The NZME/Fairfax final decision

Last week we released our final decision declining the NZME and Fairfax application to merge their media businesses. This was the third large-scale merger application we have assessed in the past 18 months, following on from the Z Energy/Chevron and Vodafone/Sky decisions.

While the Z acquisition involved a complex economic assessment across multiple markets, both Vodafone/Sky and NZME/Fairfax have required us to consider competition impacts in rapidly changing markets. A major focus of submissions across both these mergers has been on what the markets would look like with or without the proposed merger.

A key focus in the NZME/Fairfax case was to reach a view on what we considered was the most likely outcome without the merger. Ultimately we considered it was likely that they would continue to compete as separate entities. We found that both parties would increasingly focus on their online news offerings (stuff.co.nz and nzherald.co.nz), and that their print publications would be likely to diminish in frequency and comprehensiveness over time.

We found that Facebook and Google compete for digital revenue on the advertising side of the market. The significant share of digital revenue they currently obtain poses significant challenges to news media globally. However, in the reader side of the market, they act only as a distributor. Neither Google nor Facebook create New Zealand news content. This distinction between the advertising and reader markets is important.

In the reader market, we found that the NZME and Fairfax rivalry leads them to produce higher quality content than would exist with the merger. Competition between them incentivises investment in editorial resources, motivates journalists and editors in their day-to-day work and acts as a safeguard to plurality (diversity of media voices).

Given the growth in online news consumption, where the parties have a combined 2.4 million monthly readers, any reduction in the variety, volume, accuracy or timeliness of coverage would particularly affect online readers.

The other fundamental issue that led us to decline this merger centred on the scale and level of influence the merged entity would have. It would have a significant share of print and online news, hold a strong radio presence, and would ultimately have the scope to control a large share of the news consumed by a majority of New Zealanders. In our view, this level of influence, combined with the quality detriments, posed a risk to the public interest that outweighed any economic benefit the merger would deliver for the parties.

The publication of our full reasons concludes an authorisation process that included the consideration of over 100 submissions and many interviews. For those interested, the 350-page decision is available on our website.