Business

Big StuffMe legal bill for Commerce Commission

The attempted "StuffMe" merger has cost the Commerce Commission $1.4 million in legal fees, equivalent to nearly a quarter of the Commission’s annual legal budget, Thomas Coughlan reports. 

The Commerce Commission has racked up a $1.4 million legal bill fighting the proposed merger of Stuff Ltd and NZME in court.

The two media companies, who collectively publish almost 90 percent of New Zealand's newspapers, the country's two biggest news websites, all three Sunday papers and almost half the radio stations, applied to the Commission over two years ago to merge in a deal they said would give them more time to come up with a viable business model for news.

The Commission declined the merger in May 2017, but Stuff and NZME appealed the decision, first in the High Court and then the Court of Appeal.

Figures obtained through an Official Information Act request show the Commission incurred costs of $82,731 in the determination phase, $886,322 fighting the appeal in the High Court and $496,789 in the Court of Appeal.

The case could be appealed further. Stuff and NZME have until 24 October to seek leave from the Supreme Court to bring a final appeal. 

The figures are for external legal costs, billed to the Commission. They do not include internal costs incurred in the Commission’s work on the merger.

Although incurred over two years, the costs represent a substantial slice of the Commission’s budget for external legal costs, which were set at $6.5 million for 2018. The fund is set aside to fight large legal cases.

The Commission will recoup some of its expenses. The High Court awarded costs of $194,887. The Court of Appeal has yet to decide what costs it will award. 

A spokesperson for the Commission said the level of costs awarded would be “dependent on a range of factors including complexity of the case, length of hearing and the use of experts” but it was normal for the amount to be less than what was incurred fighting the case. 

Media companies’ costs likely to be greater

Former New Zealand Herald Editor Gavin Ellis told Newsroom the media companies’ legal costs were likely to be “significantly higher”, given the work both put in to prepare the merger application.

Stuff and NZME’s legal costs are not publicly available, but information included in NZME’s 2017 shareholder report shows the companies may have incurred a similar bill to the Commission. 

The shareholder report anticipated the companies would collectively spend $500,000 appealing the High Court decision, similar to the $496,789 cost posted by the Commission. 

Neither company would comment for this story, but the NZME shareholder report said its costs were “significantly outweighed by the potential benefits of the transaction, both for shareholders and the New Zealand public”.

Ellis said that given the expense of a Supreme Court appeal, the companies were unlikely to pursue the merger further.

“My gut feeling is they will be most reluctant to send further good money after bad,” he said.

“The possibility of an appeal to the Supreme Court is a high jump.”

That’s a lot of journalists

The two companies had estimated potential cost savings of merging to be between $133 million and $209 million over five years. The Commerce Commission argued that the merger would reduce media plurality in New Zealand, an argument upheld at each stage of the appeal.

Two years on from the deal being dreamed up, both NZME and Stuff have spent time and considerable amounts of money that commentators have argued should have been invested in developing new business strategies and taking on extra journalists. Trade Me Jobs reports the median salary for a journalist is currently $55,000. 

Ellis said the companies might now look at ways of sharing and minimising costs that would be in the spirit of the Commission’s decision.

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