Watchdog baulks at New Zealand media merger

New Zealand's competition watchdog indicated on Tuesday it will reject a proposed merger between the country's two largest media companies, saying the plan would reduce competition and stifle news coverage.

In a draft decision on the planned link-up between NZME and Fairfax Media NZ, the New Zealand Commerce Commission (NZCC) said its "preliminary view is that it should decline to authorise the merger".

The update sent NZME shares nosediving 24.24 percent to NZ$0.50 on the New Zealand market, but Fairfax's Australian parent added 1.24 percent to Aus$0.815.

The two companies estimate that together they would reach an audience of 3.7 million, more than 80 percent of New Zealand's 4.5 million population.

The NZCC said the combined entity would control almost 90 percent of New Zealand's print media, the second highest concentration of ownership in the world behind China.

"All this would result in an unprecedented level of media concentration for a well-established liberal democracy," the regulator said.

It warned the deal would create "a multi-media organisation, potentially with a single editorial voice, that would be the largest producer of national, regional and local news by some margin in New Zealand".

Australian-owned Fairfax NZ publishes titles such as Wellington's Dominion Post and the Christchurch Press, as well as running New Zealand's most popular news website stuff.co.nz.

NZME owns the New Zealand Herald, which has the second largest news website, and a string of radio stations.

The companies said last month that the merger would "(increase) the ability to compete in digital advertising with global competitors".

The NZCC acknowledged the business merits of the plan but said there were larger issues at play, with competition in advertising markets for digital, Sunday and community publications likely to be substantially reduced.

It said there could also be an increase in some subscription and cover prices.

In addition, it said the two media organisations currently competed for news stories, ensuring matters of public interest did not go unreported and a variety of viewpoints were aired.

"The check that NZME and Fairfax provide on each other would be lost under the proposed merger," it said.

In a joint statement, the companies described the regulator's concerns about media plurality as "unquantified".

"The NZCC has failed to properly take into account the diversity of opinions that will continue post-transaction in an increasingly converged digital world," they said.

While a final decision is not due until March 15 next year, the NZCC's draft finding was 195 pages long and appeared comprehensive.