BusinessDesk report by Sophie Boot
Justice Robert Dobson and his self-confessed “Luddite ways” was shown how news can be shared via social media during day one of Stuff and NZME’s appeal, in the High Court in Wellington, against the Commerce Commission’s rejection of their planned merger.

The video demonstrated how people can see and share news on aggregator and social media sites such as MSN News, Google News, Facebook, Twitter and Youtube.

The Commerce Commission’s lawyer James Every-Palmer opposed the video being shown as he said it demonstrated idiosyncratic behaviour and wasn’t representative of a normal social media feed, as the Facebook and Twitter accounts shown had no friends and only followed media companies’ profiles. The media companies’ lawyer David Goddard QC argued that the video was intended to demonstrate the mechanics of how news works on social media and was not supposed to be representative of a normal user experience.

Justice Dobson said he was unfamiliar with Facebook, and lay member Professor Martin Richardson, professor of economics at ANU, said he only used his Facebook account to keep up with his children, so the judge ruled he would see the video as an aid to Goddard’s submissions. The Commerce Commission will be able to argue against what was shown in its submissions.

Goddard showed the video after he argued that media companies are in a Faustian pact with social media platforms, particularly Facebook, as they need to have a presence and publish their stories on those platforms in order to be visible to more readers, but the platforms capture the advertising revenue and marketing data as users don’t click through to the news websites.

NZX-listed NZME (whose publications include the NZ Herald) and Stuff, the recently renamed New Zealand arm of ASX-listed Fairfax Media whose publications include the DomPost, applied to merge in 2015, arguing the downside of more concentrated local media ownership would be offset by the merged entity’s greater ability to survive the global competition for local advertising dollars caused by the rise of online search and social media giants such as Google and Facebook.

In May, the commission concluded the merger would have too detrimental an impact on media ‘plurality’ – the number of competing sources of reporting and opinion that it argued was essential to the media’s role as an important element of a well-functioning democracy. Fairfax and NZME filed their appeal later that month, claiming the regulator was wrong in fact and in law in rejecting the merger.

The appeal was set down for a 10-day hearing in the Wellington High Court starting yesterday.

DAYTWO report by Sophie Boot
The Commerce Commission shouldn’t have considered reduced media plurality in deciding to reject the merger of Stuff and NZME, the media companies’ lawyer told the court.

In the second day of the appeal at the Wellington High Court, David Goddard QC said the commission’s role is to assess the impact of transactions on markets, and its concern about reduced diversity in viewpoints – or plurality – in a merged entity is not within its role.

When the regulator published its decision in May, its primary concern was that the deal would reduce the quality of news produced and the diversity of voices available to the public. At the time, chair Mark Berry said the regulator didn’t think the merged entity’s competitors would be able to stop it from making cost-cutting decisions which reduced quality and plurality, and didn’t think promises to maintain current levels of plurality would be a sufficient safeguard.

Referencing the recent media storm about a potential potato chip shortage, Goddard said the Commerce Commission wouldn’t be entitled to prevent the merger of two potato chip manufacturers because it was concerned that merger would create efficiencies which could lead New Zealanders to eat more chips.

“We’re interested in what people are willing to pay for, the economic welfare implications of the transactional activity and the means of production, not the downstream health consequences years later for New Zealanders,” Goddard said. “In my submission, plurality is a bit like asking whether GMOs are good or bad, or asking about efficient production of potato chips, those are not matters the commission has expertise in.”

Goddard spent much of the morning taking Justice Robert Dobson and Professor Martin Richardson through literature on attention economics and pricing.

The Commerce Commission will likely begin its arguments on Thursday or Friday. The media companies have also filed a second appeal, which concerns the process used by the regulator before it rejected the merger. Goddard’s arguments on that will either follow straight after the first appeal, or arguments from both sides on the second appeal will be heard separately after the conclusion of the commission’s arguments on the first appeal.

Earlier reports:
Merger appeal hearing starts in High Court