So the Commerce Commission has nixed the Fairfax/NZME merger. Why? On the grounds that it would have had unacceptably bad consequences for the public interest in terms of media diversity, and for the quality of democratic debate. How come? Partly because the Commission has decided that none of the big multi-platform rivals (RNZ, TVNZ, Newshub) or small online rivals (eg Scoop) would be able to offer meaningful competition – either individually or cumulatively – to the behemoth that the merger would create.
The Commerce Commission could hardly be accused of rushing to judgment. In a bureaucratic version of rope-a-dope , the Commission had given the applicants every opportunity over the past 12 months to punch themselves out and make their case, including an extended period in which to rebut the Commission’s draft findings. Yesterday, the Commission published their exhaustive 345 page, 1,738 paragraph rationale for rejecting the merger application.
True, as the Commission agreed in its executive summary, there’s a chance that if the merger had been permitted, it could have extended – via staff reductions, the closures of some regional and community newspapers, shared resourcing and other rationalisations – the lifespan of some surviving newspapers, and saved the applicants overall somewhere between $40 million and $200 million over the course of five years. “These benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed.”
In the executive summary, Commerce Commission chairman Mark Berry made these salient points :
The merged entity would have direct control of the largest network of journalists in the country, employing more editorial staff than the next three largest mainstream media organisations combined. Its news media business would include nearly 90% of the daily newspaper circulation in New Zealand and a majority of traffic to online sources of New Zealand news. Including its radio network, the merged entity would have a monthly reach of 3.7 million New Zealanders.
This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy. The news audience reach that the applicants have provide the merged entity with the scope to control a large share of the news consumed by a majority of New Zealanders. 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,” Dr Berry said.
So what happens now? Fairfax and NZME will almost certainly try to overturn the Commission decision in the courts. To succeed, they will need to convince the courts that the Commission was wrong to weigh the public interest against the business case. Under a narrow reading of the Commerce Act – the applicants will presumably try to argue – the merits/demerits of the business case and the ‘efficient’ workings of the media market are the only issues that the Commission should have considered. However, the Commission considered at length and flatly disagreed with “the notion that there is a category of negative consequences … that we are required to ignore”.
The vast majority of the public would agree with the Commission. Journalism is not baked beans. Society conveys certain powers and responsibilities on the Fourth Estate for a reason. Also, it is seems odd to argue that a public watchdog like the Commerce Commission should be obliged to ignore the wider public interest on principle, when assessing the risks and advantages of media concentration. It is not as if the Commission didn’t carefully consider the legal foundation for its analysis.
The legal arguments begin to be traversed at page 24, para 41 of its analysis. In particular, the rationale for carrying out a public interest test reside at clauses 67(3)(b) and (c) of the Commerce Act, and these come into play if and when a merger substantially (para 55) lessens competition, as the Commission later demonstrates this merger would do. The entire section on the legal foundation is worth reading – especially given that this segment will determine whether this merger still has any future – but some of the excerpts are quite striking. First, the Commission talks about the nature of the detriments at issue in this case. Even on a narrow reading of the Commerce Act, some of these detriments exist even within the relevant markets :
70. The detriments that arise from a lessening of competition typically include allocative efficiency detriments (welfare losses from increased prices/reduced quality), productive efficiency losses (higher costs over time), and dynamic efficiency losses (reduced incentive to innovate). In some circumstances, wealth transfers from New Zealanders to non-New Zealanders may also give rise to a detriment to New Zealand.58
71. Reductions in the quality of New Zealand news content is an example of a potential source of detriment that would fall within the identified reader and advertising markets.
72. In a typical merger authorisation application we would weigh these “in market” anti- competitive effects of the proposed transaction against benefits to the public.
However, the Commission then proceeds to argue, the detrimental issues at stake go far wider :
73. …the proposed merger of NZME and Fairfax has the potential for negative consequences that may extend beyond the reader and advertising markets in which competition is affected.
76. In particular, a loss in plurality might impact on New Zealand society more generally. For example, submitters and expert media advisers identified media plurality as an important contributor to democracy and Government accountability, and as an issue of public importance irrespective of the type of media coverage (reporting or opinion).
77. A significant reduction in plurality would affect all New Zealanders, whether they directly consume news content or not. A loss in plurality may therefore have effects that extend beyond the reader markets in which competition is affected. To the extent we consider plurality as a negative “out of market” consequence from the proposed merger,
The Commission then asks itself a key question at paragraph 77.1 : “Can negative ‘out of market’ consequences be considered in our analysis? “ It concludes that they can, and should. It finds the suggestion that it has to consider some detriments to the public good – but steadfastly ignore others – to be an utterly unconvincing reading of its duties. If the Commission’s findings are going to be challenged in court by Fairfax/NZME, this will be Ground Zero of the appeal :
74. The effect of the Applicants’ approach is that there would be a category of negative consequences of a proposed merger that we are required to ignore. For example, if a merger was to have an adverse impact on the environment, employment, privacy interests, or other constituents of social welfare which fall outside of the market(s) in which competition has been lessened or else are not efficiency related, we would be required to ignore those factors in assessing whether there was such a public benefit that the transaction should be permitted.
78. The implication of the Applicants’ approach is that we might have to authorise a merger that in our assessment was not in the public interest. That is, if we considered that there was a negative consequence that outweighed the positive aspects of a proposed merger, we might still have to authorise depending on where those negative impacts were felt.
79. It is difficult to discern a rationale for Parliament wanting the Commission to consider only some of the detriments to the public of a merger and to disregard others, and we would only adopt such an approach if compelled to do so by the statutory language, or judicial interpretation of the Act.
80. In our view, the language of the Act does not compel the interpretation that some negative consequences count for the purposes of the analysis and some do not. To the contrary, we consider that our statutory task is to determine whether the merger will be likely to result “in such a benefit to the public that it should be permitted” notwithstanding that the merger has the effect or likely effect of substantially lessening competition. Whether there is such a ‘benefit to the public’ cannot be considered divorced from outcomes that harm the public, whether or not they are economic or market-oriented in nature.
Exactly. As mentioned, the whole judgment is worth reading. It is a brilliant and comprehensive piece of work that is a credit to those in the Commission who consulted widely, weighed the issues carefully and put the arguments together with clarity. Last December, Werewolf analysed the merger and its likely consequences, while offering a test case to counter the arguments about the alleged disposable repetition in political coverage being put forward by the applicants. Without the merger, Fairfax and NZME will now be compelled to maintain more of the journalists on which its online expansion depends. Under a merger, these assets would have been…merged, with job losses amid the journalists on the front lines. As the Werewolf story argued:
The journalistic teams that currently generate the said-to-be essential news content would arguably stand a better chance of surviving relatively intact without a merger, than with one. As one Commerce Commission staffer reasoned aloud at the [November] conference, if quality journalism really is the best resource that Fairfax/NZME currently own – which is what the executives were claiming – then why would it be the first resource in line to be cut should the merger be rejected?
To repeat: if the merger is rejected, other responses than consolidation would have to be explored at Fairfax/NZME to preserve their ongoing competitive rivalry. Yes, there would be intense economic pressure to scale back the expensive, low return journalistic coverage of the regions. However, that temptation will exist if the merger is approved, or if it isn’t.
Get Out, Get Down
As anyone who’s seen it will testify, Jordan Peele’s Get Out movie is not only a great horror film but an unsettling satire of racial politics and white liberalism. Here’s a couple of highlights from the unobtrusive soundtrack, starting with the quietly creepy main theme:
The movie also makes good use of the Childish Gambino track “Redbone”:
One of Get Out’s recurring subplots heaps a ton of ironic praise on the legendarily rude and incompetent Transportation Security Administration (TSA) that handles security at US airports. Peele has clearly had a thing about the TSA for quote some time. In one of his Comedy Central skits with Key and Peele, he did a great number on how al-Qaeda was being constantly thwarted by the infinite cunning of the geniuses at TSA.