Potato chip shortage brought up in NZME Fairfax merger appeal in High Court

A lawyer has mentioned the reported New Zealand chip shortage as part of his argument to allow a merger between NZME and Fairfax.

News of the country going through a potato chip shortage hit headlines recently after potato farmers reported millions of dollars worth of losses in crops after a particularly wet winter.

Lawyer David Goddard QC used the news to draw a comparison with the Commerce Commission supposedly overstepping its authority when it declined a merger between the two companies in May.

The commission said the merger would be likely to substantially lessen competition, specifically in Sunday newspapers, online news and community newspapers in 10 regions.

Part of the decision relied on the fact that a merger would reduce plurality, orthe number of voices in the media.

Yesterday Goddard argued the commission made an error in law by considering plurality, as it was not required or authorised to do so under the Commerce Act.

He said today if the commission were to look at the potato shortage, it would not be its place to concern itself with the healthiness of potato chips and the "downstream health concerns".

"Plurality is a bit like assessing whether GMOs are good or bad," he said.

"Like the formation of the government - another important, unresolved issue - these aren't matters that the commission has expertise in."

Goddard started off day two of an appeal in the Wellington High Court to allow the merger by arguing about what constitutes the "market".

He is delving into the Commerce Act, beginning with the section describing the purpose of the legislation.

"The purpose of this Act is to promote competition in markets for the long-term benefit of consumers within New Zealand," it says.

Goddard told Justice Robert Dobson the market was "where the exchange is happening".

There were two "transactions" in the news media market, the first was between publisher and advertiser, and the second was between the publisher and the readers.

"Take a farmers market. The market is where they take the vegetables to, and sell it to you, not back at the farm where they grow it."

Justice Dobson likened the market for online media being where the readers received the news, not "where the journalists and sub editors are sitting preparing the copy".

Goddard also told the court there was "no real prospect" of a reduction in quality of reporting if there was a merger.

He would be pointing to evidence from "informed market participants" who said why they didn't expect that to happen, and who explained the incentives to cover a particular issue would remain the same without the competition between the two companies.

The commission said at the time of its decision that the merged company would control the biggest network of journalists in the country, 90 per cent of the daily newspaper circulation in this country and a majority of traffic to online sources of New Zealand news.

The merged business would reach 3.7 million New Zealanders each month, the commission said.

"This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy. The news audience reach that the applicants have provide the merged entity with the scope to control a large share of the news consumed by a majority of New Zealanders. This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand's democracy and to the New Zealand public," commission chairman Mark Berry said when announcing the decision to reject the merger.

"We accept there is a real chance the merger could extend the lifespan of some newspapers and lead to significant cost savings anywhere between $40 million to around $200m over five years. However these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed."