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NZME Limited and Fairfax New Zealand Limited: authorisation determination

3 May 2017

NZME Limited and Fairfax NZ Limited and its parent company, Fairfax Media Limited, sought approval to merge the New Zealand operations of NZME Limited and Fairfax NZ Limited. The Commission is not satisfied that the merger will not have, or would not be likely to have, the effect of substantially lessening competition in a market. The Commission is also not satisfied that the merger will result, or will be likely to result, in such a benefit to the public that it should be permitted. Therefore, the Commission declines to grant authorisation for the merger pursuant to section 67(3)(c) of the Commerce Act 1986. 

Contents of report

  • Section 1 outlines the Commission’s Determination and investigation
  • Section 2 outlines the key parties to this merger, the current state of the media industry, the Applicants’ rationale for the merger, the legal framework for the Commission’s assessment, the with and without the merger scenarios and the relevant markets
  • Section 3 defines the relevant markets on the advertising side, and considers whether the proposed merger would be likely to result in a substantial lessening of competition in those advertising markets; X52.4
  • Section 4 defines the relevant markets on the reader side and considers whether the proposed merger would be likely to result in a substantial lessening of competition in those reader markets
  • Section 5 considers the potential vertical and competition effects arising out of the proposed merger; and
  • Section 6 assesses and balances the benefits and detriments that are expected to result from the proposed 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 $200 million over five years. However these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed.”

The merged entity would have direct control of the largest network of journalists in the country, employing more editorial staff than the next three largest mainstream media organisations combined. Its news media business would include nearly 90% of the daily newspaper circulation in New Zealand and a majority of traffic to online sources of New Zealand news. Including its radio network, the merged entity would have a monthly reach of 3.7 million New Zealanders.

“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,” Dr Berry said.

“Having reviewed all the evidence, our primary concerns remain that this merger would be likely to reduce both the quality of news produced and the diversity of voices (plurality) available for New Zealanders to consume. Competition between NZME and Fairfax leads them to produce higher quality content than would otherwise exist with the merger. This competition incentivises investment in editorial resources, motivates journalists and editors in their day-to-day work and acts as a safeguard to plurality.

“In our view, the merged entity’s competitors would not be able to constrain it in any real way from making cost-cutting decisions that reduce quality and plurality. The extent of internal plurality is also discretionary on the part of the media owner and we do not regard promises to maintain current levels as a sufficient safeguard on future editorial decisions.

“While we cannot weigh in dollar terms the net benefits against the detrimental societal impacts we expect to see, in our assessment this is not a finely balanced decision. We decline to grant authorisation.”

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