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NZ competition watchdog rejects Fairfax and NZME’s newspaper mega-merger

The New Zealand Commerce Commission has rejected the proposed merger between NZME and Fairfax’s New Zealand assets due to concerns around one owner controlling nearly 90% of NZ’s print media market.

The NZCC said it was not “satisfied that the merger will not have, or would not be likely to have, the effect of substantially lessening competition in a market”.

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.

The NZCC signalled it would not allow the merger in November last year.

Fairfax New Zealand’s assets include stuff.co.nz, a share of neighbourly.co.nz and more than 60 metro, Sunday, regional and community newspapers.

The two companies had argued the merger was vital for the sustainability of some of the biggest media assets in New Zealand. The deal would have seen NZME pay NZ$55m to Fairfax for majority control in the company.

Fairfax Media CEO Greg Hywood argued that the watchdog had left the publishers struggling to face the rise of Facebook and Google. He said: “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.

“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. ”

By contrast, when the Australian Competition and Consumer Commission gave the green light on News Corp’s takeover of APN News & Media’s newspapers, it assessed the entire media landscape.

Hywood said during the year-long NZCC process Fairfax Media has continued developing its standalone strategy.

“Our strategy involves leveraging our trusted brands and independent journalism and content reaching 90% of New Zealanders. This is reflected in high levels of engagement and rich data and insights.”

Hywood also signalled that the decision will mean deeper job cut, with a “greater focus on cost efficiency” required.

“Ensuring the ongoing sustainability of the New Zealand business will require continued diversification of our digital revenue base, building on recent progress of monetising our audiences through new advertising products and businesses such as Stuff Fibre and Events,” he said.

“In light of the NZCC decision, an even greater focus on cost efficiency will be necessary. Moving to the next stage of our New Zealand publishing model will involve reshaping how we deliver our journalism to local communities. Further publishing frequency changes and consolidation of titles is an inevitability.”

In the determination, the NZCC argued the “changing commercial environment” the two companies face “is not due to a reduced demand for their core product”.

“New Zealanders are strong consumers of news. Usage data suggests that, on average each month, 2.4m New Zealanders visit nzherald.co.nz and stuff.co.nz, spending over five million hours on these websites,” the report said.

“In print, NZME and Fairfax have a combined daily newspaper circulation of over 370,000 – equivalent to nearly a quarter of all households.

“However, the Applicants, like all news media, are in a transition phase. The growth in digital revenues is currently not replacing falling print revenues and they are seeking to transition to a more sustainable business model.

“Discussion of these commercial environments and imperatives occupied a great deal of submission and evidence. Our decision reflects that we have focused on the choices that readers and advertisers have, and how their choices impact on the commercial prospects of the applicants.”

In early trading on the ASX shares in Fairfax Media fell by nearly 2% to $1.06.

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