Fairfax, Stuff and NZME to appeal High Court decision which blocked merger
Fairfax Media, Stuff (the recently renamed Fairfax New Zealand) and NZME are set to appeal the High Court’s decision which ultimately stymied the merger between the two companies.
The companies first flagged their intentions to join forces in 2016, when it was reported NZME would pay NZ$55m to acquire Fairfax New Zealand’s assets, with Fairfax Australia also gaining a 41% share in the company.
The New Zealand Commerce Commission (NZCC) signalled it would not allow the merger due to concerns it would result in one outlet controlling nearly 90% of the country’s print media market.
The regulator ultimately blocked the merger in May last year, saying it was not “satisfied that the merger will not have, or would not be likely to have, the effect of substantially lessening competition in the market”.
When the merger was rejected, Fairfax Media CEO Greg Hywood said the decision left the publishers under-equipped to fight the rise of Facebook and Google.
“This decision does nothing to address the challenge of the global search and social giants, which produce no local journalism, employ very few New Zealanders, and pay minimal, if any local taxes,” he said at the time.
“We believe that the NZCC has failed New Zealand in blocking two local media companies from gaining the scale and resources necessary to aggressively compete now and into the future.
“Our impression from the outset is the NZCC seemed to be fixed in its assumption that the relevant competitive marketplace was restricted to only traditional media. No amount of market data, comparable decisions or studies from similar markets overseas could move them on that.”
The media companies subsequently lodged an appeal with the High Court arguing “the Determination is wrong in fact and law and was reached in breach of natural justice and procedural fairness”.
In December, however, the High Court declined the appeal and said upon review, it had reached the same conclusion as the NZCC.
“In our analysis on the clearance application appeal we have recognised material barriers to entry in the market for production of New Zealand news. We agree with the Commission that a substantial loss of media plurality would be virtually irreplaceable,” the court said.
It also dismissed criticisms made by Fairfax NZ and NZME on the process adopted by the Commission it its investigation and production of determination. The Court has said the Commission will be entitled to costs.
The companies announced the next stage of the appeal to the ASX today saying: “After careful review and analysis of the High Court’s reasons, the companies continue to believe that the NZCC was wrong in fact and wrong in law to decline clearance or authorisation of the merger. The High Court’s findings increase the range of estimated quantifiable net benefits to the public arising from the transaction to $133 million to $209 million, up from NZCC’s estimated range of $41 million to $204 million; however the High Court still found that these benefits were outweighed by the expected loss of plurality in the media. The appeal will focus on the issue of plurality.
“Given the potentially significant benefits from the merger, NZME is of the view that appealing the High Court decision is in the best interests of NZME, its shareholders and consumers.”
The next stage of appeal takes place in New Zealand’s Court of Appeal.
Stuff’s assets include stuff.co.nz, a share of neighbourly.co.nz and more than 60 metro, Sunday, regional and community newspapers. NZME’s assets include the New Zealand Herald and six regional daily papers, the NZME radio network, and e-commerce and digital classified sites GrabOne, HeraldHomes and driven.co.nz.
NZME and Fairfax proposed merger timeline:
2016:
11 May: APN News & Media in talks with Fairfax New Zealand over merger of NZME
29 June: NZME shares plummet after listing as former parent APN News & Media also takes a hit
7 September: NZME to pay $55m for majority of Fairfax NZ assets under merger plans
8 November: NZ Commerce Commission signals it will block NZME-Fairfax NZ merger due to diversity of voice concerns
2017:
3 May: NZ competition watchdog rejects Fairfax and NZME’s newspaper mega-merger
26 May: Fairfax Media and NZME fight merger rejection with High Court appeal
19 December: Fairfax Media and NZME merger will not go ahead, High Court rules
topics
Fairfax
Fairfax Media
Fairfax Media NZ
merger
New Zealand Commerce Commission
newspapers
NZCC
NZME
print media
Stuff
Looks like a big fat waste of money. Between them these companies employ virtually all the working reporters in NZ. An appeal court would need to be deaf dumb and blind to see anything but monopolist outcomes for NZ news.
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