New Zealand Law Society - Court of Appeal rejects media giants merger appeal

Court of Appeal rejects media giants merger appeal

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The Court of Appeal has dismissed the appeal by NZME Ltd and Fairfax Media Ltd (now Stuff Ltd) against the Commerce Commission’s decision to decline their media merger.

The appeal decision in NZME Ltd v Commerce Commission [2018] NZCA 389 upholds the earlier High Court judgment ([2017] NZHC 3186) that supported the Commission’s May 2017 decision that the merger would be likely to substantially lessen competition in advertising and reader markets in New Zealand, and that it should not be authorised as it did not create benefits that outweighed this lessening of competition.

The Court of Appeal has found that if the appellants were to merge there would very likely be substantial losses of quality and plurality in various media markets, and those losses clearly outweigh the economic efficiency gains that would flow from the merger.

The decision says the Commerce Act 1986 deliberately permits authorisation for mergers on widely-defined public benefit grounds.

The Act requires consideration of economic efficiencies arising from a merger, but it does not prevent non-economic factors from being taken into account. Those non-economic factors may be relevant or even determinative in merger applications. The identification and weighting of public benefits (including economic efficiencies) and public detriments is a matter for the Commerce Commission's judgement.

In its decision the Court of Appeal disagrees with the High Court by holding that the merged entity would be very likely to introduce a paywall on online news content post-transaction.

The Commission says it considered that the merger would concentrate New Zealand news media ownership and influence to an unprecedented extent for a well-established modern liberal democracy.

“We are pleased the court has again upheld our decision and look forward to reviewing the judgment,” says Commission Deputy Chair Sue Begg.

In May 2016 Fairfax Media Ltd and NZME Ltd sought authorisation to merge their New Zealand operations. The Commission declined the merger in May 2017 and the High Court in Wellington upheld the Commission’s decision in December 2017.

The court has awarded costs to the Commission.

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