26 Sep 2018

Stuff-NZME merger would lead to 'substantial reduction' of journalists, court says

5:25 pm on 26 September 2018

A merger of media companies Stuff and NZME could have led to fewer journalists, reduced quality and fewer voices in the news, says the Court of Appeal.

Stuff and NZME are seeking leave to appeal the High Court decision blocking their merger.

Stuff and NZME are seeking leave to appeal the High Court decision blocking their merger. Photo: RNZ

The court's judgment was released this afternoon after an initial minute yesterday which revealed the court had turned down the proposed merger.

It concluded that "detriments clearly outweigh benefits, and not by a small margin".

The closely-worded judgment backed the Commerce Commission findings that the merger would be detrimental and said the High Court was right in upholding the commission's decision.

"We share these views. The merged entity will have a powerful incentive to save costs by shedding journalists and editorial staff, with a corresponding impact on quality.

"The incentive is powerful because the firm will be under pressure to extend the 'runway' so far as it can. We think that reductions would likely exceed those estimated by the appellants in argument before us, with a correspondingly substantial effect on quality. It is difficult to gauge, but we think that staff reductions at the upper end of the range (cited by Pricewaterhouse Cooper) would cause quality effects of a substantial magnitude."

The judgment was released once lawyers for the companies had the chance to read it and ask for the removal of any confidential commercial information.

Between them the two groups publish most of the country's daily and weekend newspapers, and own a major commercial radio network and two leading news websites.

Stuff owns the Stuff website, as well as newspapers including the Dominion Post, The Press and Sunday Star-Times as well as local social media site, Neighbourly and new ventures like Stuff Fibre.

NZME owns the New Zealand Herald, nzherald.co.nz, regional papers the Northern Advocate, Rotorua Daily Post, Bay of Plenty Times, Hawkes Bay Today, Whanganui Chronicle and a stable of radio stations including NewstalkZB.

The two companies applied to the Commerce Commission to amalgamate in 2015.

They told the Commission that the merger would allow a greater chance of survival against global competitors, like Google and Facebook, who were taking local advertising dollars.

But today's judgment said that a merged news company could see a loss of "plurality" or the number of voices in the news.

"We have rejected the appellants' arguments that there will be only minor reductions in editorial staff and that any losses will be offset by other media. We find it very likely that there will be a substantial loss of plurality in the factual that will not be experienced in the counterfactual."

In conclusion, the court said it considered the transaction would cause "a substantial reduction in numbers" of journalists.

It found that quality detriments "could be very likely and substantial." Further that "plurality losses are likely and substantial".

"We agree with the High Court and the Commission that plurality is a characteristic of media markets that is vitally important to the community. We also agree with the High Court that the loss of plurality attributable to the transaction would very likely be irreparable."

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