Further consolidation in the media sector
Two high profile mergers have been announced in the last few months, representing further consolidation in the media, telecommunications and content space in New Zealand. Both mergers are conditional on Commerce Commission (Commission) approval.
On 27 May 2016 the Commission registered a joint application from Wilson & Horton (NZME) and Fairfax seeking authorisation to merge their media operations in New Zealand (NZME/Fairfax). The merger would essentially be a “two to one” in newspaper supply (national dailies), with overlap in community publications, magazine supply and (news) websites. The merger is in “response to the dramatically transforming media landscape [where] print readership and revenue [are] in decline and revenue from online news/information provision [is] becoming highly competitive.” The NZME/Fairfax application is available on the Commission’s merger authorisations register.
The parties have sought authorisation, which means that clearance can still be granted if there is no substantial lessening of competition, but if there is a substantial lessening of competition the transaction could be “authorised” by the Commission if the public benefits (essentially economic efficiencies) exceed anti-competitive detriments. Those benefits must be quantified, although the Commission can account for qualitative factors.
SKY Television and Vodafone NZ have also announced that they are considering a merger of their respective businesses, whereby Vodafone Group plc would directly or indirectly own 51% of the shares in SKY, and SKY would own 100% of Vodafone NZ (SKY/Vodafone). The Commission has received 2 applications for clearance in relation to the merger, which were registered on 29 June 2016. According to the parties, the SKY/Vodafone merger would create “a leading integrated telecommunications and media group in New Zealand [with] the ability to offer New Zealand’s best entertainment content across all platforms and devices in a rapidly evolving media and telecommunications market.” The SKY/Vodafone applications are available on the Commission’s clearances register.
As noted in the application, “the parties currently enjoy a successful and complementary strategic relationship, under which Vodafone resells SKY’s pay television services, and SKY promotes Vodafone’s broadband products and refers customers to Vodafone.” Questions have been raised about whether the merger would allow the parties to bundle their services in an anticompetitive way. However, the parties have noted that the combined group “would not have the ability or incentive to engage in any foreclosure strategy” and “will continue to make inputs available on a wholesale basis [and] offer SKY services and Vodafone telecommunication services separately.”
Ministry invites cross-submissions on monopolisation laws
The Ministry of Business, Innovation and Employment (MBIE) has invited cross-submissions in relation to its Targeted Review of the Commerce Act 1986 – Issues Paper (Issues Paper). The Issues Paper focused on whether New Zealand’s misuse of market power (monopolisation/unilateral conduct) test in section 36 of the Commerce Act and alternative enforcement mechanisms work, and whether New Zealand needs formal powers specifically aimed at analysing competition across markets. MBIE received 39 submissions on the Issues Paper. While some of those submissions were “pro-reform” (or at least encouraged further consideration of the issues), the majority – perhaps unsurprisingly from large businesses and the law firms who advise them – were not supportive of reform.
The cross-submission process appears to have been at least partly influenced by a letter sent from the Chair of the Commission, Dr Mark Berry, to the Minister of Commerce, Hon. Paul Goldsmith on 2 June 2016. The letter confirmed the Commission’s position that “reform of section 36 is necessary”, and that “an effective unilateral conduct provision is especially important for a small economy with concentrated markets”. Dr Berry has been a strong proponent for reform of section 36, and in his letter to Hon. Goldsmith, referred to the test as “not currently effective in promoting competition in New Zealand domestic markets.” Cross-submissions are due on 21 July 2016. More information (including Matthews Law’s submission on the Issues Paper) is available on MBIE’s website.
Commission to investigate deregulating Spark’s resale services
On 30 June 2016 the Commission announced that, following the completion of its five-yearly review, it will investigate whether Spark’s (formerly Telecom Corporation of New Zealand) resale voice services should be deregulated under the Telecommunications Act 2001.
Spark’s resale voice services have enabled retail service providers to offer retail fixed-line phone services without having to invest in their own infrastructure, however Telecommunications Commissioner Dr Stephen Gale said the Commission considered it was appropriate to take a closer look at deregulation of Spark’s services in light of emerging competition from other wholesale alternatives such as ultra-fast broadband and Chorus’ baseband services. (Chorus is New Zealand’s largest telecommunications infrastructure company, and was formerly a division of Telecom until Telecom underwent structural separation in 2011 as part of the Government’s ultra-fast broadband initiative).
The Commission has decided not to investigate whether other regulated telecommunications services should be deregulated at this time. Those services include interconnection with a fixed PSTN, local and cellular number portability, co-location on cellular mobile transmission sites, and a number of services that are specific to Chorus. Read more on the Commerce Commission’s website.
Increase in number of domestic price fixing penalty cases
After a relatively quiet period on the penalties front, we have seen a marked increase in the number of domestic price fixing penalty cases work their way through the New Zealand courts. Since November 2015, the Commission has collected just shy of NZ$8 million in pricing fixing penalties from national businesses in the real estate, livestock and waste oil sectors. We suspect that number will increase before the year is out.