NZCC 8 NZME Limited and Fairfax NZ Limited – Authorisation Determination
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ISSN 1178–2560 Decision Series Project no. 11.04/15933 Public version Determination NZME Limited and Fairfax New Zealand Limited [2017] NZCC 8 The Commission: Dr Mark Berry Sue Begg Elisabeth Welson Graham Crombie Summary of application: NZME Limited and Fairfax NZ Limited and its parent company, Fairfax Media Limited, seek approval to merge the New Zealand operations of NZME Limited and Fairfax NZ Limited. Determination: The Commerce Commission is not satisfied that the merger will not have, or would not be likely to have, the effect of substantially lessening competition in a market. The Commission is also not satisfied that the merger will result, or will be likely to result, in such a benefit to the public that it should be permitted. Therefore, the Commerce declines to grant authorisation for the merger pursuant to section 67(3)(c) of the Commerce Act 1986. Date of Determination: 2 May 2017 2875553 2 Confidential material in this report has been removed. Its location in the document is denoted by [ ]. 2875553 3 CONTENTS GLOSSARY ..................................................................................................................................5 SECTION 1: THE COMMISSION’S DETERMINATION ..................................................................... 15 The proposed merger ....................................................................................................................... 15 Determination .................................................................................................................................. 15 The Commission’s investigation ....................................................................................................... 16 SECTION 2: KEY PARTIES AND COMPETITION ISSUES .................................................................. 18 The merging parties .......................................................................................................................... 18 Other industry participants .............................................................................................................. 20 Industry background ........................................................................................................................ 21 The Applicants’ rationale for the proposed merger ......................................................................... 23 Legal framework ............................................................................................................................... 24 Counterfactual analysis .................................................................................................................... 44 The relevant markets ....................................................................................................................... 58 SECTION 3: ADVERTISING MARKETS .......................................................................................... 60 The Commission’s Draft Determination ........................................................................................... 60 Market definition in advertising markets ......................................................................................... 61 Competition analysis – digital advertising ........................................................................................ 67 Competition analysis – print advertising .......................................................................................... 76 Community newspapers ................................................................................................................... 88 SECTION 4: READER MARKETS ................................................................................................. 117 Reader markets of concern ............................................................................................................ 118 Competition analysis ...................................................................................................................... 135 Online New Zealand news .............................................................................................................. 135 Sunday newspapers ........................................................................................................................ 194 Community newspapers ................................................................................................................. 203 SECTION 5: VERTICAL AND CONGLOMERATE EFFECTS .............................................................. 205 Vertical effects ................................................................................................................................ 205 Conglomerate effects ..................................................................................................................... 207 Other effects ................................................................................................................................... 209 2875553 4 SECTION 6: PUBLIC BENEFITS AND DETRIMENTS ...................................................................... 212 Approach to assessing benefits and detriments ............................................................................ 214 Quantified benefits and detriments ............................................................................................... 220 Production efficiencies ................................................................................................................... 220 Productive, dynamic and allocative efficiency losses .................................................................... 239 Summary of the quantified benefits and detriments..................................................................... 260 Unquantified benefits .................................................................................................................... 266 Effects of a loss of media plurality ................................................................................................. 276 Unquantified detriments ................................................................................................................ 330 Chairman ........................................................................................................................................ 345 Attachment A- NZME and Fairfax print publications financial forecasts ....................................... 346 ATTACHMENT B – COMMUNITY ADVERTISERS ......................................................................... 355 2875553 5 Glossary Term Description App A type of software that allows you to perform specific tasks. Applications for desktop or laptop computers are sometimes called desktop applications, while those for mobile devices are called mobile apps. Banner or display Advertisements that are embedded into a webpage and which advertising typically occupy the top and sides of the webpage, or within articles and pages. Cpi or cpm ‘Cost per impression’ (cpi) or ‘cost per thousand impressions’ (cpm), which refers to the cost of advertising where advertisers pay each time an ad is displayed. Datawall A requirement to submit and register information to access news content, or news content above a specified amount. Digital and online These terms are used interchangeably to refer to any content (including news), advertisement, advertising inventory, or platform (ie, website or app) that relates to the internet. Homepage Advertisements displayed for a day on a publisher homepage. Often takeovers used for branding campaigns. Mobile interstitials Full-screen advertisements that appear before a webpage is first loaded on a mobile phone browser or application. These advertisements must be dismissed by the reader before the webpage or application can be used. Native Content that is created for the paid promotion of a brand but which advertisements does not have the usual format of an advertisement. These are sometimes referred to as advertorials. NZME News Service NZME’s news sharing service with NZME’s daily, Sunday and community newspapers and online websites and independent publishers. News Works The trading name of the New Zealand Press Association Limited’s (NZPA) commercial entity. News Works advocates and promotes the brands of Newspaper Publishers’ Association members (amongst other functions). 2875553 6 Term Description NPA Newspaper Publishers’ Association. The NPA’s members are Fairfax, Allied Press, The Gisborne Herald , Ashburton Guardian , The Greymouth Star , Westport News , The Whakatane Beacon and Wairoa Star . Paywall A system that prevents internet users from accessing at least some of a website’s content without payment. Programmatic The use of software to purchase digital advertising, rather than buying advertising ads from salespeople. Reach The total number of different people or households exposed, at least once, to a media platform during a given period. Search advertising A method of placing online advertisements on web pages that shows results from search engine queries. Search engine A software system that is designed to search for information on the internet. Syndicated content Content that is not self-generated by the publisher, user generated or generated by freelance writers, but is collected from a range of other news, information and entertainment organisations and is made available in the publisher’s own print or online publication. 2875553 7 Executive Summary X1. On 27 May 2016 Fairfax and NZME (the Applicants) sought clearance