then be reinvested into the publishing businesses or content creation.

The news organisations have previously said the merger would give them a fighting chance against Google and Facebook which dominate digital advertising markets, and have downplayed the size of editorial job cuts, which would account for about 10 percent-to-13 per cent of the projected $136.5 million to $218.7m of quantified benefits over five years.