Justice Robert Dobson and Professor Martin Richardson drew a line between online content aggregators and distributors such as Facebook and Google and news organisations Fairfax New Zealand and NZME in rejecting the publishers' appeal to merge.
Among Justice Dobson and Professor Richardson's findings in the 100-page High Court judgment, they backed the Commerce Commission's decision to turn down a proposed merger of NZME and Fairfax NZ, which was touted as the only way the country's dominant newspaper publishers could stand up to the likes of Facebook and Google eating into their online advertising revenue. The publishers claimed the online giants would remain a significant competitive constraint on a merged business, something the commission didn't believe in its decision to reject the transaction and that view was upheld in the High Court in Wellington.
The judge and professor said the commission's approach distinguishing a difference between producers of news, and collators and redistributors was relevant and that the regulator was right to exclude the likes of Facebook and Google in assessing the competitiveness of online national news production, which were unlikely to be a "meaningful constraint" on the merged publisher.
"Observed patterns of behaviour suggest that readers are likely to assess content from sites operated both by producers and by collators," the judgment said. "In seeking out reliable original news, visitors to collators' sites are likely to discriminate in their level of attention, placing greater credence and therefore spending more time on items from reputable producers of news."
Justice Dobson accepted the collators and distributors helped promote plurality of voices by inviting readers to access a wide range of news sources, however a distinction between production and distribution was still necessary, because "fifteen recyclers of the product of two producers of news are still only making two views available".
The publishers talked up the constraint caused by Google and Facebook, pointing to the two-sided market of competing for an audience as well as vying for advertiser dollars. Traditional publishers have struggled to respond to Google and Facebook hoovering up online advertising having devalued their print operations by freely distributing their content online.
While the online threat was front and centre of the firms' application, online ad sales only account for a fraction of the publishers' combined revenue which is still largely derived from traditional print advertising.
Among the regulator's concerns in rejecting the merger was the prospect of the dominant publisher introducing a subscription model to access a news website, better known as a paywall. NZME and Fairfax rejected that analysis, saying a merged entity would probably not introduce a paywall because of the unprofitable experience internationally. While Justice Dobson and Professor Richardson didn't accept that approach, saying the local environment was different, they did see the failure of paywalls internationally as compelling.
"We take a different view from the commission and cannot rate the prospect of a paywall being introduced as a sufficient likelihood to take it into account as conduct the appellants would likely undertake as a result of an SLC (substantially lessening competition) in the online reader market," they said.
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