The Commerce Commission has announced its preliminary decision to decline the proposed merger between NZME and Fairfax.
The Commission says that is has assessed the impact of the merger in terms of both advertising and reader markets and says it would substantially lessen competition for a number of media platforms.
It singled out the markets markets for premium digital advertising, advertising in Sunday newspapers and advertising in community newspapers in 10 regions throughout New Zealand.
It also noted it would impact both quality and the diversity of voices in the media as well as increasing prices for subscriptions, Sunday newspapers and the possible introduction of a paywall.
Chairman Dr Mark Berry said the merger would result in one media outlet controlling nearly 90% of New Zealand’s print media market.
“Our preliminary view is that competition would not be sufficiently robust to constrain a multi-media organisation, potentially with a single editorial voice, that would be the largest producer of national, regional and local news by some margin in New Zealand,” Dr Berry said.
"NZME and Fairfax each play a substantial role in influencing New Zealand’s news agenda. Competition between the parties drives content creation, increases the volume and variety of news available in New Zealand and assists with objectivity and accuracy in reporting.
"Our view is that the removal of this competitive tension would likely lead to a reduction in the quality and quantity of New Zealand news content both online and in print, with potential flow-on effects in television and radio,"
This would be the second highest level of print media ownership in the world, behind only mainland China.
The two media companies signed a merger implementation agreement subject to various approvals that would have seen NZME add another $90m to its banking facility so it could buy all the shares in Fairfax New Zealand in a cash and scrip deal.
In a joint statement on the NZX, NZME and Fairfax said the Commerce Commission had failed to take into account the diversity that would continue after the proposed merger.
The companies say they will now take time to review the draft determination and make further submissions to the commission.
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