A merged media entity of the country's biggest newspaper publishers could cut coverage quality or introduce a paywall without losing much advertising revenue, disadvantaging the public, the Commerce Commission's lawyer told the Wellington High Court.
In the sixth day of Stuff and NZME's appeal against the regulator's decision earlier this year, James Farmer QC continued setting out the commission's case for rejecting the merger. The media companies argued interdependency between reader numbers and advertising revenue would prevent it from increasing costs to consumers or reducing quality, but Farmer said that was not a universal truth and had no regard to the facts of this case.
Farmer said it was obvious the merger would result in cost savings and synergies for the media companies, otherwise they wouldn't do it. Those savings would translate into reduced quality of news coverage, but that wouldn't be seen by all audiences, as some readers wouldn't be aware of what they were missing out on, he said.
The media companies' lawyers argued the prospect of reduced advertising dollars created incentives for the merged company to maintain quality news coverage. However, Farmer said there may be very little impact on advertising revenue as the number of readers wouldn't necessarily decrease enough to cut ad sales even if quality declined.
"The commission came to the conclusion that the cost savings might be worth it because they would not translate into such a loss of readers that there would be detrimental impact on advertising revenue," Farmer said. James Every-Palmer, another of the commission's lawyers, will argue more fully on that point later in the case, he said.
Farmer made a similar argument on the issue of a paywall, saying the current competition between NZME and Stuff prevents either from imposing a paywall but a merged entity would have no such competitive concerns. The commission had found that a paywall post-merger would likely be more expensive and restrictive than paywalls that could be introduced by either of the companies without the merger, he said.
"A paywall could be introduced without losing a disproportionate amount of revenue through loss of readers," Farmer said. "That's the issue. That's the commission's assessment, and this court has to be satisfied it is not able to make that assessment and it wasn't open to it to make that assessment.
"Bearing in mind the lack of evidence put before the commission on that question, our submission would be the commission is perfectly entitled to make that assessment."
Farmer also said the Commerce Commission was well within its jurisdiction under the Commerce Act to consider the issue of plurality in rejecting the merger, under its concern for public benefits or detriments of the merger. The media companies argued that's outside the scope of the regulator's considerations.
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