NZME/Fairfax merger could go to court - lawyer

NZME and Fairfax could go to the High Court if their proposed merger is not approved by the Commerce Commission, says a leading law firm.

Simpson Grierson, in a note published yesterday, said "the unabashed reliance by the Commission on the unquantifiable detriments to society from the merger is bound to be highly contentious".

The regulator said on Tuesday in a draft decision that it may reject the merger and part of its reason was that different perspectives and voices would be lost if NZME and Fairfax NZ joined forces.

"In an industry where the costs of achieving scale are substantial, we consider the loss of plurality that arises from the proposed merger is likely to be significant and potentially irreplaceable," the regulator said.

While it could not put a dollar figure on such "detriments", the commission said "that they are likely to be so fundamental to a well-functioning New Zealand society that they outweigh the organisational efficiencies achieved by the merger".

NZME owns the NZ Herald, Herald on Sunday, nzherald.co.nz website, a range of regional newspapers, Newstalk ZB and entertainment radio stations, while Fairfax owns stuff.co.nz, the Sunday Star-Times and other metropolitan and regional newspapers.

A partner at law firm Simpson Grierson, Anne Callinan, said the draft decision raises questions about the extent to which the regulator can base its "decision on unquantifiable detriments to the public" and whether the commission had correctly assessed these.

"Obviously a draft determination that does not accept the authorisation is a significant setback, but it is not irreversible ... more often than not the commission has stuck to its draft determination, with one exception where it did change its mind from the draft decision and allowed the merger of two North Island ski fields," she said.

That case was the 2000 deal between Ruapehu Alpine Lifts and Turoa Ski Resort.

If the commission rejected the merger in its final decision, due on or before March 15, NZME or Fairfax could appeal to the High Court, Callinan said.

"A case of that complexity would likely take at least six months to be heard and decided," she said.

Both NZME and Fairfax have the next fornight to respond to the commission's draft decision and the regulator has also scheduled a conference next month where the parties can provide more information.

The two media companies made a joint statement to the New Zealand stock exchange yesterday, saying the commission's concerns relating to plurality of media were "unquantified".

"The parties' view is that the [commission] has failed to properly take into account the diversity of opinions that will continue post-transaction in an increasingly converged digital world," the two companies said.