On 19 December the High Court essentially confirmed that the New Zealand Commerce Commission (NZCC) was right to decline clearance & authorisation for the proposed NZME and Fairfax merger. The proposed merger would have brought New Zealand’s two biggest newspaper networks and online news sites under common ownership, with a combined monthly reach of 3.7 million New Zealanders, with a news media business that would have included nearly 90% of the daily newspaper circulation in the country as well as a majority of the traffic to online news. Our November 2017 IBA article summarises the NZCC’s decision to block the proposed merger.
Key findings of the Court
The Court agreed with the NZCC (for 4/6 of the markets) that it could not be satisfied that the proposed merger would not be likely to substantially lessen competition, therefore clearance was not available.
The Court also agreed with the NZCC to decline authorisation. It upheld the jurisdiction of the NZCC to consider detriments beyond economic or financial detriments in the relevant markets, particularly to take into account the material detriment arising from the loss of media plurality.
The main issues were:
- Whether the NZCC had the ability to consider non-economic factors; and
- Whether it had correctly done so.
“Authorisation” is available where the NZCC is satisfied that there is such a benefit to the public that it exceeds any anti-competitive detriment. The NZCC is explicitly charged with having regard to economic efficiencies.
The appellants had argued that the NZCC was an economic regulator, that Parliament had mandated the NZCC to have primary regard to efficiencies when considering authorisation applications, and that the NZCC was obliged to quantify benefits and detriments to the greatest extent possible.
The Court stated that it is “appropriate to attribute material importance to maintaining media plurality”. While the Court couldn’t be certain that there would be a material loss of plurality if the proposed merger had proceeded, “the risk is clearly a meaningful one and… would have major implications for the quality of New Zealand democracy.”
The Court also found that the NZCC was entitled to place significant weight on the prospect of reduced quality of the products of the merged entity. The Court’s media release indicated that it has dismissed criticisms of inadequacies in the process adopted by the NZCC. This will be heartening to the NZCC.
Would an appeal succeed?
The full 100-page judgment was only published after 5pm (NZT) this evening, so has yet to be reviewed. The likelihood of a successful appeal will clearly be a hot topic within the NZME and Fairfax boardrooms over the next 20 working days, as the parties consider whether to continue their fight in the Court of Appeal.
Previous High Court commentary has confirmed the general principal that benefits include efficiency gains and “anything of value to the community generally” (eg Air New Zealand v Commerce Commission (No 6) (2004) 11 TCLR 347), but there do not appear to have been such definitive statements made at the Court of Appeal level where the decisions have tended to focus on economic arguments. Arguably the Court of Appeal has implicitly accepted earlier statements from the High Court about the breadth of the public benefit test and it seems to have softened its approach on the need to quantify benefits. In Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZCA 560 the Court explicitly noted that “the legislative regime does not require the Commission to quantify all factors. So long as the Commission marshals robust reasons, applying its expertise to quantitative and qualitative factors within its statutory mandate, the courts will not lightly resort to a tangential ground to interfere…”
Links to judgment and relevant media releases
The comments in this newsletter are based on the Court’s “results judgment” and selected media releases. Key documents can be accessed at the following links: