Nine, Fairfax merger sees news quality take center stage in Australian regulator's review

20 August 2018 8:32am

17 August 2018. By James Panichi

The impact of Nine Entertainment's proposed merger with Fairfax Media on the ability of the news companies to investigate and report on current events and present stories in a “compelling fashion” is set to play a role in the Australian competition watchdog’s review of the deal.

The Australian Competition & Consumer Commission’s market inquiries letter, published late on Thursday, calls for submissions on market issues including the degree to which the merged Nine-Fairfax company would be able to maintain journalistic standards.

This includes the new company’s ability to offer a diversity of approaches to covering news by taking a “different angle” on a news story.

The ACCC wants submissions to its review of the deal to delve into the “impact on choice and volume or range of the news and information available to consumers,” and lists as examples the possibility of a diminished “variety of topics covered” and a “less vigorous investigation of issues.”

The market inquiries letter suggests the ACCC is set to approach the merger, announced on July 26, by assessing the quality of the news provided by the media outlets alongside their market share and the deal’s impact on competition for advertisers as they negotiate with the combined company.

The focus on the loss of quality news mirrors the approach taken by the ACCC’s New Zealand counterpart, the Commerce Commission, in its review of the proposed merger between local media company NZME and Fairfax New Zealand, a local subsidiary of Australia’s Fairfax Media. Last year, the Commerce Commission declined to clear that deal.

In explaining its review, the ACCC said its standard “substantial lessening of competition” test will focus on “the extent to which the merger parties constrain each other, and the effect that removal of this competition constraint will have on prices, quality and choice.” But that doesn't preclude a broader industry analysis.

“[T]he potential impact on diversity and plurality can be relevant to assessing whether there is a lessening of competition,” the watchdog said in its call for submissions.

If completed as announced to the Australian Securities Exchange last month, the deal would create a media company worth A$4.2 billion ($3.1 billion), capable of operating across a range of media platforms. The merging companies say the deal would help provide advertisers with tailored campaigns.

The ACCC has also called for information on the degree to which Nine and Fairfax’s media platforms currently compete in the supply of content, such as news and information, to consumers.

This suggests the regulator is interested in assessing whether different media platforms — for example, print and online, or radio and television — are in competition with one another. The merging parties argue the deal is essentially vertical and there are few areas in which they directly compete.

Fairfax is the publicly-listed publisher of The Financial Review, The Sydney Morning Herald and Melbourne’s The Age, and owns a network of rural and regional publications. It has a controlling stake in Domain Group, a property-listing portal.

Nine, also listed on the ASX, operates free-to-air television networks including Channel 9, 9Go! and 9Life, and has a 50 percent interest in video-streaming service Stan, with Fairfax owning the other 50 percent of the company.

The deal will rebrand the merged company as “Nine” and will grant Nine Entertainment shareholders a 51.1 percent stake, with Fairfax shareholders owning the remaining 48.9 percent.

The merger is the first deal of its kind under Australia’s new media laws, which were loosened last year to allow media proprietors to own a full range of media platforms in the same market. As a result, television owners, previously banned from owning newspapers, are now free to do so.

Speaking to investors after the deal was announced, Fairfax chief Greg Hywood said the merger didn’t include “a lot of competitive overlap” and the two companies didn’t expect to encounter opposition from the ACCC.

But in comments to MLex last week, ACCC Chairman Rod Sims said it would be wrong to take the regulatory process for granted and that his review of the deal would go beyond price issues to also consider “service standards.”

The market inquiries letter is also asking for public submissions on the degree to which news provided on different platforms is interchangeable. For example, would newspaper readers be prepared to obtain their information online, should it become too expensive or no longer available in print?

“If the price of the Fairfax publication you publish…increased or the quality declined…what would you switch to for your news?” the ACCC asks. “Would it be another written publication (that is, newspaper or online) or other source of news such as television, radio or magazines?”

The regulator puts the same question to listeners of the Macquarie radio network, of which Fairfax has a controlling stake, and viewers of Nine’s news and current-affairs television programs.

The watchdog also wants to determine whether potential advertisers currently use separate negotiations with Nine and Fairfax to leverage a better deal for themselves. For example, are advertisrs able to direct their budgets to Fairfax’s publications if they are unhappy with a television deal offered by Nine?

“Have you ever used the presence of Nine to negotiate a more favorable advertising arrangement with Fairfax or vice-versa?” the ACCC asks, while also quizzing advertisers on whether they have deals specifically targeting online outlets — the one area of direct competition between Nine and Fairfax.

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