NZME, Fairfax merger declined over ‘risk of causing harm’ to NZ democracy

Commerce Commission rejected the NZME-Fairfax merger proposal over concerns it would harm New Zealand's democracy. Image: Radio NZ

By Pacific Media Watch editor Kendall Hutt 

New Zealand’s Commerce Commission has denied a move which would have seen two of the country’s largest media outlets merge.

Commerce Commission chairman Dr Mark Berry, in a statement, described the merger as harmful to democracy because it would have seen NZME and Fairfax collectively own 90 per cent of the daily newspaper circulation and a majority of traffic to online sources.

“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 said.

Media plurality, diversity
More importantly, the merger would have spelled the end of media plurality and diversity in the country, the commission warned.

“Our primary concerns remain that this merger would be likely to reduce both the quality of news produced and the diversity of voices (plurality) available for New Zealanders to consume.”

This is due to the fact current, healthy competition between the media outlets would have come to an end.

“In our view, the merged entity’s competitors would not be able to constrain it in any real way from making cost-cutting decisions that reduce quality and plurality.”

The commission did, however, acknowledge that their decision left NZME and Fairfax in a precarious position. The media outlets currently face a challenging commercial environment as they seek to transition from traditional print products to a sustainable online model, the commission noted.

Job cuts looming
“In our view, without the merger NZME and Fairfax will be increasingly focused on their online businesses as their print products diminish in number and comprehensiveness over time,” Dr Berry said.

“We accept there is a real chance the merger could extend the lifespan of some newspapers and lead to significant cost savings anywhere between $40 million to around $200 million over five years. However these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed.”

Several hours after the Commerce Commission’s decision, Fairfax’s reported job cuts with the owner’s regional papers were likely.

Fairfax’s acting managing director Andrew Boyle stated the no decision on the merger brought into stark reality the need to address what publishing model was sustainable for the company. He was quoted as saying: “Tough decisions will have to be made in terms on ensuring that ongoing viability.”

Declined decision welcome
The Commerce Commission’s decision to reject the merger has been welcomed by Auckland University of Technology’s Centre for Journalism, Media and Democracy (JMAD).

“I think the decision is in the public’s interest if you think that there’s now no single company which controls most of the online and print news assets in New Zealand. So I welcome that decision,” said Merja Myllylahti, JMAD’s project manager.

“I congratulate the Commerce Commission on keeping their head cool and do the best available decision at the time.”

Myllylahti warned however that the decision was not entirely something to be celebrated.

“We should actually remember that there is no winner in this situation. We really shouldn’t gloat and celebrate this because the future of the New Zealand media is actually very gloomy.”

She explained this is because the industry is likely to face “drastic changes” namely in the form of job cuts and closures.

If the merger had gone ahead, Myllylahti said it would have affected media freedom.

“We would have had less competition, less voices, less diversity, less plurality in the market.”

More importantly, the merger would have meant “more junk food news”, Myllylahti added.

Dr Peter Thompson, a senior lecturer in media at Victoria University, shared Myllylahti’s views.

“I think it was absolutely the right ruling, so I congratulate the Commerce Commission in having the courage to uphold its draft determination.

“Ultimately the Commerce Commission has done the right thing in prioritising the interests of the New Zealand public over the interests of Australian shareholders.”

However, Thompson said the commission’s decision highlights that the media in New Zealand is in crisis.

Media in crisis
This was not only down to the fact regional and local papers were under threat from the decision, but also because of weaknesses in current legislation.

The rejected merger therefore represents the opportunity for the government to rethink its regulatory framework, Thompson said.

“This decision makes the Commerce Commission incumbent upon the current government to recognise that our news media are in crisis and they need to look at the regulatory levers available to remedy that.”

Thompson, who is also part of the Coalition for Better Broadcasting, added the controversy over the merger – an “absolutely ridiculous, completely unthinkable scenario” – speaks to the weakness of the Commerce Act.

Both Fairfax and NZME have 20 working days to appeal the ruling and if this happens, Thompson said, a virtual monopoly in the print media sector will be created.

“If it goes to court and the unthinkable happens and the ruling gets overturned, then it’s going to be a very dark day for our news media and it’s going to be a very dark day for democracy in New Zealand and it will underline the urgent need, regardless of the current decision, to revise and review the Commerce Act and to revise and review the overall media regulation settings in New Zealand.”

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Kendall Hutt is Pacific Media Watch freedom project contributing editor 2017. A graduate journalist from Auckland University of Technology, she also completed her Honours year in Communication Studies. Kendall was on the Pacific Media Centre's 2016 Asia-Pacific Journalism Studies course. Kendall is interested in political and climate change journalism, and runs her own television and film review blog. In December 2017, Kendall took up a job with the North Shore Times.