Comment

StuffMe heads back to court

Is it a sign of confidence or weakness that the country's two biggest publishing and digital news giants, Stuff and NZME, want to have another go in the courts to gain approval for their mega merger?

The pair have announced they will seek leave to appeal the twice-rejected merger plan, known as StuffMe, in the Court of Appeal.

That would continue a nearly two-year struggle to prove that multi-million dollar savings to the companies are more important than the public goods of news media diversity and journalistic quality.

That is the nub of their latest action.

An announcement to the NZ stock exchange by the listed NZME today emphasised what it called an improved estimate from the High Court judgment for what NZME termed 'net quantifiable benefits to the public'. The market announcement said the High Court findings "increase the range" to between $133m and $209m — up from the $41m to $204m estimated by the Commerce Commission. (Interestingly, the $133m and $209m numbers were not the High Court's at all. They do not appear in the public version of the High Court's December judgment but have since been estimated by an NZME economic consultancy from a comment by the Court.)

The High Court tended to doubt any such savings would be for the public benefit, remarking: "We certainly do not accept that the projected extent of benefits would be a sum 'available to New Zealand' in the sense that it accrues to the public good." It noted: "The owners of the merged entity can be expected to apply any surplus generated by efficiencies in the best interests of shareholders."

While talking up the benefits "to the public" the companies' announcement says their appeal will "focus on the issue of plurality".

Both the Commerce Commission and the High Court found that a loss of plurality (or range of news gathering, sourcing and viewpoints) represented a negative to the public interest greater than the dollar benefits which would accrue to the merged business.

Moreover, both judgments found that a loss of quality of journalism under the merger would also be a factor big enough (even disregarding the plurality issue) to negate the economic benefits of a merger.

A merged giant would control 90 percent of the newspaper market, including all three Sunday titles and every metropolitan daily other than Dunedin's, plus the country's two biggest news websites and half the commercial radio market. The High Court judgment says StuffMe would have 300 more journalists than the next three biggest newsrooms in New Zealand combined.

The two companies' intention to fight on the issue of plurality is interesting. It is an argument they have lost, lost and lost again.

Even in the hands of a highly regarded QC, David Goddard, their argument before the High Court was that the Commerce Commission should decide purely on commerce, not on public goods like plurality. They argued that if there was a gap in the law that meant the commission had to stick to the dollars and not democratic niceties, that gap was for Parliament, not the Commission to fill.

Their High Court action claimed Parliament did not intend the Commerce Act to take such issues as journalistic plurality into consideration. But Justice Robert Dobson and his adviser Professor Martin Richardson, were able to quote directly from the Hansard transcripts of the parliamentary debate on that law to prove otherwise.

A select committee report said the new purpose of the Act was to make "it clear that competition is not an end in itself but a means to increasing consumer welfare in the long-term".

Even more starkly, the Court quoted the Minister of Commerce at the time, Paul Swain saying: "The focus on competition in the purpose statement also does not preclude wider public benefit issues being taken into account where appropriate."

The High Court said: "It is implicit in these statements during the Parliamentary debates that Parliament contemplated the Commission would be able to have regard to all forms of relevant benefit that were seen as likely to flow from a transaction for which an authorisation was sought.

"It is inconsistent with Parliament's approach to infer, without any clear indication of such an intention, that Parliament intended to discriminate between the scope of benefits to which the Commission could have regard, and then a narrow subset of detriments."

The companies argued that even if New Zealand's Parliament had said such things, some foreign jurisdictions explicitly restricted commerce regulators from regulation of the media.

The High Court said: "We are not persuaded the experience in other countries where comparable competition law regulators do not have jurisdiction to assess the impacts of loss of media plurality can constitute an influence on the intention attributed to New Zealand's Parliament when it has addressed the relevant terms of the Act."

Now, with this bid for leave to appeal, the companies are betting another set of judges will take another view and set aside plurality concerns in favour of an economic benefits-only interpretation.

After each defeat, at the Commission and High Court, the companies have said they would carefully study the judgment for possible appeal but also that they would press forward with strong existing business plans.

This attempt to appeal again is either a show of strength in their convictions, and their shareholders' funds and patience — or it is a show of weakness: That there is not such a strong Plan B, that existing business plans aren't going to be enough and that winning this case isn't everything, it's the only thing.

They have argued they need some extra runway in their fight against global digital advertising giants Facebook and Google. But sometimes if the runway is too short, you might be trying to land the wrong plane.

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