345 pages of unanimous rejection
COMMENT: The Commerce Commission verdict on the StuffMe merger proposal is 345 pages of dense, deep and forceful rejection of the applicants' proposition.
It was made unanimously by the four commissioners. It anticipated and addressed likely lines of legal challenge by the two denied suitors. It was a very correct, forward defensive position, no gap left between bat and pad.
In rejecting an anti-competitive giant, it chose the least bad of two bad options for print-digital journalism in New Zealand. Either way there were going to be unpalatable cuts to the companies' workforce, capabilities and products.
The Commission chose to go the way of assured rather than imagined competition. A theme throughout its decision is that these two companies are their own biggest competition and if that is removed the consumer, the reader and viewer, and the advertiser, will suffer.
In making a strong stand for plurality, or diversity of news media and voices, the Commission cloaked its decision as a defence of democracy.
"This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy.
"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."
The applicant companies' lawyers had challenged the Commission's right to consider such social intangibles as plurality and quality. But the decision today set out in some detail why the regulator was obliged to consider just such things when looking at 'detriments' from approving a merger. Moreover, it said, the Commission could not be forced to quantify the unquantifiable by applying some kind of 'false scientism' instead of using its judgment.
While confirming its draft decision from last November the Commission made just one inconsequential concession to the torrent of arguments put before it by Fairfax NZ and NZME. (It accepted that 'premium' advertising spots on websites were not a market in themselves).
On every other count, it used the time between draft and final verdict to look further into the two companies' arguments and deemed them either implausible, unlikely or over-stated.
The Commission found in all three news markets that were in question — online, Sunday paper and areas in which regional papers overlapped — prices would go up and the quality of the journalism or product would go down unless the companies had to compete with each other.
It decided that in the online news market, the chances of a paywall being imposed to charge readers for content would be higher under a merged company than as separate entities. And the prices involved would be higher too.
The judgment frequently used the companies' own internal documents to challenge claims made in their application and supporting submissions. It quoted back at NZME its upbeat self-assessment made when announcing its half-year financial results in February.
The decision concluded that better journalism and stronger online and newspaper products were more likely through the existing separate companies rather than a combined entity.
A loss of competition between NZME and Fairfax was likely "to lead to significantly greater rationalisation" than no merger.
"We consider competition between [them] is likely to lead to each of them retaining journalists."
In several places the Commission just did not believe what the applicants were saying. After the draft rejection, the companies put confidential predictions to the Commission significantly altering their pre-draft views on their likely fates without the merger.
The Commission response: "In this decision we reject that these are likely scenarios with the merger."
It wondered aloud whether the company's future board might be tempted to use the savings from the merger not to support remaining print products but to pay out to shareholders in dividends.
Where the two companies said the country's broadcasters, TVNZ, Newshub and RNZ could be real and sustainable competitors for online news, the Commission chose to believe the broadcasters - who said, 'No way. Not so'.
Where the applicants said a rejection of the merger might mean accelerated closures of newspapers around the country, the Commission assessed the ongoing contribution of print to their businesses, and the upbeat comments of editors towards print, and demurred. What would cut or close would cut or close, irrespective of the merger.
The StuffMe plan asked for time - adding 'runway' in their fight for digital revenue against the global platforms Facebook, and Google. The Commission instead saw Facebook and Google as ensuring effective competition for the two big local media companies. It consulted ad agencies and advertisers and pointed to differences in the type, targeting and effectiveness of local and national ads between the Fairfax and NZME sites and the global players.
Throughout the judgment, the Commission frowned at savings numbers put forward by the companies or their advisers, substituting its own in some instances.
If felt Fairfax and NZME would continue to run effective online businesses and maximise their newspaper interests if kept apart.
After the comprehensive rejection last November, it must be galling for the companies and their owners to come back for another round and be even more undone.
Their lawyers ran an aggressive campaign against the Commission's draft thinking, calling for a decision based on hard data, not "wishful and nostalgic narratives". The Commission looked hard at that NZME-Fairfax data and was not persuaded, let alone convinced, that it was real.
Read more: It’s NO to StuffMe merger