A media merger between New Zealand’s two largest print media companies has been rejected because it would have concentrated ownership to an “unprecedented level” and reduced healthy competition in the newspaper sector.
The tie-up between Fairfax Media and NZME was proposed in May last year with both newspapers saying they needed the merge to consolidate their resources amid dwindling readership and competition for advertising dollars from Google and Facebook.
But on Wednesday the commerce commission rejected the proposal despite lobbying from both companies.
“This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy,” commission chair Mark Berry said in a statement.
“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.”
NZME owns the New Zealand Herald and commercial radio stations while Fairfax owns the country’s most popular news website stuff.co.nz, as well as the major metropolitan newspapers in Wellington and Christchurch, the Dominion Post and The Press.
Including the radio stations, the merged entity would have had a readership of 3.7 million New Zealanders and controlled more than 90% of the print media market.
NZME’s share price fell by 5.6% after the announcement. Fairfax chief executive Greg Hywood said he was “disappointed” by the decision.
“This decision does nothing to address the challenge of the global search and social giants, which produce no local journalism, employ very few New Zealanders, and pay minimal, if any, local taxes.
“We believe that the [commerce commission] has failed New Zealand in blocking two local media companies from gaining the scale and resources necessary to aggressively compete now and into the future.
“In light of the NZCC decision, an even greater focus on cost efficiency will be necessary. Moving to the next stage of our New Zealand publishing model will involve reshaping how we deliver our journalism to local communities. Further publishing frequency changes and consolidation of titles is an inevitability.”
NZME chief executive Michael Boggs said the companies intended to examine the decision over the coming weeks and consider their options.
Fairfax and NZME had argued that their bottom line was increasingly threatened by the likes of Google and Facebook, and a rejection of the merger would mean they would likely be forced to make cutbacks to frontline reporters, and to regional and community newspapers.
An open letter signed by 30 senior editors of NZME and Fairfax Media in November 2016 argued in favour of the merger, saying that job losses were “inevitable” if the merger did not proceed. However, a group of former editors said the deal risked the rise of a “glib, click-bait” news culture.
The commerce commission said it disagreed with some of the scenarios put forward by the two companies, and though it agreed the merger could have extended the lifespan of “some newspapers”, and potentially saved between NZ$40-200m over five years, the potential benefits did not outweigh the risks.
“Having reviewed all the evidence, 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,” said Berry.
“Competition between NZME and Fairfax leads them to produce higher quality content than would otherwise exist with the merger. This competition incentivises investment in editorial resources, motivates journalists and editors in their day-to-day work and acts as a safeguard to plurality.”
The two companies can appeal the decision in the high court.