The Commerce Commission has never been limited to balancing strictly economic considerations when gauging whether a merger passes a public benefit test, the Court of Appeal says.

The court earlier this week declined Stuff and NZME's bid to toss out the commission's rejection of the firms' planned merger.

Today, Justices Stephen Kos, Forrie Miller and Raynor Asher released the full judgment shooting down the companies' arguments that the Commerce Act required the regulator to rule only on efficiency grounds.

"This judgment establishes that it would be an error to exclude a public benefit or detriment on the ground that the act is concerned with efficiency alone," the judges said.


"For the avoidance of doubt, it does not follow that the commission would err were it to discard or discount any given public interest consideration in the circumstances of any given case. There may be good reasons for doing so."

The media companies unsuccessfully argued in the High Court that the regulator went beyond its remit in claiming the reduction of diversity in news gathering that would result from the merger trumped the $130 million to $200mn of economic benefits expected from it over five years. They then rehashed the same argument in the Appeal Court.

The appeal bench agreed with the regulator that Parliament didn't intend to exclude non-market considerations in the public benefit test.

"We accept that non-economic detriments may complicate merger analysis and introduce an additional element of unpredictability, which is undesirable," they said.

"Some measure of uncertainty is inherent in the legislative decision to permit authorisation on widely-defined public benefit grounds."

NZX-listed NZME and Stuff, the New Zealand arm of ASX-listed Fairfax Media, applied to amalgamate in 2016.

They argued 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.

The companies still generate most of their revenue from their print operations but those revenues are declining along with profitability.


The Appeal Court judges accepted the High Court erred by taking into account the remote risk of a single owner exploiting the merged entity for political purposes.

They said both NZME and Fairfax were publicly-listed companies and without a substantial change, no one person could impose their agenda on the entity.

However, the mistake had no practical significance and wasn't made by the regulator.

The judges didn't accept that the costs of reduced plurality and quality could be quantified by the expected number of editorial jobs lost. PwC estimated that could be as much as 15-to-20 per cent.

The judges noted those social costs went beyond purely financial metrics and observed that the merged entity would have a powerful incentive to keep cutting editorial staff to continue trading.

The judgment said the paywall recently announced by NZME seemed the most likely strategy to be implemented by the merged entity and noted that it would be made easier without the competitive pressure from separation.

The court heard the public detriment from such a paywall could have ranged between zero and $65m over five years.

The court dismissed the appeal and ordered the media companies pay the regulator's costs.