Fairfax-NZME merger a no go - Commerce Commission

The proposed Fairfax-NZME media merger has been stopped in its tracks, with the Commerce Commission citing potential harm to the country's democracy.

After much delay, the competition watchdog on Wednesday announced its decision on the proposed merger between the media companies.

In September, the companies agreed to a merger deal that would give Australia's Fairfax Media a 41 percent stake in the combined business.

The proposed merger would have combined NZME's New Zealand Herald newspaper and nzherald.co.nz website, a portfolio of radio stations, including Newstalk ZB, and the GrabOne deals site with Fairfax's suite of newspapers, stuff.co.nz and its magazines.

Commerce Commission chair Dr Mark Berry says following their initial draft decision, the commission received "a substantial amount of further evidence and submissions".

Commerce Commission chair Dr Mark Berry (Newshub.)
Commerce Commission chair Dr Mark Berry (Newshub.)

The commission's draft decision, released in November, said it was likely to oppose the merger on the basis it would likely substantially lessen competition in a number of markets with the merged outlet controlling 90 percent of the print media market.

On Wednesday, Dr Berry said while any merger would over time save "anywhere between $40m and $200m over five years", those benefits would not "outweigh the detriments".

"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 says.

Dr Berry says in light of all the evidence, a coming together of the companies would "likely reduce the quality of news produced and the diversity of voices".

The Commission says the competition will incentivise investment in editorial resources, the production of higher quality journalism and motivate journalists and editors.

Both NZME chief executive Michael Boggs and Fairfax managing director Andrew Boyle say they're "disappointed" by the decision.

NZME says it will take time to go through it carefully.

But Mr Boyle believes the Commission "shows a lack of understanding about the commercial realities of our industry".

"The pace at which our global competitors are dominating advertising spend and changing the rules for others is not slowing. New ways forward are essential."

A spokesperson for MediaWorks says the decision is the right one.

"[It] ensures New Zealand can continue to have plurality of media and the widest range of viewpoints available to the audience. 

"We hope this now opens the door for other opportunities that could see partnerships between local media organisations that don't have a detrimental impact on competition."

Prior to the decision, NBR editor Nevil Gibson said he'd be astonished if the Commission had changed its mind following active and "aggressive" lobbying by the companies to change its mind.

"There's been a lot of activity behind the scenes and that's all come from the companies involved and if they've changed the mind of the commission I'd be quite surprised.

"Some say they've been earbashing and been quite aggressive toward the Commission, putting them on the defensive," he told the AM Show.

He said the Commission was set up to protect consumers and encourage competition.

"New Zealand is a small country, we've got duopolies in almost every business you can think of and not enough competition means our productivity has been low and...though we are growing, we could have done a lot better over the last couple of decades."

Mr Gibson said when it comes to media outlets, "the more the merrier".

"No country in the world outside of North Korea wants all their newspapers owned by one company and it'd be the same with radio and television."

He believed the merger of the companies, which between them employ the majority of New Zealand's journalists, would mean job losses.

However, it would unlikely be in the newspapers "because they don't compete with each other apart from the Sunday papers".

The Commission pushed back its final decision from April to May, after receiving an additional "lengthy submission" from the two companies in support of the proposal. The decision was originally expected on March 15.

NZN / Newshub.