NZME LIMITED v COMMERCE COMMISSION [2017] NZHC 3186

NZME LIMITED v COMMERCE COMMISSION [2017] NZHC 3186 [18 December 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-Ā-TARA ROHECIV 2017-485-445[2017] NZHC 3186BETWEEN NZME LIMITEDFirst AppellantFAIRFAX MEDIA LIMITEDSecond AppellantFAIRFAX NEW ZEALAND LIMITEDThird AppellantAND COMMERCE COMMISSIONRespondentHearing: 16–20 October, 24-27 October 2017Counsel: D J Goddard QC, A S Butler, S C Keene, T J Pilkington,M W McMenamin and C M Marks for the AppellantsJ A Farmer QC, J D Every-Palmer QC, F J Cuncannon,P I C Comrie-Thomson and G Spittle for the RespondentJudgment: 18 December 2017JUDGMENT OF DOBSON J AND PROFESSOR RICHARDSON[Public, redacted version]CONFIDENTIALITY:The Court made orders on 31 July 2017 to protect the confidentiality of matters that were provided tothe Commerce Commission in confidence in the course of its investigation. Those orders are now madepermanent, with the effect that no confidential material will be publicly available either in the contentof the public version of this judgment, or by search of the Court file.The unredacted version of this judgment has been distributed on a restricted basis to counsel andnominated representatives of the parties on the date appearing above. After receiving submissions fromcounsel on the extent to which confidential matters need to be redacted, the redacted version of thejudgment was re-issued at 4.00 pm on 19 December 2017.In a small number of paragraphs, text containing confidential material has been redacted. In a largernumber of cases, where it is sufficient to support the content of this judgment by cross-reference,references have been made to confidential content in the non-publicly available version of theCommission's determination. The scope of entitlement to access that document therefore dictates thescope of entitlement to have regard to that cross-referenced material in this judgment.ContentsIntroduction ............................................................................................................. [1]Outline of the appellants' businesses................................................................... [3]The Commission's determination ...................................................................... [14]Nature of the appeal ........................................................................................... [33]Grounds of appeal .............................................................................................. [39]The clearance decision .......................................................................................... [41]Market definition ................................................................................................ [41]The counterfactual ............................................................................................. [44]Functional dimension ........................................................................................ [47]Distribution of news and information? ............................................................. [52]Treatment of two-sided markets ......................................................................... [60]Effect of zero price? ........................................................................................... [66]Online national news reader market ................................................................... [70]Advertising constraints on quality ..................................................................... [72]Other business constraints on quality ............................................................... [87]Barriers to entry in the production of news ...................................................... [97]Multi-sourcing/multi-homing .......................................................................... [109]Prospect of a paywall........................................................................................ [118]Sunday newspapers ............................................................................................. [125]The reader market ............................................................................................ [133]The advertising market .................................................................................... [139]Community newspapers ..................................................................................... [149]The reader market ............................................................................................ [150]The advertising market .................................................................................... [160]Conclusions on clearance appeal ....................................................................... [175]The authorisation decision ................................................................................. [177]Relevance of loss of media plurality ................................................................ [177]Scope of Commission's jurisdiction ................................................................. [178]Analysis ............................................................................................................. [190](i) Legislative history ................................................................................. [190](ii) The position elsewhere .......................................................................... [196](iii) Commission's prior conduct and scope of expertise ............................. [202](iv) Judicial consideration ........................................................................... [215]Weight given to loss of plurality ....................................................................... [232]The plurality debate.......................................................................................... [236]Relative importance of media plurality ......................................................... [242]Adequacy of internal plurality ...................................................................... [268]Other unquantified benefits and detriments ................................................... [277]Quantified benefits and detriments.................................................................. [290]The overall assessment ..................................................................................... [298]Conclusion on authorisation appeal .................................................................. [306]Process complaints .............................................................................................. [310]Conduct of post-conference interviews............................................................ [313]Terms and timing of instructions to BDO ....................................................... [337](i) Terms of instructions ............................................................................. [343](ii) Limited time to respond ......................................................................... [356]Nature of any relief .......................................................................................... [362]Costs ..................................................................................................................... [365]Summary .............................................................................................................. [370]Introduction[1] The first and third appellants (jointly the appellants, separately NZME andFairfax) both have substantial media businesses in New Zealand. In May 2016 theyapplied to the respondent (the Commission) for either a clearance or an authorisationto complete a merger of their New Zealand businesses. On 2 May 2017 theCommission declined both applications and the appellants have appealed from thatdetermination.1[2] In addition to substantive challenges to the correctness of the Commission'sdetermination, the appellants have raised criticisms of the process adopted bythe Commission. Those criticisms might have been dealt with separately as anapplication for judicial review. However, over the Commission's objection, I1 NZME Ltd and Fairfax New Zealand Ltd [2017] NZCC 8 [CCFD].allowed the appellants to include them as a component of the appeal. We dealseparately with the issues raised by those process criticisms towards the end of thisjudgment. The outcome on them has not had any bearing on arguments raised in thesubstantive appeal.Outline of the appellants' businesses[3] NZME is a media and entertainment business with newspaper interestsproducing: print publications, namely the New Zealand Herald, the Herald on Sundayand the Weekend Herald; digital publications, including nzherald.co.nz; radiobroadcasting businesses, including Newstalk ZB, ZM and Radio Hauraki; and othere-commerce services. NZME also has ownership interests in other newspaper andpublishing companies. Its businesses are located in the North Island and include sixdaily newspapers, two paid weekly papers, 11 online versions of newspaper websites,two lifestyle websites, 10 radio station websites, 16 other websites, six magazines,nine radio stations, and 23 community newspapers.[4] NZME was, until June 2016, known as Wilson and Horton Ltd and its currentbusiness resulted from a demerger from APN News & Media Ltd. NZME is listed onthe NZX.[5] Fairfax is a New Zealand subsidiary of the Australian entity, Fairfax MediaLtd, the second appellant. Fairfax produces numerous print publications, operateswebsites and tablet and smartphone apps for stuff.co.nz, and has additional mediainterests by virtue of shareholdings in publishers of other newspapers. It alsooperates a website providing a private neighbourhood forum for neighbours to talkand share online. Fairfax's principal newspapers include The Dominion Post, ThePress and the Sunday Star-Times. In total, it publishes nine daily newspapers ofwhich four are in the North Island and five in the South Island, three paid weeklypapers, seven websites, 62 community publications spread throughout the country,and 10 magazines.[6] The proposed transaction would involve NZME acquiring all of the shares inFairfax. In exchange NZME would pay NZ$55 million in cash and would issueshares equal to a 41 per cent shareholding in NZME to an Australian subsidiary ofFairfax Media Ltd. The Commission treated the appellants as each other's strongestcompetitor in most of their businesses' principal spheres of activity.[7] In recent years the rapid growth of dissemination of news and information indigital form has caused a radical transformation of the way in which these activitiesoccur. Media businesses such as the appellants have supplemented their traditionalprint products with digital forms of making news and information available. BothNZME and Fairfax have adopted a "digital first" strategy so that the content preparedfor publication is first posted on the digital sites maintained by each of them(nzherald.co.nz for NZME and stuff.co.nz for Fairfax). A sub-set of the items postedsince the last print publication are selected for hardcopy publication in the dailynewspapers for each, including their masthead papers, namely the New ZealandHerald for NZME, and The Dominion Post and The Press for Fairfax.[8] This transformation in the mode of dissemination has radically altered thesources of revenue for the businesses. Their circulation of printed products hasdropped consistently, taking with it the level of subscription income and receipts fromcasual purchasers of the printed newspapers. Reduced circulation means thatpublishers cannot continue to charge at the same rate for advertisements in printednewspapers.[9] At the same time revenue generated from advertisements on the appellants'digital sites has increased with the growth in users going to those sites as a source ofnews. Neither of the appellants charge viewers to access their websites or apps, so thesole source of revenue from the digital form of their publications is the payments byadvertisers for having their advertisements appear on those platforms. The amountscharged for digital advertising are dictated by the number of visits to the site or app,so that the appellants are incentivised to optimise the quality of their digital format.That supposedly means that they display the most popular content which encouragesthe largest readership of their digital forms of publication.[10] One feature of the marketing of digital advertising in New Zealand is a jointventure between NZME, Fairfax, TVNZ and MediaWorks through KPEX Ltd.22 KPEX is an abbreviation of Kiwi Premium Advertising Exchange.KPEX operates as a clearing house to sell unbooked digital advertising inventory thatis available in any of the joint venturers' digital platforms. The matching of advertisersto available digital advertising slots is conducted by algorithms that match the needsin advertising capacity without regard to an individual publisher's requirements.Currently each of the four shareholders hold one quarter of the shares. [].[11] Media companies such as the appellants do not have the digital media platformto themselves. First, the internet gives readers access to an extensive range ofworldwide major newspapers that have adopted similar strategies to the appellants inpublishing their newspapers or equivalent content in digital form. Some of the world'sbest known newspapers charge readers wishing to access their content,3 some affordaccess to some part of their content free of charge, but then require payment for fullaccess,4 and others afford entirely free access to the whole of their publication indigital form.5 This extraordinarily expanded access to sources of international newsmeans that there is no market within New Zealand confined to New Zealand producersof international news. The focus of any competition analysis is therefore on theproduction of New Zealand news, opinions, and other information relating toNew Zealand.[12] Second, the internet and digital technologies have facilitated the growth ofbusinesses that collate and redistribute news produced by a range of sources.Internationally, this role is dominated by entities such as Facebook and Google.Their ability to very speedily collate and make available news and information withthe facility to tailor content to the algorithmically predicted areas of interest of theviewer has transformed the manner in which news and current affairs informationis accessed for those familiar with (and potentially reliant on) communications indigital form.3 For example The Times and The Wall Street Journal.4 For example The New York Times and The Washington Post.5 For example The Guardian, which does invite donations.[13] The recent experience in New Zealand reflects similar changes in comparableeconomies. There has been a great deal of analysis and academic writing about howthese financial arrangements can be rebalanced to enable digital forms of mediapublications previously produced only as printed newspapers to be maintainedsustainably. There is a degree of pessimism, at least in some quarters, that asatisfactory outcome will be achieved.The Commission's determination[14] The appellants sought a clearance from the Commission under s 66 of theCommerce Act 1986 (the Act), on the basis that their proposed merger would not haveor would not be likely to have the effect of substantially lessening competition (anSLC) in a market. Their alternative application was for authorisation of the transactionunder s 67 of the Act. The Commission is empowered under that section to grant anauthorisation where, despite not having been satisfied that the acquisition will not haveor would not be likely to have an SLC in a market, the acquisition would nonethelessresult in such a benefit to the public that it should be permitted.6[15] The Commission consulted widely in its consideration of the application. On8 November 2016 it issued a Draft Determination which signalled the preliminaryview that the proposed merger would be likely to substantially lessen competition incertain relevant markets, and that it was not likely to generate sufficient benefits towarrant authorisation. Following release of that draft the Commission convened apublic conference to hear submissions for two days in early December 2016. Afterthe conference further submissions and evidence were received and considered.[16] When considering whether a proposed merger is likely to lead to an SLC, theCommission analyses the scope of the market or markets in which the participants'commercial activities occur. It defines the relevant market or markets as a tool inhelping to identify the state of competition in that market as it projects that occurringin both the factual and counterfactual scenarios.6 Commerce Act 1986, s 67(3)(b). That section is set out at [181] below.[17] The Commission found that the appellants' businesses operated in two-sidedmarkets. The first side is a market between each of their businesses as producers ofnews and related content, and the readers who receive that content. Traditionally, thatmarket represented the sale of newspapers to consumers. The second side is a marketbetween the publishers of the media product and advertisers who pay to displayadvertisements to promote their goods and services to the readers of the mediabusinesses' product. In essence, the advertisers are paying for the attention of thereaders to what is produced in the appellants' publications.[18] The task of defining the scope of the markets in which the appellants conducttheir business is complicated by the distinct relationships between the appellants asproducers of news and the consumers who read their publications on the one hand, andthe appellants and the advertisers who pay for advertising space in their publicationson the other. These two distinct sets of commercial relationships are nonethelessclosely interdependent because the quality and reputation of the news produced by theappellants will dictate the extent of readership that they attract, and the demand forand value of the advertising space in their products will depend on the number ofreaders of their publications. Accordingly the Commission treated the appellants asoperating in two-sided markets.[19] For reasons that we address in considering the appellants' criticisms of thedetermination, the Commission defined separate markets on both the reader andadvertising sides of the platform for national news in the appellants' daily papers(separately in their printed and online forms), for the Sunday newspapers and forcommunity newspapers.[20] In projecting the way in which the businesses would operate in the next twoyears both with and without the merger, the Commission considered it appropriate toassess the conduct of the participants on two scenarios: first, that within the relevanttime frame the businesses (whether remaining separate or merged) would continue tooperate more or less the existing mix of digital and print publications; and second,that the businesses (whether remaining separate or merged) would scale back theirprint publications to focus increasingly on production of digital news. In someaspects of its analysis, the Commission made distinctions between the outcomes inthese alternative "digital and print" or "digital and limited print" scenarios.[21] Because of geographical separation of the areas in which their printed dailynewspapers circulate, the Commission found there was no likelihood of an SLC in thereader aspect of that market (that is, between producers of newspapers and buyers ofthem). However, the Commission did identify the likelihood of an SLC in theproduction of online national news.[22] The Commission considered the market for Sunday newspapers as a separateone. Fairfax publishes the Sunday Star-Times and the Sunday News. NZMEpublishes the Herald on Sunday. Only Fairfax Sunday newspapers are circulated inthe South Island, but there is direct competition between the Sunday newspaperspublished by both appellants in the North Island. The Commission determined thatthere would likely be an SLC in both the reader and advertiser markets for Sundaynewspapers in the North Island.[23] Both appellants have substantial businesses in producing communitynewspapers. These are typically published weekly and distributed free within definedlocal boundaries. NZME produces 23 such publications and Fairfax 62 of them. Theirpublications compete in 10 areas in the North Island.7 The Commission found thatthere would likely be an SLC in both the reader and advertiser sides of communitynewspaper businesses in the 10 areas in which the appellants compete.[24] Because of the findings of the likelihood of SLCs in those markets, theCommission declined to grant a clearance for the proposed merger. The Commissionwent on to consider whether it should nonetheless grant an authorisation for themerger.[25] This task involved an analysis of the projected benefits and detriments of themerger in both quantifiable and unquantifiable forms. Because of the significant7 Whangārei, Hamilton, Rotorua, Taupō, Napier, Hastings, Stratford, Palmerston North,Horowhenua, and Kāpiti.uncertainties in projecting the circumstances that would pertain in the first years of themerged entity, the range of quantified benefits/detriments outcomes was wide:8Table 17: Estimated net quantifiable impact – 'digital and print' scenarioTime frame High detriment/low benefits Low detriment/high benefits5 years $41 million $204 millionTable 20: Estimated net quantifiable impact – 'digital plus limited print' scenarioTime frame High detriment/low benefits Low detriment/high benefits5 years $55 million $196 million[26] These quantifiable benefits arose from projected savings related to overheadcosts such as marketing, IT, premises and management costs, as well as employmentand other operational cost savings that were likely to follow from the merger.[27] The Commission acknowledged that there could also be unquantifiablebenefits if the merger prolonged the viable life of various print publications and theoverall level of editorial resourcing that could result from a strengthening of thebusinesses' financial position. The Commission took the view that this advantage waslikely to be relatively transitory.[28] The Commission also assessed unquantifiable detriments that it saw asarising from the merger. This focussed primarily on the loss of media plurality whichprovides a diversity of viewpoints and editorial approaches under the existingcompetitive ownership structure. The Commission found that plurality of the newsmedia is essential to maintain a well-functioning democracy because it facilitates theavailability and exchange of a divergence of views. Given that a merger would resultin a single organisation controlling nearly 90 per cent of all print media, NewZealand's two largest news websites and one of New Zealand's two largestcommercial radio companies, the Commission was concerned that the merger would8 CCFD, above n 1, at [1326] and [1329].result in a level of media concentration unprecedented in a well-established liberaldemocracy.9[29] The Commission was not persuaded that commitments by the appellants tomaintaining divergent editorial policies so as to maintain internal plurality within themerged businesses would be adequate to maintain the external plurality that presentlyexists. The loss of plurality was found likely to be significant and potentiallyirreplaceable. The Commission treated the relative importance of maintenance ofplurality as so significant that its conclusion on the point was not a finely balancedone.[30] The Commission also found that the merger would lead to a reduction in thequality of news content as a result of loss of competition. This was classified as anon-price allocative efficiency loss. The Commission treated the extent of thisreduction in quality as likely to be significant.10[31] The Commission did not consider that the need to attract audiences in order toattract advertising would constrain the merged entity from cost saving initiatives thatwould detrimentally affect the quality of the merged entity's product. In addition theCommission saw the appellants as playing a particular role in setting the agenda fornews produced by other publishers. The Commission was concerned that a reductionin quality of the appellants' output would also have a flow on effect in reducing thequality of other sources of news.[32] It concluded that these detriments, although unable to be quantifiedspecifically, were significant, and clearly outweighed the significant quantifiablebenefits that were projected to arise from the merger. The Commission accordinglydeclined to authorise the merger.9 At [1728].10 At [1672].Nature of the appeal[33] Section 91 of the Act gives unsuccessful applicants to the Commission a rightof appeal against the Commission's determination. This is a general right of appeal,to be conducted by way of re-hearing.[34] The standard to be applied by the Court on appeal is that described by theSupreme Court in Austin, Nichols & Co Inc v Stitchting Lodestar.11 This requires theCourt to form its own views on the merits of the case. The appellants bear an onus ofestablishing that the Commission's determination is incorrect and, if that point isreached, the Court has jurisdiction to modify or reverse the determination or any partof it. The Court has the powers that could have been exercised by the Commission inrelation to the matter that is appealed.12 If considered appropriate, the Court can sendthe matter back to the Commission for reconsideration in light of an identified error.[35] The Court is not obliged to give any particular level of deference to theCommission's views. The Court can have regard to the range of expertiseappropriately attributed to the original decision maker, and any advantages the originaldecision maker had in assessing the evidence and submissions as presented to it.[36] In this case counsel for the Commission emphasised that the Commissionconducts an inquisitorial process for which it is expertly equipped by the range ofskills possessed by Commission members and the investigative staff assisting them.The Commission has a reservoir of institutional expertise in investigating andanalysing the sequence of issues that arose in dealing with both applications. It wassubmitted for the Commission that these advantages warrant a usual degree ofdeference being shown to its decision as that of a specialist body.[37] It was submitted for the appellants that the Commission had neitherexperience nor expertise to evaluate the critical issue determined against them ontheir authorisation application, namely the relative importance of maintaining11 Austin, Nichols & Co Inc v Stitchting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.12 Commerce Act 1986, s 93.plurality in the mainstream provision of news. Accordingly, no deference should beaccorded to the view it came to on that issue.13[38] We agree with the appellants that the Commission did not have expertise inevaluating the relative importance of plurality in the media. On other issues thematerial evidence was largely documentary so the Commission did not have anadvantage in observing it first-hand. Ultimately our decisions on the important issuesraised by the appeal are not affected by any measure of the level of deferenceappropriately given to the views of the Commission.Grounds of appeal[39] The appellants challenged the definition of the markets in which the activitiesoccurred, as well as the Commission's findings on the prospect of each of thepossible SLCs. These were components of a wider challenge that the Commissionought to have given a clearance to the transaction. On numerous parts of the appealthere were also more detailed levels of criticisms of the approach adopted by theCommission. We deal with the criticisms of the Commission's analysis and decisionon the clearance application in the sequence that appears in the contents at the outsetof the judgment.[40] In the event that the appellants are not successful in having their clearance applicationupheld on appeal, they also argued that the Commission's assessment of benefits and detrimentsof the merger was wrong in sufficient respects that the Court should grant an authorisation.They contend the sum of the benefits outweighed the sum of relevant detriments. Theappellants' primary ground of challenge was that the Commission had taken into account thelikely detriment from a loss of media plurality which they argue is outside the Commission'sjurisdiction. If that challenge is not upheld, the appellants argue that the Commission'sevaluation of detriments when weighed against identified benefits arising from the merger waswrong, so that an authorisation should be granted. Again, the sequence of the issues addressedappears in the contents at the outset of the judgment.13 This argument was secondary to a prior objection that the terms of the Act do not provide anyjurisdiction for the Commission to have regard to broad societal concerns so that theCommission exceeded its jurisdiction by having regard to anything beyond economicconsiderations.The clearance decisionMarket definition[41] The Commission identified six markets in which the appellants operated thatit found were relevant to the competition analysis. These markets comprised theadvertising and reader sides for online national news, Sunday (print) newspapers,and community newspapers (in the 10 areas within the North Island where theappellants' publications overlap). The appellants mounted a number of criticisms ofthe Commission's definition of the scope of these markets.[42] Numerous judicial decisions have emphasised that market definitions are buta tool used in various competition law contexts to provide a framework for analysisof the relevant competition law concern, in this case constraints on competition. Anearly description of the function of market definition, reflected in numerous morerecent decisions, is that of French J in Singapore Airlines Ltd:14In competition law [market definition] has a descriptive and a purposive role.It involves fact-finding together with evaluative and purposive selection. In its statutory setting the market designation imposes, on the activities whichit encompasses, limits set by the law for the protection of competition. Itinvolves a choice of the relevant range of activity by reference to economicand commercial realities and the policy of the statute. To the extent that itmust serve statutory policy, the identification will be evaluative and purposiveas well as descriptive.[43] The parameters of any market as defined are not necessarily determinative ofthe analysis of competitive constraints on the conduct of participants in that market.Where the market is appropriately defined in narrow terms, constraints from outsidethe market must still be taken into account if they operate on the state ofcompetition.15The counterfactual[44] A necessary component of the Commission's analysis is to identify one or morecounterfactual scenarios that would apply if the merger did not proceed. Treating the14 Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 (FCA) at 174. See alsoWoolworths Ltd v Commerce Commission (2008) 8 NZBLC 102,128 (HC) at [270(d)].15 Brambles New Zealand Ltd v Commerce Commission (2003) 10 TCLR 868 (HC) at [137].scenario that would pertain if the merger is allowed as the factual, for the purposes ofcomparison the Commission must settle on a counterfactual of the scenario that wouldpertain without it. The Commission is not obliged to define the counterfactualscenario that it considers to be the most likely if the merger does not proceed and,provided it is within the range of scenarios that are likely, the Commission can adoptthe counterfactual that would give rise to the most competition concerns.16[45] Identifying likely counterfactuals in this case is challenging because the stateof news media markets is changing, in some respects dramatically and at considerablespeed. Assuming continuation of the status quo is therefore unlikely. The Commissionadopted a counterfactual in which both applicants would be likely to increasinglyfocus on developing their online news businesses, and their print products would belikely to continue to diminish in number and comprehensiveness over time.17 TheCommission took the view that the future for the appellants' print publications waslikely to be similar in both the factual scenario where the merger proceeded, and in thecounterfactual where their businesses remained under separate ownership.18[46] The appellants abandoned criticisms that the Commission had erred in thedefinition of the counterfactual that it adopted. We have adopted the Commission'scounterfactual for the purposes of assessing the appellants' criticisms. In itsauthorisation decision, the Commission adopted two possible scenarios under whichthe merged business would either continue more or less its present scale of printpublication businesses, or alternatively would maintain a more limited range of printpublications.Functional dimension[47] One of the criteria recognised by the Commission in its Mergers andAcquisitions Guidelines when testing the prospects of substitution for the goods orservices in issue is the level in the supply chain at which the parties operate.19 On this16 CCFD, above n 1, at [63]; Commerce Commission v Woolworths Ltd [2008] NZCA 276, (2008)12 TCLR 194 at 207; and Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZHC 1262,[2016] 3 NZLR 645 [Godfrey Hirst 2 (HC)] at [70].17 At [X15].18 At [183].19 Commerce Commission Mergers and Acquisitions Guidelines (July 2013) at [3.14.3].aspect of the market definition, the Commission defined "two separate functionalmarkets for New Zealand news" being the upstream production of New Zealand newscontent and the downstream distribution of that content across two-sided platforms.20The appellants criticised the Commission for what they argued was an inaccuratecharacterisation of a functional market.[48] The appellants criticised the Commission's approach on the ground that theseparate activity involved in producing news content could not constitute a market onits own until there was a supply that was intended to generate a return on the cost ofproduction.[49] Holding the Commission to what the appellants treated as a separate marketfor the production of news, they argued that there was no competition issue identifiedat the functional level of news production. It would then follow that all competitionconcerns should focus on the distribution or supply of news content, where the mergedentity would arguably face significant competition so that no prospect of an SLC couldarise.[50] We do not accept that the Commission did analyse the appellants' activities asinvolving participation in two separate functional markets. Other comments in thispart of the determination treated the appellants as vertically integrated firms thatoperate at both the upstream and downstream levels.21 Having identified the twofunctional dimensions, the Commission commented:22The primary focus of our competition analysis is in the upstream productionof New Zealand news content and how this is accessed by consumers.However, we recognise that the desire to attract consumers at the distributionlevel influences the quality of content that is produced to some degree.[51] We agree with the appellants that production alone does not constitute a marketstanding on its own until the product is traded either to wholesalers or retail consumers.However on an evaluation of the Commission's reasoning, we do not consider that itproceeded on the basis of separate markets. The functional distinction was ultimately20 CCFD, above n 1, at [581].21 At [576].22 At [582].not relevant because the Commission, correctly in our view, treated the appellants asbeing vertically integrated and being the biggest players in both components of thewider functional market including upstream production and downstream distribution.Distribution of news and information?[52] Before the Commission the appellants argued that the relevant market shouldbe provision of news and information services. The addition of the latter category wasrejected by the Commission.23 It treated New Zealand news content as a separateproduct, for which the appellants competed with a limited number of others who alsoproduced it. Irrespective of how definitional difficulties in identifying the scope ofinformation services are resolved, we agree with the Commission that adding suchservices would erroneously broaden the market. For the purposes of the appellants'applications, the market is appropriately defined as production and dissemination ofnews.[53] A related aspect of the appellants' criticism of markets as defined by theCommission being confined to the production and dissemination of news is the linebetween hard news on topics of national and local interest on the one hand, and itemsin the nature of gossip on the other. Mr Goddard QC, counsel for the appellants citedcomments by a media representative interviewed by the Commission to the effect thatwhile public discussion focused on the merits of high quality journalism, the publictend to be more interested in gossip.24[54] We do not accept that any blurring of the line between news and informationcontributed to by consumers' misrepresentation of the topics that maintain theirinterest could justify an expansion of the market for production and distribution ofnews.[55] The appellants also argued that collators and distributors of news likeFacebook and Google are treated as sources of news by many readers. From their23 At [536.2].24 Transcript of interview CC.FS.4098 at 15.perspective such distributors are close substitutes for accessing news via the onlineversions of the producers of news such as the appellants.[56] The Commission maintained several grounds for distinguishing news contentmade available by Facebook and similar sites. Those sites channel news that has beenproduced by others, with the content readers are presented with being haphazard bycomparison to the ordered content of sites maintained by online producers. Thecontent offered by such collators is rated by popularity rather than by reliability,timeliness, or its importance. The Commission submitted that readers wanting seriousjournalism will go to a website or use a news media organisation's app.Mr Every-Palmer QC, counsel for the respondent cited statistics showing that readerswho arrive at the online Stuff and Herald websites via Facebook spend much less timeon them than those readers who go directly to those sites.[57] Mr Goddard submitted orally that a New Zealand Law Commission reportpublished in 2013 adopted a more forward-looking and realistic approach to the scopeof news media in New Zealand than that adopted by the Commission in thedetermination.25 The Law Commission report addressed the need for, and possiblescope of, regulation of "new media". Mr Goddard suggested that theLaw Commission's approach included collators, commentators and distributors ofnews as a component of the news media in New Zealand. Arguably the Commissionought similarly to have included them within its market definition.[58] The Law Commission did, however, maintain the distinction between thosegenerating news and those disseminating the news produced by others:[4.56] First, and most significantly, we concluded that this proliferation ofpublishers is enriching public debate and has the potential to strengthendemocracy by increasing participation in public affairs, widening the sourcesof information available to the public and providing a greater diversity ofopinion. It is also providing a new form of accountability for the mainstreamnews media as bloggers and others critique aspects of the mainstream media'scoverage of political and other events.[4.57] However, we also noted a number of caveats: despite the massiveproliferation of publishing online, only a small percentage of this newpublishing activity is focused primarily on the generation and dissemination25 Law Commission The News Media Meets "New Media": Rights, Responsibilities and Regulationin the Digital Age (NZLC R128, 2013) (citations omitted).of original, local, news and current affairs. For example, we identified only asmall number of professional, internet-native entities for whom this was theprimary focus: these included sites such as Scoop, NewsWire, BusinessDesk,allaboutauckland.com and interest.co.nz.We consider that the Law Commission's appreciation of this distinction is consistentwith the approach adopted by the Commission in the present determination.[59] We consider that the distinction between producers of news and collators andredistributors of news produced by others remains a relevant one and theCommission's approach was appropriate. Although it oversimplifies the point,Mr Every-Palmer's distinction that those accessing material via Facebook areaccidental rather than deliberate newsreaders has some merit.Treatment of two-sided markets[60] The appellants also criticised the way in which the Commission treated theinterrelationship between the two sides of each of the markets that operated on aplatform – that is, the provision by the appellants of news reports to readers, and theprovision by the appellants of publication of advertisements for advertisers.[61] The arguments on both sides tended to exaggerate the difference between themon the relevance of two-sided markets, and the relative importance of this componentof the analysis in correctly defining the nature of the markets in which the appellantspresently compete.[62] Counsel referred us to a range of published articles on the features of differenttwo-sided markets. Those articles included various hypotheses on how such marketsshould be treated in competition analyses. Apart from media businesses, anothertripartite activity often considered in the research is the business of credit cardcompanies. They depend, in interrelated ways, on the number of merchants preparedto accept payment from purchasers by use of their credit card, which involves a costto the merchant in procuring payment from the credit card company. The relativepopularity of the credit card company with consumers will depend, at least in part, onhow widely merchants will accept their credit card as a form of payment and itspopularity with merchants will depend, similarly, on how widespread is its use byconsumers.[63] One of the articles we were referred to drew a distinction between the positionon the one hand of credit card companies, and on the other hand media businesseswhere the firm transacts separately with purchasers of the news (in whatever form),and with advertisers. Unlike the second direct transaction between a merchant and acardholder, the present relationships do not require any relevant transaction betweenthe advertisers and the consumers of the news. The point was expressed in thefollowing terms:26However, in a case involving newspapers, a product might be in the relevantmarket on the advertiser's side but not on the readers' side. For instance,suppose that people do not regard TV and newspapers as substitutes becausethey read newspapers on the metro going to work and watch TV at home inthe evening. However, if advertisers are interested in reaching each persononly once during a day, they will tend to regard TV and newspapers assubstitutes. TV would then be in the same relevant market as newspapers onthe advertiser's side but not on the readers' side. The analysis of a merger caseinvolving newspapers should then consider that TV exerts competitivepressure on newspapers in the market for advertising, but not in the market forcontent.We submit that the crucial element distinguishing a newspaper market from apayment cards market is that, in the latter, a transaction is present between so-called end-users – that is, between customers on the two sides of the market.[64] We agree with that analysis of the two-sided markets in which the appellantsoperate. We also agree with the approach adopted by the Commission. It consideredeach side of the platform individually, but also took into account the constraints arisingfrom the activity on the other side of the platform. As another respected writer on anti-trust economics has observed, the importance of the interaction between the two sidesis an empirical question.27[65] An aspect of the treatment of two-sided markets was the appellants' criticismthat the Commission did not adequately take into account the extent of stronginterdependence or "feedback loops" in assessing the competitive constraints that the26 Lapo Filistrucchi and others "Market Definition on Two-Side Markets: Theory and Practice"(2014) 10 Journal of Competition, Law & Economics 293 at 301 (citations omitted).27 David S Evans "The Antitrust Economics of Multi-Sided Platform Markets" (2003) 20 Yale J Reg325 at 358.appellants argued for. There is scope for debate on the weight to be given to the natureand effect of the interdependence, but we consider the Commission's appreciation ofinterdependence was at a point within the correct range on this topic. A preference forany different level of interdependence which would fall within that range would notchange the outcome on either market definition or the nature of competitiveconstraints.Effect of zero price?[66] The appellants' readers or viewers (we henceforth refer to them as "readers",irrespective of the form of publication they are accessing) accessing their online newssites do not pay to do so. Adopting an approach used in 2009 and 2012 OECD reportson two-sided markets,28 the appellants submitted that analysis of competitiveconstraints must encompass both sides of the market because the pricing andproduction decisions are so closely interdependent and competitiveness in the entiremarket should reflect the sum of all prices. Given the Commission's conclusion thatthere was no SLC on the advertisers' side, that conclusion ought to apply to both sidesof the two-sided market. Where the price paid by the advertisers is only added to bythe "zero" price the reader pays, arguably the competitiveness should therefore bedetermined by the competitiveness of the advertiser side of the platform.[67] We do not agree that this analysis can determine the prospect of an SLC on thereader side of the online news market. It is unnecessary to review in detail theeconomic analysis on the impact of a zero price when that factor at least sends awarning signal that the reader accepting a "free" service will likely be making acontribution in different form to direct monetary consideration passing to the producerof the online news. As the author of a recent article on the topic observed:29Human attention, both valuable and limited in supply, is a resource. It hasbecome commonplace, especially in the media and technology industries, tospeak of an "attention economy" and of competition in "attention markets".In the business slang, firms in the attention economy "compete for eyeballs";28 OECD Policy Roundtables: Two-Sided Markets DAF/COMP(2009)20 (2009); and OECD PolicyRoundtables Market Definition DAF/COMP/(2012)19 (2012).29 Tim Wu "Attention Markets and the Law" (unpublished paper, 2017) at 2 (citations omitted). Thispaper has since been updated and can be found at papers.ssrn.com: Tim Wu "Blind Spot: TheAttention Economy and the Law" (unpublished paper, 2017).and in another widely used metaphor, whoever gains attention "sucks oxygen"from everyone else.[68] In this two-sided market, that price is the attention "paid" by readers to thewebsite, necessarily including the advertisements that appear there for which theproducer of the news is paid by the advertisers. The cost to readers of giving theirattention to a news website is recognised as a form of consideration passing from them,despite the absence of a monetary cost. The number of visits to a publisher's websiteis monitored and directly affects the cost of an advertisement, which is calculated at acertain cost per given number of visits to the site. In that sense the reader does providea form of consideration in going to the site and thereby counting as a view thatcontributes to the advertising revenue earned.[69] We are not persuaded that the zero price feature of the online news marketneeds to be treated differently from the way in which it was analysed by theCommission.Online national news reader market[70] The Commission rejected the appellants' wider market definition that wouldinclude different types of media so that television, radio and printed newspapers wouldbe combined with online news products. In doing so the Commission rejected theapproach adopted by its Australian counterpart, the ACCC, in a recent informal reviewof a merger of media assets in Western Australia.30 The ACCC did not form a view onwhether printed newspapers and online products were within the same market,preferring to focus on the degree of constraint each provided the other. TheCommission recognised that other platforms may provide some constraint, but foundthat it was appropriate to define separate print and online markets.31 The differentapproach to that of the ACCC is appropriate given the materially different scale of themerger participants' activities in the areas in which they were operating.[71] In assessing the reader market for online news, the Commission found that themerger would likely result in a reduction in quality which would be achievable because30 ACCC informal review: Seven West Media Limited – proposed acquisition of the Sunday Timespublication and website (15 September 2016).31 CCFD, above n 1, a [536.3].of an SLC. The appellants challenged this conclusion on four grounds. First, itresulted from an incorrect view on market definition. We have dealt with this criticismin the matters we have already traversed.32 Second, the Commission did not giveproper weight to evidence about the pressure from advertisers on the other side of thetwo-sided market for the producer to maintain quality. Third, the Commission failedto give adequate weight to the extent of constraint on quality that was provided by therange of other online news providers. The second and third grounds require a reviewof the Commission's analysis on barriers to entry in the production of news, and therelevance of multi-sourcing/ multi-homing. Fourth, the appellants contend theCommission wrongly assessed the prospects of a paywall being introduced by thepost-merger business.Advertising constraints on quality[72] The appellants submitted that the pressure from advertisers to maintain qualitywould operate to prevent any SLC. The concept of quality of online newsencompasses a number of dimensions. The dimensions considered by the Commissionincluded:• coverage of important and relevant news topics;• coverage of a variety of perspectives, opinions and viewpoints on commonnews topics;• in-depth analysis and investigation; and• timely and accurate reporting.33[73] In assessing presentation and delivery as distinct from content, theCommission also recognised these dimensions:32 See [47]–[69] above.33 CCFD, above n 1, at [825].• the design and format of the online platform; and• inventive ways of presenting individual stories.34[74] Mr Goddard emphasised there was an economic imperative that he submittedwould arise post-merger for the business to maintain and enhance the quality of itsonline news. It was only by doing so that the business would optimise the circulationand the number of visits to its websites, thereby optimising advertising revenue.[75] The contrary hypothesis is that the immediate imperative for the merged entitywould be to reduce costs. Condensing journalistic and editorial resources would be socompelling an area for cost reduction that it would be difficult to justify completingthe merger without doing so in a material manner. The financial imperative to reducecosts [] would almost certainly be put to management.[76] Of these competing options, we consider it more likely that the merged entitywould adopt the second strategy. We consider it an inevitable part of the rationale forthe merger that efficiencies pursued would include scaling back journalistic andeditorial resources, as well as managerial resources. One necessary consequence ofdoing so would be a reduction in quality. We are therefore satisfied that there wouldbe a material reduction in the scope of topics reported upon, and the diversity of viewsexpressed within them. That would constitute a reduction in quality.[77] We do not consider it a sufficient answer that the merged business would beeconomically incentivised to provide coverage on what readers want. Dissatisfactionwith a reduction in the scope of what is published is unlikely to be conveyed eitherpromptly or effectively enough to influence management decisions on what mayappear to be duplicated resources, but which readers would prefer were retained. Sotoo with the level of more arcane topics that are likely not to be covered post-merger.We agree with the Commission that the merged entity could reduce the quality of itsoutput in numerous respects that would not be observed by consumers in any concerted34 At [826].way, so that the reduction in quality could be effected without producing anycompelling demand for restoration of the qualities that existed in the competitive era.[78] We also agree with the Commission that competition between news producersstimulates coverage by each of a wider range of topics than would be covered in a non-competitive environment. If one publication covers a news story, then its rival will beincentivised to cover that story as well, albeit with a different perspective.[79] We are mindful that senior editorial staff currently employed by the appellantsprovided assurances of their intentions to maintain variety and diversity of newscontent. We have no reason to doubt the integrity of the editorial personnel and respecttheir commitment. The commercial reality is that the extent to which they can achievevariety and diversity of news content will be dictated by management decisions.[80] We were not referred to any evidence that might enable an arithmeticcalculation of the impact of a reduction in quality causing a reduction in the numberof visits to an appellant's online site. The competing views are therefore intuitive.[81] Mr Goddard explained that advertisers usually pay for their advertisement tobe shown when readers open a given online page, per specified number of visits to thepage. Once the number of visits an advertiser has paid for has occurred, thatadvertisement will disappear and the next advertiser to have paid will have itsadvertisement appear.[82] The decision confronting management of the merged entity can be illustratedby a simple numerical example. We assume, for the purposes of it, that each of twofirms, pre-merger, has the same number of readers, reader habits and cost structures.Say that each firm incurs $100,000 in costs to provide news coverage on health mattersand that the visits to their sites to read health news coverage generates $110,000 inadvertising revenues for each publisher, provided they maintain a measure of diversityand difference in the health topics covered; were no such diversity to be providedconsumer demand would be such that only $200,000 of revenues would be created.Each firm then has a clear competitive incentive to provide coverage differentiatedfrom that of its rival, earning profits of $10,000 versus the $0 profit they would earnfrom providing identical perspectives. The merged entity could then earn $20,000 inprofit by replicating the competitive solution, but could earn $100,000 of profit by,instead, shutting down one of its health news coverage resources, losing $20,000 inrevenues but saving $100,000 in costs.[83] This fictitious example is entirely hypothetical and its exact conclusion wouldbe modified by the presence of meaningful third party competition, but it illustratesthat the structure of competition can materially affect a firm's supply decisions; themantra that 'a firm must supply what the market wants' is overly simplistic. Weconsider that in numerous choices that would confront the merged entity onrationalisation of news production resources, it is more likely than not that thefinancially beneficial outcome would be to rationalise the production resource ratherthan incur a measure of duplicated costs for the sake of maintaining modest ormarginal increases in advertising revenue.[84] The appellants enjoy a strongly dominant position in the New Zealand onlinenews market. On the extent of editorial and journalist resources the merged entitywould employ over 300 more editorial staff than the three next biggest mainstreammedia organisations combined.35 A survey in the period between February 2016 andJanuary 2017 showed that New Zealanders spent an average 5.5 million hours permonth accessing stuff.co.nz and nzherald.co.nz. This is more than seven times thenumber of hours spent on the three next largest New Zealand news websites,amounting to some 700,000 hours per month for visits to newshub.co.nz,36radionz.co.nz and tvnz.co.nz.37[85] Other statistics discussed below demonstrate that they each attract many timesmore visits than the next most popular sites, and their combined number of visitscompounds their dominance in that market.38 On the basis of the evidence, weconsider that they have earned positive reputations because of their longstandingstrengths in production of printed daily newspapers with positive reputations for35 CCFD, above n 1, at [656].36 "Newshub" is the collective brand under which the news platforms of MediaWorks operate.Newshub and MediaWorks are used interchangeably in this judgment.37 CCFD, above n 1, at [678], fig 5.38 See [102]–[105] below.quality and reliability transferring across to the online form of their products. Giventhat position, it appears likely that management of the merged entity would beconfident that their business would withstand a drop in quality caused byrationalisation of resources, without a reduction in the level of online advertisingrevenue they generate to an extent that exceeded the available cost savings.[86] The appellants disputed that the merged entity could reduce the quality of itsonline news product without its readers noticing a drop in quality or using theirwebsites less. If that were so, arguably the appellants would not risk a drop inreadership because they would instead be motivated to optimise the numbers accessingtheir website when it has so direct a bearing on their source of revenue. This riskwould be recognised as so likely to follow that the merged entity would not take it.However, we consider it foreseeable that such adverse changes in quality could occurwithout readers of their online sites being aware that it had occurred. We do not acceptthat the merged firm would maintain all standards. There are greater financialimperatives to cut costs.Other business constraints on quality[87] As to the third ground, the appellants argued that competitive constraints wereimposed on the quality of the appellants' online products by a range of other businessesincluding TVNZ, RNZ,39 and Newshub. Each of those news producers now have anonline presence, accessible in the same way as the appellants' digital products.[88] The appellants also argued that the online news market included specialistpublications, such as the National Business Review (NBR), that produce relativelysmall amounts of news in niche areas (in the NBR's case, business reporting). Theappellants' market definition would also include collators and distributors of nationalnews such as Facebook, Google, Twitter and syndicators such as Spinoff, Newsie andAAP News Wire.[89] The appellants argued that the Commission had erred in excluding this lastgroup of news distributors from the market for the provision of online national news.39 Formerly Radio New Zealand.Alternatively, if the market was defined narrowly as the Commission did, then it failedto give appropriate weight to the constraint on anticompetitive behaviour that wouldbe exerted by all of these other online news providers and distributors from outsidesuch a market. Mr Goddard labelled collators who present news produced by othersto digital audiences defined by algorithms as "disrupters". He predicted that theirpower in doing so would expand their influence to an extent that constrained theappellants, despite the disrupters not producing news content of their own.[90] We are satisfied that the market for online production of national news shouldexclude collators and distributors such as Facebook and Google, and other operatorsof websites that package and in some cases comment on news produced by others.Observed patterns of behaviour suggest that readers are likely to access content fromsites operated both by producers and by collators. However those providing thecontent for online news on such sites have carried out distinct functions, withproduction of original news being a recognisable and distinct feature. In seeking outreliable original news, visitors to collators' sites are likely to discriminate in their levelof attention, placing greater credence and therefore spending more time on items fromreputable producers of news.[91] In their competing online formats, the other mainstream producers of nationalnews, namely TVNZ, Newshub and RNZ, do provide a measure of constraint on thepotential for the merged entity to reduce the quality of its online product. Theappellants submitted that the Commission failed to deal with evidence that thoseestablished competitors would have the incentive and capacity to fill any gap in thequality of online national news, by providing enhanced diversity or quality in theirown reporting.[92] Within this category, we agree with the Commission that there are grounds fordoubting the capacity of both TVNZ and RNZ to materially expand the scope of theironline national news coverage. TVNZ's chief executive had recently announced areduction in newsroom staff. Other information, provided confidentially by [ ]added to the grounds for the Commission's finding that it would be unlikely to seek toexpand if a gap was left by the contraction of the scope, or reduction in quality, of themerged firm's online websites.40[93] [], we consider that the prospects of material expansionin the online news coverage by RNZ are limited by the extent to which it is able toprocure greater Government funding. In mid 2017, there was a commitment to ameasure of increased funding, but it was not calculated to fund any substantialexpansion of its capacity to produce online national news.[94] TVNZ, RNZ and Newshub have all entered the online news market withestablished brand awareness but, despite that, the data before the Commission onmarket shares showed that they were getting relatively low online market shares.41[95] Adopting the statutory test, we consider it unlikely that the existence of sitesmanaged by collators and distributors can operate as a meaningful constraint on thequality of the online news product produced by the appellants, or the merged entitypost-merger.[96] The prospects of competition from new entrants are more limited. We aresatisfied that a reputation for reliability and quality of news cannot be gained in a shortperiod of time and the requirement for a positive reputation constitutes a significantbarrier to entry. It is less relevant that costs of increased distribution of original onlineproduct may be insignificant.42Barriers to entry in the production of news[97] A routine component of the analysis of whether merger participants wouldenjoy market power is an analysis of the extent of barriers to entry into the market inwhich they operate. Although this raises many of the considerations we have just dealtwith, the focus on this topic in argument bears some repetition when viewed throughthis lens. The appellants submitted that numerous online news platforms now provide40 CCFD, above n 1, at [743]–[744].41 See [102]–[105] below.42 Interview with Newsroom principals CC.FS.0848.0002 at 19.more than adequate competition for the online forms of the appellants' newspapers.They characterised the extent of that activity as increasing rapidly. Arguably, thesenew ventures require little by way of set-up capital, and a flexible extent of resourcesto maintain a website that, depending on its quality, can be a valid alternative to theappellants as a source of New Zealand news.[98] We have dealt at [89] to [95] above with the appellants' arguments that relevantcompetition includes collators and distributors of news.[99] Collators and distributors of online news do assist in promoting plurality byinviting readers to access numerous sources of news. However we remain of the viewthat a valid distinction should still be drawn between the production and distributionof news. Fifteen recyclers of the product of two producers of news are still onlymaking two views available. We therefore do not test barriers to entry by consideringthe position of entities such as Facebook and Google.43[100] There are significantly fewer alternative producers of news. The five identifiedin the Commission's analysis were the two appellants, plus MediaWorks, TVNZ andRNZ. An analysis of consumption of news by media type was compiled by theCommission for its determination. The table contained numerous statistics that remainconfidential, and the more detailed points arising from it cannot be made withoutreferring to those details.44[101] The table confirms that the appellants' daily circulation of its printednewspapers is overwhelmingly dominant in that part of the market. Despite certainimpressions of a wholesale change of reading habits to online sources, theCommission noted elsewhere that a sizeable group of readers continue to consumedaily newspapers with total circulation of all daily newspapers being approximately420,000 per day, which is equivalent to a quarter of all households in the country.4543 We identify with the final observation in the Levy and Foster report obtained by the Commissionthat the two functions remain distinct when assessing alternative sources of adequate mediaplurality, post a merger of the appellants' businesses. David Levy and Robin Foster Impact of theProposed NZME/Fairfax merger on media plurality in New Zealand: expert review of theCommerce Commission's Draft Determination Document (16 November 2016,CC.FS.0649.0001). See [255] below.44 CCFD, above n 1, at [1522], table 23.45 At [604].The appellants' online forms of publication are similarly overwhelmingly dominant inthe numbers of browser page views per month, and app page views per month.Because the measurement of resort to television and radio (views monthly versuslisteners weekly) is not easily compared with the level of purchase of print forms ofnewspapers and extent of access to online sites, precise ranking of importance isdifficult.[102] The Commission also cited statistics gathered by Fairfax in a survey itundertook of the habits of New Zealand news consumers in 2016.46 The results of thatsurvey indicated that, in a typical week in New Zealand in 2016, online sourcesaccounted for approximately 54 per cent of the news consumed, television 21 per cent,traditional newspapers 13 per cent, radio nine per cent and other sources threeper cent. The 54 per cent consuming news online was made up of 25 per cent fromNew Zealand news sites, nine per cent from international news sites, 15 per cent fromFacebook, three per cent from other social media and two per cent from blogs or othercommentaries.[103] Both these measurements of news consumption reinforce the relativeimportance of news producers, and relegate the significance of collator/distributors.The second category are dependent on the first for their product, and the reachachieved is very modest by comparison.[104] The Commission conducted interviews with some of the collator/distributors,and also with new businesses seeking to produce their own New Zealand news.Smaller online publishers of New Zealand news do not consider themselvescompetitors of the appellants, whereas they see the appellants as currently competingintensely with each other.47 Confidential information and opinions conveyed to theCommission justified the view that set-up costs are not the most significant barrier toentry. Nonetheless they do encounter difficulties securing investment capital. Agreater barrier is developing trust as a brand of news provider. That trust isfundamentally important to developing a readership, and cannot be achieved in a short46 At [1520] and fig 12.47 At [646] and [648].or even medium term timeframe.48 In addition the financial viability of productionand distribution of online news remains uncertain. Even well-established newsproducers in other formats are struggling to establish a viable business structure fortheir online presence.49[105] In the year from the fourth quarter of 2015 to the third quarter of 2016 researchcommissioned for Fairfax revealed that the average combined reach of the appellants'websites represented about 60 per cent of New Zealand's population aged 10 yearsand over per month.50 In contrast the average monthly reach of the next largest,newshub.co.nz is 22.5 per cent with the equivalent figures for TVNZ's news websiteat 14.3 per cent, and RNZ's at 12.1 per cent.51 All of these measures reflect a positionof substantial dominance for the merged entity, and on all measures they are inarguablyeach other's strongest competitor.[106] It is clear that in the production of national news the scale of establishedresources is important to the extent of coverage that can be achieved. Each of theappellants has substantially more extensive resources in terms of numbers and nationalcoverage, than any of the other producers of news.52[107] For these reasons, we treat the barriers to entry for new producers of NewZealand news to be significant. Although the barriers are lower for distributors, theyare nonetheless material. We do not accept the appellants' proposition that any loss of"voices" caused by a contraction of the number of views expressed by their businessespost a merger would be readily filled by "other voices". Certainly, in specialisedniches, small players may attract a following for views and commentaries on politicsand other New Zealand news subjects, but those initiatives will not reach statisticallysignificant portions of the consumers of New Zealand news.[108] Whether viewed as a two to one merger within the part of news productionoriginating with traditional newspapers, or a five to four contraction of the wider48 At [725].49 At [64], [643], [644], [719], 721], [722] and [732.1] (redacted in public version).50 This comprised an aggregated 2.4 million unique visitors per month, with the individual figure forFairfax being 2.1 million, and NZME being 1.8 million.51 At [673] and fig 2.52 See for example, the statistics at [655] and [656], and confidential numbers at [657] and [741].online news production market including Newshub, TVNZ and RNZ, the contractionin such markets would be significant, and there would be significant barriers to entryby others.Multi-sourcing/multi-homing[109] A feature of the data about those accessing online sites for national news is theextent to which those doing so go to multiple sites or sources of online news.Economics literature on media markets describes this as "multi-homing" or "multi-sourcing". Data compiled by a market research firm that was in evidence before theCommission showed that very high proportions of those who visited each of theappellants' online sites at least once a month also visited the other site.53[110] The appellants cited the extent of multi-homing demonstrated by thesestatistics as evidencing substitutability between all of the sites which would arguablyapply as a constraint on the merged entity if it attempted to use any perceived marketpower to reduce quality. That data also showed that not insignificant numbers of thosevisiting these two major sites also visited other sites, at least once a month. Forinstance, 39.3 per cent of stuff.co.nz visitors visited newshub.co.nz, and 14.1 per centvisited radionz.co.nz. Of nzherald.co.nz visitors, 43.9 per cent also visitednewshub.co.nz, and 13.8 per cent visited radionz.co.nz.[111] Mr Goddard criticised the approach adopted by the Commission in assessingthe evolving state of the online news market. He submitted that it was an error for theCommission to have adopted a static analysis of a freeze frame as matters stood at thetime of its determination. He went further and characterised the analysis as backwardlooking when the Commission arguably ought to have projected forward to assess theconditions that were most likely to apply given continuation of present trends. OnMr Goddard's approach, the trend of increased resort to multi-sourcing and the growthin popularity of a range of online news sites should have led to a finding by theCommission that such sites would comprise materially stronger competition andtherefore be a stronger competitive constraint than is suggested by the historical data.53 Spreadsheet CC.FS.0214.0001: 87.5 per cent of those accessing stuff.co.nz also accessednzherald.co.nz and 73.4 per cent of those accessing nzherald.co.nz also accessed stuff.co.nz.[112] The appellants criticised the Commission's view that multi-sourcing indicatedthat different sites engendered different and complementary demand.54 The appellantssubmitted that this finding set the Commission apart from other competitionauthorities that have identified multi-homing as indicative of a lack of structural lock-in (that is, fixed patterns of resort by readers to a particular form of news media), andas negating any ability to exercise market power post-merger.[113] Statistics recording at least a single monthly visit to a site provide a basicpicture. We agree with the Commission that the pattern of visiting online sites is morelikely than not to reflect the markedly more regular pattern of visits to the dominantsites, with visits likely to be for a greater length of time than the numerically smallernumber of visits to the lesser visited sites.[114] We do not accept that the practice of multi-homing can elevate the less visitedsites into a position as meaningful competitors of the appellants. The statistics onmonthly visits, viewed in light of the other evidence before the Commission of thedifficulty of establishing a reputation for reliability, and the reduced scope of coverageprovided by many of the less frequently visited sites, lessens their stature. Treatingthem as a competitive constraint cannot be justified merely because of evidence thatnumbers of readers practice "multi-homing".[115] The appellants' arguments depended on an assumption that recent trends wouldcontinue to an extent that the appellants' present dominance in terms of the number ofvisits to their online news sites would be substantially eroded in the foreseeable future.We accept that there is a prospect of the trend as described by Mr Goddard occurring.Circumstances confronting competition authorities in other jurisdictions may haveprogressed further with this trend than is apparent on the evidence in New Zealand.However a feature of disruptive technologies in the digital era is the unpredictabilityof the manner in which trends in behaviour adapting to new technology can change.[116] Numerous uncertainties exist, and the prospect of others is quite likely. Forinstance there appears no consensus on how pervasive adblockers will become, or the54 CCFD, above n 1, at [589.2].impact of them on the manner of charging for digital advertising space.55 Theprojected ubiquity of Facebook may not develop consistently with recent history.Resistance to the intrusive extent of algorithmic analysis of viewers' areas of interestand concerns over the extent to which it facilitates "fake news" raise the prospect thatits development may not continue in an uncontrolled manner.56 Because of suchuncertainties, we do not consider it appropriate to assess the extent of competitiveconstraints on an increase of the recent trend in matters such as multi-homing.[117] Considering the proposed transaction as a five to four merger in the market foronline New Zealand news, the patterns of usage suggest the appellants are thedominant participants in that market. Their position in the market is helped by thestrength of their reputation. We consider there is scope for a reduction in quality to beimposed by the merged entity irrespective of the practice of multi-homing.Prospect of a paywall[118] If the operators of a digital news site wish to charge its readers to access thecontent they publish, it is done by imposing a paywall which requires readers to paybefore obtaining access. Such arrangements can include "soft" paywalls where theobligation to pay is only triggered after usage above a certain level or to access certainrestricted content.57 The viability of paywalls is another aspect of the evolution ofdigital news media that has attracted substantial debate and analysis. Before theCommission, and in the argument on the appeal, consideration of the prospects of apaywall involved reference to commercially sensitive information from the appellants.We are able to explain our own analysis of this point at a level of abstraction thatavoids any detailed disclosure.55 An adblocker is an app (or a number of apps) developed to allow the user of a digital device toview websites in a way that blocks advertisements the operator of the site is projecting when aparticular page is viewed. It was suggested that this can prevent that page view from countingtowards the number of readers for which an advertiser pays.56 Even an elementary internet search on the subject reveals a large volume of writings critical oftheir unbridled power. For example, Jonathan Taplin Move Fast and Break Things: HowFacebook, Google and Amazon Cornered Culture and Undermined Democracy (Little, Brown andCo, Boston, 2017); and Christina Larson "Facebook Can't Cope With the World It's Created" (17November 2017) FP < www.foreignpolicy.com>.57 For example The Washington Post, The New York Times, and The Australian. The Guardian is anexample of a news media website continuing to offer all its content free to readers.[119] []. The Commission reasoned that thiscompetitive pressure for one appellant not to introduce a paywall would be removedwhen the digital form of both publications were under common ownership. Readersput off the publication that they had to pay for would be likely to migrate to the digitalpublication available for free, thereby continuing to be readers of the merged entities'online publications.[120] The appellants disputed this analysis. They cited extensive overseasexperience that paywalls have not worked for the digital publishers of mainstreamdaily newspapers in many other countries. The appellants cited statistics from theReuters Institute report submitted to the Commission that on average in Englishspeaking countries only around nine per cent of consumers of news were prepared topay to access general news.58 The appellants argued that the merged entities wouldmost likely not introduce any form of paywall because of the number of unprofitableexperiences for the digital form of newspapers elsewhere.[121] We do not accept that the merged entities' decision on a paywall for one of itsdigital productions would be determined by the recent experience [] because the regulatory and commercial environment in which theyoperate is materially different. Until 2017, [ ] media markets have beenhighly regulated in terms of ownership restrictions and a media company unilaterallyintroducing a paywall for equivalent digital publications [ ] could be sure toface enhanced competition from a number of rivals that are providing their digitalpublications without charge. That position is comparable to the pre-merger situationhere []. That competitive constraint would be lost if readers rejecting a digitalproduct available only via a paywall could migrate in substantial numbers to acomparable publication that the merged entity provided for free.58 Nic Newman and others Reuters Institute Digital News Report 2016 (Reuters Institute, Universityof Oxford, 2016, CC.FS.0540.0001) at 7 and 24–25.[122] The appellants also argued that a paywall would make the publication lessattractive to advertisers, and the pressure from that other side of the platform wouldcontribute to a decision by the merged entity not to introduce a paywall. We do notaccept that advertisers would exert any additional influence on such a decision, beyondthe projected financial consequences of reduced visits leading to reduced advertisingrevenue.[123] Notwithstanding these points, the failures of paywalls in numerous contextsinternationally is increasingly compelling. []. We take a different view from the Commission and cannot rate theprospect of a paywall being introduced as a sufficient likelihood to take it into accountas conduct the appellants would likely undertake as a result of an SLC in the onlinereader market.[124] Overall, however, we are not satisfied that an SLC in the reader market foronline New Zealand news would not be likely.Sunday newspapers[125] The appellants publish all three of New Zealand's Sunday newspapers. In itsanalysis of them, the Commission recognised that the Sunday News is pitched at adiscrete audience with a heavy focus on sport. The Commission accepted the view ofthe current editor of that newspaper (who is also the editor of the Sunday Star-Times)that readers of the Sunday News include many who would never switch to anotherSunday paper.[126] The two remaining Sunday papers, the Sunday Star-Times and the Herald onSunday both have wide coverage over the North Island. The Sunday Star-Times isalso published in the South Island whilst the Herald on Sunday has a greaterpenetration north of the middle of the North Island.[127] The Commission rejected the appellants' characterisation that their two Sundaypapers were "essentially complementary". Relying on a number of factors includinginternal monitoring documents provided confidentially by the appellants, theCommission found that each publisher treated the other Sunday paper as its principalcompetition.[128] Both Sunday papers presently have the same or very similar cover prices andboth are pitched at essentially the same market of readers wanting in-depthinvestigative journalism as well as lifestyle and leisure reading appropriate for theweekend. Circulation of Sunday newspapers is dropping consistently with theexperience for printed newspapers generally.[129] The Commission considered that the Sunday papers are not close substitutesfor daily metropolitan newspapers, and also not substitutes for magazines such as theListener, Metro, and North & South.[130] The Commission's conclusion on the impact of a merger on the reader marketfor Sunday papers was that it could not be satisfied that there would not be the prospectof an SLC by way of increase in price and reduction in quality.[131] The appellants criticised the Commission's definition of separate markets forthe supply of advertising in the market for Sunday newspapers and the reader marketfor the supply of Sunday newspapers. In both aspects, the appellants argued that thesemarkets were too narrowly defined because they failed to assess accurately the rangeof substitutes for both advertisers in Sunday papers, and readers of them.[132] The appellants argued that declining overall revenues including advertisingrevenues showed that former readers are finding substitutes that must therefore becompeting for both readers and advertisers. [].The reader market[133] The Commission treated certain evidence [] as establishingthat the competitor's Sunday newspaper effectively constrained Fairfax's behaviour inthe reader market in the North Island. 59[134] The appellants disputed the factual basis for this. They argued that [] they are explicable on grounds other than any competitivepressure exerted on Fairfax's pricing behaviour in the North Island.[135] We do not see the existence or extent of [] as making out a competitive constraint being exerted byNZME's competing publication in the North Island. Irrespective of this behaviour, thereality is that each appellant treats the other's publication as its principal competitor.The Sunday newspaper reader market is a duopoly so that each firm is the greatestconstraint on the other.[136] The drop in circulation for both papers in recent years must also be a materialconstraint in decisions about price increases. In the counterfactual, pricing behaviourby the firms is likely to be dominated by two considerations, the first being the conductof their competitor and the second the risk of exacerbating the reduction in readership.[137] In contrast, the factual scenario post-merger would see the merged entity freeof the previous competitive constraint. We consider that the merger is therefore likelyto lead to an SLC that could be exploited by increased prices.[138] We adopt similar reasoning in relation to the risk of reduction in quality. Thesame forces will be at work with any perceptible drop in quality likely to cause furtherdrops in readership. A reduction in quality could however occur with materially lessrisk when the merged entity was free of pressure that would be maintained in the59 [].counterfactual by the risk that the competitor will maintain previous standards ofquality.The advertising market[139] The Commission found that the merged entity would likely involve an SLC inthe market for advertising in their Sunday newspapers. The Commissionacknowledged a measure of constraint from other print publications, includingmagazines such as the Listener, Metro and North & South, and online sites. However,that constraint was found insufficient to prevent the merged entity increasing the pricefor advertising in its Sunday newspapers.[140] The appellants challenged this finding on a number of grounds:• The Commission had misconstrued the effect of evidence from advertisers.• The Commission had defined the market too narrowly because it failed torecognise the extent of substitutable products.• [].60[141] The appellants and the Commission drew very different inferences frominterviews and other evidence before the Commission as to the views of advertiserswho used Sunday papers, and what could be inferred as to the habits of readers ofSunday newspapers.[142] The Commission found that some advertisers treated Sunday newspapers asaccessing a market with separate characteristics from the audiences for other forms ofadvertising. Readers of Sunday papers are characterised by advertisers as interestedin in-depth investigative journalism, and leisure and travel topics appropriately read60 [ ].in a less hurried fashion than daily newspapers and of a different character from onlinenews sources.[143] The appellants criticised the Commission for suggesting there was a practiceof large scale advertisers being able to play one company off against the other innegotiating prices for advertising in Sunday newspapers when the appellantsconsidered there was only a single possible instance of this, and that it was mentionedin provisional terms not justifying a finding that the existing publications eachconstitute a competitive constraint on the prices that can be charged for advertising bythe other.[144] We agree with the appellants that the conclusions the Commission drew fromthe evidence of advertisers' conduct are not justified. Reviewing all of that evidenceprovides an inconclusive range of views. There was a single instance of an advertiserappreciating the prospect of playing one publication off against the other whennegotiating advertising rates. There is somewhat more evidence that Sundaynewspapers comprise a discrete and decreasingly important component of much wideradvertising strategies for significant national advertisers.[145] Certainly, the readership of Sunday newspapers comprise a defined audiencethat may be efficiently reached via advertisements in those papers, when they are thetarget audience for an advertising campaign. Some of the advertisers interviewedanticipated that the merger would lead to an increase in rates for advertising, but therewas no consistent pattern of acknowledgements that price increases would betolerated. Rather, there was some evidence that increased prices would causeadvertisers to at least reassess the cost effectiveness of alternative forms of advertising.[146] The Commission made the point that the merged entity would be the onlyprovider of Sunday newspaper advertising in New Zealand.61 The determination didnot address the competition consequences of both firms' attempts to minimise orreverse the trend of reducing demand for advertising in their Sunday papers.61 At [339].[147] We incline to the view that the response to this trend will be similar in both thefactual and counterfactual scenarios. The evidence before the Commission on thescope of the market for advertising in Sunday newspapers suggests that advertiserswho buy substantial volumes of advertising space in Sunday newspapers routinelyreview the effectiveness of that advertising against alternatives. They are likely to besensitive to increases in the cost of using this form of advertising, to an extent that islikely to deprive the merged entity of market power. The drop in demand foradvertising is likely to constrain the ability of the publications in both scenarios, tosuccessfully introduce increases in charges for advertising.[148] We accordingly agree with the appellants' submission that the Commissionwas wrong to find the prospect of an SLC in the Sunday newspaper advertising market.Community newspapers[149] The nature of the appellants' businesses in producing community newspapersis outlined at [23]. The Commission's conclusion on the impact of a merger on thereader market for community newspapers was that there would likely be an SLC.The reader market[150] The Commission analysed the prospects of the merged entity being able toreduce the quality of community newspapers in the areas where the publicationsoverlap. It took a similar approach to that adopted in relation to the prospect of areduction in the quality of online news. The Commission determined that there wouldbe a compelling case for rationalisation, so that some of the community newspaperswould cease to be published in the areas of overlap.[151] The Commission relied on confidential content from PwC's merger synergiesreport for the appellants. [].62[152] Given the same imperative to reduce costs in order to produce a financialbenefit from the merger, the Commission found that the merged entity would reducethe journalistic and editorial resources employed in producing the communitynewspapers, and that these prospects would certainly arise in the areas where there arepresently overlapping publications.[153] Given also that the community newspapers are distributed free, as with onlinenational news, negative responses from readers to a reduction in quality may not leaddirectly to material reductions in the volume of advertising purchased. This is aqualitative consideration and would depend on the extent of the reduction in quality.It is foreseeable that if the standards of journalism dropped to an extent that thecommunity newspaper was treated as junk mail, then a material drop in advertisingwould be likely.[154] The appellants adopted arguments they had advanced about the online readermarket to challenge the Commission's finding of the prospect of an SLC in the readermarket for community newspapers. First, they criticised the extent of distinctionmaintained by the Commission's analysis between the producer/advertiser side, andthe producer/reader side of this two-sided platform. Arguably, when viewed as anentire multi-sided platform, the constraints from other forms of advertising and theperceived need to maintain quality of content in order to maintain the level ofadvertising space purchased would provide the merged entity with sufficient incentiveto maintain quality.[155] Second, the appellants submitted that the Commission erred in not followingits own analysis of the competitive constraints in community newspapers, from its2005 decision in relation to Times Media Group Ltd.63 There, the Commissionfound:6462 At [ ].63 Fairfax New Zealand Ltd and Times Media Group Ltd (Commerce Commission Decision No 561,14 October 2005).64 At [141]. the news and information market is inextricably linked to the advertisingmarket. As such, publishers of community newspapers have no opportunityor incentive to decrease the quality of the news/information provision or tocharge for the newspaper as this would have a detrimental effect on the abilityto attract advertising dollars.[156] Arguably, the Commission was correct on that occasion, and has erred in thepresent case.[157] The Commission adopted the submissions it had made on the correctness ofthe market definition and the extent of interdependence between the reader andadvertiser sides of the two-sided platform. The Commission submitted that the extentof reach was critical to maintaining advertising revenue for community newspapersand that the merged entity could maintain existing reach with rationalised publicationsin areas of overlap because all the infrastructure was in place so there were noimpediments to maintaining existing circulation.[158] The Times Media Group Ltd decision granted clearance for Fairfax to acquirethree community newspapers in the Rodney area. The Commission considered thatdecision to be distinguishable on the facts.65 So do we. In that case the Commissionfound that there was a sufficient measure of competition from other providers ofadvertising in the area that, when combined with the substantial degree ofcountervailing power that advertisers had, meant that an SLC was unlikely. The scaleof those operations, and the market conditions in which they were operating some 11years ago are different to the conditions confronting the appellants in the areas of theiroverlapping community newspapers as they are presently operating.[159] The financial imperatives to generate improvements in profitability out of themerger are in our view likely to be compelling for management of the merged entity.[]. We accordingly agree that the prospect of an SLC on thereader side of the community newspapers market in the overlapping areas cannot besaid to be unlikely.65 CCFD, above n 1, at [480].The advertising market[160] The appellants criticised the Commission for not defining a precise market foradvertising in community newspapers. The Commission dealt with this in thefollowing terms:66In this case, we consider that there is no bright line that separates products thatare within a market from those that are outside the market. Communitynewspapers face differing levels of advertising constraints, including fromother community newspapers, other forms of print advertising (includingadvertising flyers and metropolitan and regional newspapers) and from othermedia platforms such as radio and digital.The competition analysis below does not rely on exact delineation of therelevant product market to identify the competitive constraints acting on themerged entity with respect to community newspaper advertising.[161] The appellants made the superficially attractive submission that it was illogicalto find the prospect of an SLC in a market of undefined scope. Arguably, if theconventional test of the market's response to a small but significant increase in pricecould not be assessed against the extent of competition the merged entity would facein a defined market, there was no basis for finding that an SLC was likely to occur.[162] The Commission has previously considered an application for clearance of amedia merger without defining a precise market.67 In the present case the Commissionrecognised that the market for advertising in which community newspapers participatewill include a number of different types of advertisers as customers with differentrequirements. The community newspapers also face a range of alternative forms ofadvertising, the presence and strength of which is not uniform throughout the areas ofthe country in which the appellants' publications overlap. Each alternative wouldpresent substitutability constraints on the terms for advertising in some communitynewspapers, potentially in a range of different circumstances.[163] If the market were defined by aggregating all of the potential range ofsubstitutable forms of advertising together, the result would be an artificially extendedmarket that does not address the substitutability of a given alternative in the contextrelevant to each community area. For example, in one area where the appellants'66 At [403]–[404].67 Bauer Media Group (NZ) LP and APN Specialist Publications NZ Ltd [2014] NZCC 1.community newspapers compete, some advertisers may see a regional newspaper as aviable alternative if rates for advertising in the community newspaper were increased.In another area an active local radio station, or well-organised flyer distribution maybe seen as substitutes. Generally, however, such alternative forms of advertising arenot competitors of community newspapers for various reasons such as cost and reach.[164] Accordingly a degree of flexibility is appropriate in defining the market foradvertising in community newspapers to fulfil the aims of being descriptive, purposiveand evaluative in terms of the approach described by French J in Singapore Airlines.68The Commission's reasoning accommodated the prospect of some measure ofconstraints applying in parts of the market for advertising in community newspapers,from products which fell outside any "bright line". We are not persuaded that theCommission's analysis in respect of this market was faulty because of the lack of amore precise definition.[165] The parties disputed the effect of the evidence before the Commission aboutthe position of advertisers in areas of overlapping community newspapers. Some ofthat evidence was received from one or other of the appellants on a confidential basis,and our analysis requires a number of references to the confidential information to beredacted in the published version of our judgment. In other respects the parties invitedopposite conclusions from statements made in interviews that the Commissionundertook with advertisers who use community newspapers.[166] The appellants argued that, before the merger raised the prospect of an SLC inthe advertising market for community newspapers, the Commission would need tofind circumstances in which the merged entity could raise prices above a competitivelevel without losing sales to an extent that the price increase would becomeunprofitable.69 To the contrary, the appellants submitted that the general trend acrosscommunity newspapers is that the advertising revenue is dropping, and that this trendis similar in the areas where their community newspapers compete. They consider thedrop in revenue must be caused by some external factor.68 Singapore Airlines, above n 14, at [174].69 The test in these terms is derived from Commerce Commission v Southern Cross Medical CareSociety (2001) 10 TCLR 269 (CA) at [68].[167] The appellants disputed the relevance of the Commission's reliance on internaldocuments. [].[168] The appellants disputed the inference that these documents evidenced acompetitive constraint on pricing in areas where the two appellants' communitynewspapers compete.[169] The appellants relied on comments from large scale advertisers who usecommunity newspapers that they would switch to other forms of advertising if therewere a material increase in price. The Commission cited comments from otherinterviews to suggest that regular local advertisers would continue to advertise in thecommunity newspapers they were using, even if there were a price increase. Someadvertisers in this category consider they do not have viable alternatives.[170] One explanation for the opposing views attributed to advertisers in communitynewspapers is that different types of advertisers will respond differently to any use ofmarket power. Larger national businesses are likely to be using communitynewspapers as one part of a much wider advertising strategy and can more readilyexplore alternatives for the (likely modest) portion of their total spending onadvertising. In contrast local businesses who traditionally rely heavily on advertisingin community newspapers are less likely to consider alternatives. They would beresigned to continued use of advertising in community newspapers despite priceincreases.[171] []. On that basis they argued that the presence of competition in theoverlapping area does not make a difference, and that external factors are the cause ofthe identified trends. [].[172] The Commission submitted that the evidence demonstrated a different marketdynamic. []. Moreover, if it reflected a move by some advertisers to usingother modes of advertising, the drop in the overall level of demand did not indicatethat the merger of the current competitors could not lead to anti-competitive pricingbehaviour where they have previously competed at arm's length.[173] The Commission submitted that the [] is significant evidence of the prospect that the merged entity could exploitan SLC in the absence of competition in the 10 areas where their publications presentlydo overlap.[174] We consider that patterns of advertising for those who use communitynewspapers are likely to be undergoing change in their own ways, as is occurring inother parts of the markets in which the appellants are operating. Communitynewspapers will continue for the foreseeable future to provide an outlet for advertisersof certain types that is not readily substitutable by alternative forms of advertisingavailable to them. That position pertains to an extent that there is a real prospect theappellants could more or less sustain existing levels of advertising business despite anincrease in the prices charged in the areas where they presently compete. Weaccordingly consider that the evidence does make out the likely prospect of an SLC inthe market for advertising in those areas where the appellants' community newspapersoverlap.Conclusions on clearance appeal[175] We agree with the Commission that the appellants are unable to establish thatSLCs are not likely in the reader market for online national news, in the reader marketfor Sunday newspapers and in both the advertising and reader markets for communitynewspapers in the areas where their publications overlap. We have reached a differentview to the Commission on the prospects of a paywall being introduced in one of themerged entity's online news websites operating in the market for online national news.In relation to Sunday newspapers, we have come to the opposite conclusion to theCommission in that we are satisfied that an SLC is not likely in the advertising marketfor Sunday newspapers.[176] Accordingly, the appellants have not made out their case for a clearance to begranted in respect of the proposed merger transaction.The authorisation decisionRelevance of loss of media plurality[177] The Commission gave substantial weight in its decision not to authorise themerger to the qualitative detriment (or disbenefit) it identified as arising from the lossof media plurality if the appellants were merged under single ownership.70 TheCommission rejected the appellants' arguments that it did not have jurisdiction to takeinto account matters of a non-economic nature that arose as effects outside the marketsdefined for the competition analysis.Scope of Commission's jurisdiction[178] The Commission was concerned that the appellants' approach requiring it toignore adverse consequences of a loss of plurality would result in the Commissionhaving to exclude an important category of negative consequences of the proposedmerger. The Commission saw that approach as leading to the prospect that it mighthave to authorise a merger it assessed as not being in the public interest. TheCommission considered the language of the Act did not compel an interpretation thatsome negative consequences would count for the purposes of an authorisationanalysis, and some not.70 We discuss any need to distinguish detriments from disbenefits at [239]–[241] below.[179] The Commission relied on the classic observations as to the approach toauthorisations under Australian trade practices legislation in QCMA, to the effect thatthe tribunal there would not wish to rule out of consideration any argument:71 coming within the widest possible conception of public benefit. This wesee as anything of value to the community generally, any contribution to theaims pursued by the society including as one of its principal elements (in thecontext of trade practices legislation) the achievement of the economic goalsof efficiency and progress.[180] The Commission treated observations by the Court of Appeal in the recentGodfrey Hirst 2 appeal as confirming its jurisdiction to take into account benefits anddetriments broader than the efficiencies it found as likely to result from the merger, inlight of the overriding purpose to promote competition in markets for the long termbenefit of consumers in New Zealand.72[181] The appellants submitted that the Commission does not have jurisdiction totake into account any detriments that arise outside the market in which theCommission has found the prospect of an SLC or detriments of a type going beyondefficiency issues. They argued that the terms of s 67 of the Act confine theCommission's analysis to an orthodox competition law one of the merged entity'sfinancial and economic ability to raise prices or reduce the quality of products itsupplies post the merger. That is, impacts arising in the market or markets as definedby the Commission in determining the related application for clearance. The sequenceof considerations required of the Commission under s 67(3) is as follows:67 Commission may grant authorisations for business acquisitions(3) Within 60 working days after the date of registration of the notice, orsuch longer period as the Commission and the person who gave thenotice agree, the Commission shall—(a) if it is satisfied that the acquisition will not have, or would notbe likely to have, the effect of substantially lesseningcompetition in a market, by notice in writing to the person byor on whose behalf the notice was given, give a clearance forthe acquisition; or71 Re Queensland Cooperative Milling Association Ltd [1976] 25 FLR 169 (Trade PracticesTribunal) at 182.72 Godfrey Hirst NZ Ltd v Commerce Commission [2016] NZCA 560, [2017] 2 NZLR 729 [GodfreyHirst 2 (CA)] at [31], cited in CCFD, above n 1, at [95].(b) if it is satisfied that the acquisition will result, or will be likelyto result, in such a benefit to the public that it should bepermitted, by notice in writing to the person by or on whosebehalf the notice was given, grant an authorisation for theacquisition; or(c) if it is not satisfied as to the matters referred to inparagraph (a) or paragraph (b), by notice in writing to theperson by or on whose behalf the notice was given, decline togive a clearance or grant an authorisation for the acquisition.[182] Arguably because the decision under (a) relates to the effect of substantiallylessening competition in a market, in cases where clearance is not given and theCommission progresses to consider an authorisation under (b), that should similarlybe confined to offsetting benefits in the market in which the Commission has decidedthere is a likelihood of detriment by way of an SLC. On the appellants' argument itfollows that if the merged businesses will affect multiple markets, and the Commissionhas found that there is no likelihood of an SLC in some of those markets, thendetriments arising in the markets where the Commission has found no likelihood ofan SLC cannot be taken into account in the Commission's evaluation of whether togrant an authorisation under s 67(3)(b).[183] The appellants submitted that the Commission's wider consideration ofout-of-market detriments was contrary to the statutory scheme, unsupported by caselaw, and contrary to its own previous position. They cited the Commission'sAuthorisation Guidelines as recognising that the scope of anti-competitive detrimentswould be limited to those arising in the markets where there has been a finding of thelikelihood of an SLC. The Commission's July 2013 Authorisation Guidelines addressthe point in the following terms:7336. In particular, section 3A of the Commerce Act requires us to haveregard to efficiencies that likely arise from the transaction in assessingwhether a transaction gives rise to public benefits. However, NewZealand courts have made clear that efficiencies are not the onlypublic benefits which can be counted.37. In our assessment we regard a public benefit as any gain to the publicof New Zealand that would result from the proposed transactionregardless of the market in which that benefit occurs or whom in NewZealand it benefits. We take into account any costs incurred inachieving benefits.73 Citations omitted.38. In contrast, in assessing detriments we only consider anti-competitivedetriments that arise in the market(s) where we find a lessening ofcompetition (whether substantial or otherwise).39. To illustrate the difference in our approach to benefits and detriments,if a transaction gives rise to a lessening of competition in market Aand benefits in market A and market B, then:39.1 the public benefit is counted across both markets A and B; and39.2 only those detriments arising in market A are counted.[184] In its determination the Commission did not consider that these Guidelinesprecluded it from taking a wider approach to the scope of potential detriments. Ittreated the Guidelines as necessarily general and they were to be applied flexiblyaccording to the facts of each application. They were not intended to address everyissue that might arise. A footnote to the determination recorded that the AuthorisationGuidelines had not been revised to reflect the more recent High Court and Court ofAppeal decisions in Godfrey Hirst 2.74[185] The appellants also argued that the statutory purpose of the Act, the statutoryprocess for considering applications for clearance and authorisations, and the areas ofexpertise provided for within the Commission all pointed to the scope of detrimentsrelevant to an authorisation assessment being confined to economic detriments. Theycould therefore not extend to matters of social policy or politics that were beyond theareas of the Commission's expertise.[186] The appellants cited an earlier appeal decision involving the Commission andTelecom in which the Court of Appeal observed that:75 a public authority which is a creature of statute cannot act outside the scopeof its express and implied statutory powers.That decision emphasised that in implying a power to fill any gap in an Act, the Courtmust be satisfied that it is doing so in order to make the Act work as Parliament musthave intended.7674 CCFD, above n 1, at n 72.75 Commerce Commission v Telecom Corp of New Zealand Ltd [1994] 2 NZLR 421 (CA) at 430 perCooke P.76 At 424–425 per Cooke P.[187] The appellants also argued that extending the Commission's jurisdiction toconsider out-of-market detriments, or social and political considerations would renderthe authorisation process more uncertain and unpredictable, when that should beavoided.[188] In including an analysis of the detriments likely to arise from loss of pluralityin this case, the Commission has assumed jurisdiction where it had previously decidedit did not have it. Mr Farmer QC, for the respondent submitted that it was entitled todo so where the factual circumstances and relative importance of the issue warrantedreconsideration. Given the relative importance it attributed to the loss of plurality thatwould follow from this merger, the Commission assumed jurisdiction to take that intoaccount because failure to do so would abrogate the responsibilities it perceived it had,to carry out the purpose of the Act:1A PurposeThe purpose of this Act is to promote competition in markets for the long-termbenefit of consumers within New Zealand.[189] In the present case the Commission included its consideration of the risks ofloss of media plurality on the basis that if the Commission did not have regard to it onthe authorisation application, then there was no other source of constraint onaggregation of national media interests that might constitute a material detriment tothe public interest. The appellants argued that if confining its jurisdiction to thein-market detriments as contemplated in the Commission's guidelines meant that therewas a gap in the New Zealand regulatory framework, then it was not the Commission'srole to assume it could fill that gap.Analysis(i) Legislative history[190] In opposing this breadth of jurisdiction the appellants submitted that the scopeof the Commission's powers were narrowed under the 1986 Act, relative to the scopeof considerations that it could undertake under its previous, 1975 Act. The former Acthad a public interest test that allowed the Commission to take into account "any effectsaiding the wellbeing of the people of New Zealand".77 The appellants submitted, bothbefore the Commission and on appeal, that the former Act was not an economicoutcomes-focused piece of legislation, whereas the current Act is.[191] There is nothing in the wording of s 67(3)(b) to suggest either that some formsof benefit ought not to be taken into account, or that detriments that would also followfrom the merger should not be considered across whatever range is material to thetransaction in question.[192] There are no explicit references in Parliamentary debates about what wasintended on the scope of relevant detriments, but there are implicit indications on theintroduction of the new purpose in s 1A.[193] The provision that became s 1A was introduced by way of a supplementaryorder paper in 1999 which was part of a proposed amendment Bill that lapsed, but wasadopted as part of wider reform of the Act in 2001.78 The Select Committee's reporton the new purpose statement included the following:79The SOP seeks to replace the long title of the Act with a new purposestatement. Currently the Act's long title implies that competition is an end initself. This narrow view is not reflected in the body of the Act, which throughsuch mechanisms as the "public benefit test", takes a wider view of the impactof conduct on the wellbeing of New Zealanders as a whole.The new purpose statement is intended to make transparent the existing policyof the Act by making it clear that competition is not an end in itself but a meansto increasing consumer welfare in the long-term. The ultimate goal is tofacilitate effective competition to promote economic growth, whileaccommodating the unusual situation where competition does not improve thewelfare of New Zealanders as a whole. It is clear that the statement will confirm the existing approach thatcompetition is a means to an end, not an end in itself. The difference is that itdoes this more explicitly than the existing long title, and clarifies that it is the77 Commerce Act 1975, s 80(b)(vii).78 The legislative background for this reform is not straightforward. The 1999 proposals lapsed andwere adopted by the new Government in 2000. A select committee report was completed andreported back in early 2001. The Bill was dropped, for reasons that remain unclear. For equallyunclear reasons, the Bill was re-adopted and passed later in 2001.79 Commerce Amendment Bill 2001 (296-2) (select committee report) at 5–7.impact on the long-term welfare of consumers within New Zealand that shouldbe the overarching goal when assessing market behaviour.[194] When the Bill was reported back from the Select Committee in February 2001,Paul Swain the Minister of Commerce stated:80The focus on competition in the purpose statement also does not precludewider public benefit issues being taken into account where appropriate.[195] It is implicit in these statements during the Parliamentary debates thatParliament contemplated the Commission would be able to have regard to all forms ofrelevant benefit that were seen as likely to flow from a transaction for which anauthorisation was sought. It is inconsistent with Parliament's approach to infer,without any clear indication of such an intention, that Parliament intended todiscriminate between the scope of benefits to which the Commission could haveregard, and then a narrower subset of detriments.(ii) The position elsewhere[196] In disputing that a purposive interpretation of the scope of s 67(3)(b) couldextend to out-of-market detriments, the appellants invited comparison with the modeof regulation of the media in other jurisdictions. In some countries regulation of themedia falls outside the scope of competition regulation and is the subject of specificmedia industry regulation, often governed by political processes.[197] Giving implicit acknowledgement to the relative importance to New Zealandsociety of maintenance of media plurality, Mr Goddard submitted that control ofmedia plurality is a highly sensitive subject which requires debate in a legislativecontext and is not a matter where jurisdiction should be asserted by a specialisteconomic regulator.[198] In the United Kingdom, legislation provides for intervention in a media mergerby the relevant Secretary of State based on public interest grounds. The appellantscriticised the Commission's reliance on an Ofcom report Measuring media pluralitybecause that report did not arise in the course of Ofcom's usual jurisdiction (which can80 (27 February 2001) 590 NZDP 7972.be seen as comparable to the Commission's).81 It instead resulted from a specificdirection from the Secretary of State. Ofcom's conclusion was that media pluralityquestions were more appropriate for Parliament to debate and consider.[199] In Canada, a Parliamentary inquiry as to whether that country's CompetitionAct 1985 ought to be amended to create industry specific provisions for newspaperswas rejected. The report observed:82Expanding the objectives of the Act to take account of such considerationswould require Canada to make a complete paradigm shift, away from theanalytical approach currently used by anti trust authorities the world over,towards a more holistic model relying not on economics, but on the disciplinesof psychology, sociology and political science.[200] The absence of a distinct process provided for in legislation to regulate theconduct of media businesses may be seen as either favouring the inclusion of suchconsiderations within the Commission's jurisdiction, or supporting the exclusion ofthat jurisdiction. On the one hand, it may be that Parliament considers the scope ofrelevant detriments to be the same as benefits so that the clearance and authorisationregime under the Act is a sufficient check on any undue aggregation of media interestsmaking other regulation unnecessary. On the other hand, the recognition incomparable jurisdictions of the discrete nature of control over aggregation of mediainterests might indicate that a separate statutory framework is needed to protect thequality of national media as an important element of a healthy democracy. On thatapproach the competition regulator of general jurisdiction would not be entrusted withdiscrete concerns arising from aggregation of the media interests.[201] We are not persuaded that the experience in other countries where comparablecompetition law regulators do not have jurisdiction to assess the impacts of loss ofmedia plurality can constitute an influence on the intention attributed toNew Zealand's Parliament when it has addressed the relevant terms of the Act.81 Ofcom Measuring media plurality: Ofcom's advice to the Secretary of State for Culture, Olympics,Media and Sport (19 June 2012, CC.FS.4027).82 Canada (House of Parliament, Standing Committee on Industry) 2000, 6 as cited by the appellantsat [35] of their submissions to the Commission regarding jurisdiction to consider plurality issues.(iii) Commission's prior conduct and scope of expertise[202] Consideration of whether an undue degree of influence on public opinionwould result from a merger, and concerns for the level of accuracy of the presentationof news had featured in a 1985 Commission decision on a news media merger.83 Theappellants implicitly accepted that the broader public interest test under the 1975 Actentitled the Commission to consider matters such as loss of media plurality.[203] In contrast, the Commission observed in the first merger decision relating tonewspapers following the 1986 Act that:84The 1986 Act revokes the power of the Commission or the Court to canvassthe issues of independence of the press or editorial freedom as reasons forrefusing consent to a merger or takeover proposal.[204] The appellants criticise the alleged inconsistency between the Commission'sapproach on that application, and on the present one.[205] Mr Farmer emphasised that that decision related only to a clearanceapplication, and did not reflect the approach the Commission may take on anauthorisation application.[206] We do not consider that either the Commission's previous clearance decisionsor the terms of the Commission's 2013 Authorisation Guidelines operate to restrict theCommission's jurisdiction more narrowly than is vested in the Commission by theterms of its statute. Just as parties to proceedings before a court or tribunal establishedby statute cannot, by consent, vest the decision maker with a jurisdiction beyond itsstatutory authority, so too a body like the Commission cannot confine its jurisdictionmore narrowly by means of its own pronouncements than is vested in it by itsempowering statute.[207] In other circumstances a participant in proceedings before the Commissionmight complain that the Guidelines gave rise to some form of legitimate expectation,or to an estoppel preventing the Commission going beyond the range of considerations83 Re Proposal by Brierley Investments Ltd (1984–1986) 5 NZAR 108 (Commerce Commission);and Brierley Investments Ltd v Commerce Commission (1986–1987) 6 NZAR 25 (HC).84 Re Proposal by News Ltd (1986–1987) 6 NZAR 47 (Commerce Commission).that it has previously represented it would take into account. That point was not takenhere and it could not be when the Commission's intention to have regard to widerconcerns such as loss of media plurality was clearly signalled during its inquisitorialprocess. The process afforded adequate opportunities for the appellants to makesubmissions on both the claimed lack of jurisdiction, and on the substance of the natureand effect of any detriments that might arise from the loss of media plurality.[208] It was submitted for the Commission that detriments or benefits arising in areasthat are beyond the range of expertise reasonably expected of Commission membersand the staff will be relatively rare, and that the lack of in-house expertise to evaluatesuch matters cannot arbitrarily deprive the Commission of jurisdiction to take thosematters into account. The contrary proposition was put by the appellants to theCommission in the course of dealing with their applications.[209] The Commission recognised that the nature and relative importance of pluralityin the New Zealand media was an area on which it needed evidence from others, anddid that by retaining independent experts. The Commission instructed Dr David Levywho is the Director of the Reuters Institute for the Study of Journalism at theUniversity of Oxford and Mr Robin Foster who is a media policy adviser and founderof a consultancy based in the United Kingdom that addresses media issues. Theyproduced two preliminary commentaries on media plurality and then a report inNovember 2016 providing an analysis of plurality and comments on the Commission'sdraft determination.[210] We do not accept that the role envisaged for the Commission by reference tothe areas of expertise of those appointed to it can restrict the scope of topics on whichit might assess the existence of benefits or detriments when acting pursuant to astatutory purpose. It has certainly evaluated claimed benefits to New Zealand societyand weighed their relevance on matters beyond economic impact. We are notpersuaded that the Commission lacks jurisdiction to consider identifiable benefits ordetriments that arise in areas outside those in which it has recognised expertise.[211] The manner in which the Commission has informed itself, evaluated all theidentified benefits and detriments, and the weight given to them, is a matter on whichthe Commission's decision may be vulnerable to challenge. However that is a distinctmatter from the question of whether such conduct arises within its jurisdiction.[212] Nor do we consider that this breadth of jurisdiction leads to any unacceptableunpredictability for those seeking authorisations. Out-of-market considerations arelikely to arise in only a minority of merger and acquisition transactions. Further, theCommission's processes mean that such concerns will be raised during the dialoguewith an applicant (as occurred here) so that debate can occur before a decision is made.[213] It will usually be appropriate for the Commission to confine its assessment ofdetriments on an authorisation application to those arising in the market or markets inwhich it has decided there is likelihood of an SLC. However we do not consider thatconstraint is required by the terms of the statute. Proposed mergers will have widelyvarying levels of impact on New Zealand consumers generally and where thoseimpacts are as broad and as significant as arose here, then it would be inconsistentwith the statutory scheme to require the Commission to ignore them. Parliamentcannot have intended such an outcome.[214] The statutory purpose in s 1A of the Act is to promote competition in marketsfor the long-term benefit of consumers within New Zealand. Achieving that purposewill be frustrated if matters likely to be to the long-term benefit of consumers couldonly include positive effects resulting in the markets in which anticompetitive conductwas in issue. The Commission has routinely adopted that approach. A balancedapproach requires the same attitude to be taken in respect of detrimental matters thatshould be weighed against the overall benefits.(iv) Judicial consideration[215] We note that an early judicial consideration of the benefits and detrimentsassessment on authorisation appears not to have been criticised subsequently. In theappeal by Telecom from refusal of authorisation for its proposal to hold the radio bandfrequency for AMPS-A, the Court observed:8585 Telecom Corporation of New Zealand Ltd v Commerce Commission (1991) 4 TCLR 473 (HC) at527.The likely benefits and detriments to be considered are those that would resultfrom implementation of the merger or takeover proposal. We are required topredict the shape of the future with and without the acquisition in question,but at this authorisation stage we go forward to an assessment of the likelyultimate impact upon the interest of society as a whole.[216] And:86 the detriments attributable to the strengthening of dominance are not theonly detriments that could conceivably be relevant. The very concept ofbenefit to the public allows for some netting out, in an appropriate case, of anydetriments to the public from the acquisition itself [217] We respectfully agree. These observations reflect common sense, consistentwith the statutory purpose.[218] In its decision in Godfrey Hirst 2 the Court of Appeal reviewed the nature ofthe Commission's task on an authorisation application. The appellant was a NewZealand carpet manufacturer with a direct interest in the state of competition in theNew Zealand wool scouring market, in which the merger participants operated. Thesecond appeal was brought on a question as to the absence of quantification of theprojected benefits arising from the transaction. The Court of Appeal's analysis of therole of the Commission in considering an authorisation application included thefollowing:87[31] In determining whether the subject conduct will meet thatthreshold [for a grant of an authorisation], the Commission's inquiry wasqualified by only one statutory requirement: it was to have regard to anyefficiencies it considers will result or are likely to result from the acquisition,as well as broader benefits and detriments in the light of the overridingpurpose to promote competition in markets for the long-term benefit ofconsumers in New Zealand.[35] The Commission correctly referred to judicial guidance. Ithighlighted in particular the view of Richardson J in AMPS-A CA that aregulatory body such as the Commission must "attempt so far as possible toquantify benefits and detriments [of the acquisition to the public] rather thanrely on a purely intuitive judgment". This guidance may imply a dichotomybetween strict objectivity and undisciplined subjectivity. It must not beallowed, however, to obscure the Commission's primary function ofexercising a qualitative judgment in reaching its final determination. TheCommission is a specialist body whose members are appointed for their86 At 528.87 Godfrey Hirst 2 (CA), above n 72 (citations omitted).particular expertise across a range of disciplines and who are expected toexercise their collective knowledge, skill and experience in making what is anessentially evaluative judgment on any application.[36] the statutory framework and legislative history shows that theCommission's determination must have regard to efficiencies when weighedtogether with long-term benefits to consumers, the promotion of competition,and any economic and non-economic public benefits at stake in the relevantmarket ...[38] However, in the light of the statutory scheme, we are satisfied that aquantitative analysis of this nature cannot dominate the Commission'sapproach. In cases where the Commission is able to undertake parallelassessments of a qualitative and quantitative nature, each must be informedby and ultimately integrated within the Commission's determination byexercising its institutional expertise. Qualitative factors can be givenindependent and, where appropriate, decisive weight; it follows thatnon-quantifiable factors need not assume a merely supplementary function ina largely arithmetical exercise, as supposed in contemporary practice.[41] The statute does not allow for imposition of an artificial constructor gloss on what is a deliberate broad and evaluative test.[219] That appeal did not deal explicitly with the permissible scope of qualitativebenefits or detriments that may be recognised by the Commission, but it is implicitthat to achieve the statutory purpose, it is for the Commission to recognise relevancein a projected detriment without needing to exclude any detriments that arise outsidethe market or markets in which it has found that SLCs are likely to arise. The passagesin [31] and [35] of Godfrey Hirst 2 in particular are inconsistent with there being anydistinction between the scope of relevant detriments, and benefits to which theCommission may have regard.[220] That approach is wider than the approach adopted at the High Court stage ofthe first Godfrey Hirst appeal in 2011.88 The approach to the Commission'sauthorisation process in that appeal was as follows:89[72] The consistent approach of the Commission throughout the legislativechanges has been to assess competitive detriments in the relevant markets (that88 Godfrey Hirst NZ Ltd v Commerce Commission (2011) 9 NZBLC 103,396 (HC) [Godfrey Hirst1].89 Citations omitted. The Telecom appeal referred to is Telecom Corp of New Zealand v CommerceCommission [1992] 3 NZLR 429 (CA) at 435 and 449; and Telecom, above n 85, at 533.is those markets in which dominance was likely to be strengthened/acquiredor competition substantially lessened) and compare those detriments (orwelfare losses) with the public benefits claimed to flow from the acquisition.That approach was sanctioned by the High Court and Court of Appeal inTelecom when s 47 was in its previous form but the authorisation test was inits present form.[221] The broader approach in the Court of Appeal's reasoning in Godfrey Hirst 2suggests the detriments that may be taken into account need not be confined to thosearising in the relevant market. Non-quantifiable factors may be decisive, and nological reason for limiting the type of detriments is suggested. Generally, mergers areunlikely to cause material detriments outside the market in which they are to occur.[222] The vast majority of the Commission's determinations about proposed mergersarise in contexts where there are no material consequences for those who are notconsumers in the direct sense of the goods or services that the merger participants dealin. For the purposes of the statute, the consumers in such cases are clearly delineated.They generally comprise a subset of the public and the beneficial or detrimentalimpacts on those consumers do not impact on the rest of the public beyond that definedsubset group.[223] In the present case, if a consistent definition is applied of "consumers" in boththe authorisation and clearance analyses so that the group is confined to those whobuy the appellants' print publications and those who access the digital forms of theirpublications, then the analysis of benefit and detriments would exclude highly materialimpacts that arise beyond that group, that is, the impacts across members of the publicin general. There should not be an artificially limited assessment of detriments if suchlimitation would prevent the preferable advancement of the long-term interests ofconsumers. That cannot have been parliament's intention.[224] Proportionality considerations may well arise. Where detriments arerecognised outside the market defined for the competition analysis, then it may needto be compellingly material before its influence on the narrower analysis of in-marketdetriments and in and out-of-market benefits can be justified.[225] The appellants cited two passages from the High Court decision in the 2004appeal from the Commission's refusal to grant an authorisation for a proposed alliancebetween Air New Zealand and Qantas.90 The more pertinent of the passages was:91Determinations of authorisation applications under the Act are properlyconcerned with balancing any efficiency detriments associated with breachesof the statutory competition standard, against any efficiency gains that mayresult from the business acquisition or contractual arrangement in question. Itis the balancing of these real resource impacts on the economy that best servesthe long-term interests of consumers.[226] That passage is to be read in the context of the substantive issues at stake inthat appeal. A party to the appeal had argued that benefits to the public would notcount because the terms of s 1A arguably require the exclusion of benefits that did notflow directly to consumers. The quoted passage reflects the Court's rejection of thatproposition and confirmation that the public benefit test required on an authorisationapplication extended to benefits to the public which were intentionally broader thanthose attributable to consumers of the goods or services generated in the market inquestion.[227] We do not treat that reasoning as excluding non-efficiency detriments that mayarise outside the markets in question. The rationalisation provided in the contextconfronting the Court understandably did not contemplate the unusual circumstanceswhere potentially significant consequences of a merger would include detriments tothe public in non-economic or non-efficiency terms.[228] The appellants also cited the Air New Zealand decision for the proposition thatthe test under s 67 is substantially the same as the test under s 61 of the Act whichapplies to applications for authorisation of restricted trade practices.92 The relevantpart of s 61(6) specifies that the Commission is not to grant authorisation for arestrictive practice unless it is satisfied that the trade practice: will in all the circumstances result, or be likely to result, in a benefit to thepublic which would outweigh the lessening in competition that would result,or would be likely to result or is deemed to result therefrom.90 Air New Zealand v Commerce Commission (No 6) (2004) 11 TCLR 347 (HC).91 At [241].92 At [33].[229] That provides the more specific focus on the benefits and detriments likely toarise from a restrictive trade practice than is the case in the more open-textured inquiryinto the extent of benefit to the public in s 67(3)(b). In arguing that the focusedapproach that applies under s 61(6) ought also to be adopted in the authorisationassessment here, Mr Goddard submitted that it was illogical to deny clearance for aproposed merger because of perceived detriments in the nature of an SLC, and thenwhen considering the alterative of a grant of authorisation for such a merger, toevaluate the benefits to the public by having regard to a wider range of detriments thanthose causing the transaction not to qualify for a clearance.[230] We do not accept that there is an illogicality in proceeding in this way, nor dowe treat it as inconsistent with the statutory scheme. If a proposed merger does notqualify for a clearance because of detriments likely to arise in the markets affected byit, then the Commission is to consider whether it should nonetheless be authorisedbecause an overall weighing of matters relevant to the public establishes that thebenefits sufficiently outweigh the detriments. Once the Commission's task on anauthorisation assessment is viewed in that light, it would be illogical to excludeconsideration of identifiable detriments that affect an overall assessment of thebenefits to the public merely because those detriments do not arise in the market inwhich the merged entity would operate.[231] Accordingly we are satisfied that the Commission did not err in assertingjurisdiction to have regard to the detriments arising from any material loss of mediaplurality that it found would result from the proposed merger.Weight given to loss of plurality[232] The issue of loss of media plurality attracted substantial attention during theCommission's investigation and determination. Its reasoning on this concern occupieda material part of the entire determination.93 In the Executive Summary it wasdescribed as "the fundamental detriment".94 In its conclusion, the Commission93 CCFD, above n 1, at [1393]–[1738].94 At [X37].observed that its weighing of the positive and negative consequences of the mergerwas not finely balanced.95[233] The Commission listed a number of other unquantified benefits and detrimentsin its determination.96 Mr Farmer submitted that the loss of media plurality was notthe determinative detriment on its own. He referred to in particular the Commission'sconcern about reduced quality in reader markets. The Commission's reasoning treatedboth of these unquantifiable detriments as being of "significant" magnitude.[234] On the other hand, Mr Goddard characterised the relative importance attributedto loss of plurality in the Commission's determination as pivotal. Arguably, sufficientdetriments could not be identified to withhold an authorisation if the Commissionerred in assuming jurisdiction to take into account loss of plurality.[235] It is unnecessary for us to decide whether the weight attributed to loss ofplurality by the Commission was decisive to the outcome of its authorisation decision.After our own analysis of the relative importance of loss of plurality, we provide ourview of the weight to be attributed to it, as a matter of our judgment.The plurality debate[236] Assuming we are correct in treating consideration of the potential loss of mediaplurality as a matter within the Commission's jurisdiction, there remains theappellants' substantive criticism of the manner in which it was assessed, and theweight given to it. The appellants argued that the Commission's view on loss of mediaplurality was speculative; not justified on the evidence before it; and that the risk wassufficiently remote that it ought either not to have been taken into account at all, orotherwise given substantially less weight than it was. An aspect of this criticism wasthat the Commission's approach on this potential detriment was binary, in the sensethat once the Commission found that loss of media plurality represented a detriment itcould take into account as arising from the merger, then axiomatically it was one of95 At [1737].96 At [1705]–[1714].sufficient importance to outweigh the substantial quantified and unquantified benefitsthat were also recognised.[237] The plurality debate can be addressed under two headings:• the relative importance of media plurality; and• the adequacy of internal plurality.97[238] First, however, we consider the Commission's approach in treating the loss ofplurality as a "disbenefit".[239] The Commission characterised the loss of media plurality that would followfrom the merger as a disbenefit, which we understand to be a term of art distinguishingthe costs (economic or otherwise) associated with procuring a benefit that wouldaccrue from the transaction in question. A disbenefit is to be distinguished from adetriment because a disbenefit only arises from the costs associated with procuring abenefit.[240] The appellants advanced a separate criticism that if loss of media pluralitybecame relevant as a disbenefit, then the negative value attributed to that adverseconsequence could not be greater than the positive value of the related benefit, thecreation of which was the trigger for incurring the disbenefit. Arguably, in itsauthorisation assessment, the Commission could not attribute a greater negative valueto disbenefits arising from the impact on media plurality than the value of theadvantages of maintaining the fourth estate that arose from the merger.9897 Internal plurality refers to the internal range of views within the proposed merger. Externalplurality means the range of views within the media industry.98 The term "fourth estate" is commonly understood to refer to news media. The first use of the termin reference to the press or news media is attributed to Edmund Burke who, in 1787, whilecommenting that there were three estates of Parliament (the Lords Spiritual, the Lords Temporaland the Commons), pointed to the press gallery and said there sat a fourth estate, far moreimportant than the others. See Thomas Carlyle "On Heroes, Hero-Worship, and the Heroic inHistory, Lecture V: the Hero as a Man of Letters, Johnson, Rousseau, Burns" (Tuesday 19 May1840) as reproduced in Thomas Carlyle Sartor Resartus and On Heroes, Hero Worship (London,Dent, 1908) 383 at 392.[241] Given the view that we have come to on the breadth of matters legitimatelytaken into account by the Commission under an authorisation assessment, there is norequirement for relevant negative consequences of a merger that arise outside themarket in which the need for authorisation arises to be tied to a benefit perceived asarising from the merger. In our analysis there is accordingly no distinction necessarilydrawn between a detriment and a disbenefit. Further, given our finding that adetriment for the purposes of an authorisation assessment need not be tied to a benefit,there is consequently no need for the negative value of a detriment that does relate toa benefit to be limited by the value of that benefit.Relative importance of media plurality[242] Before the Commission, and on appeal, the appellants made a relatively mutedchallenge to the proposition that maintaining media plurality is an important societalvalue in maintaining a strong and well-functioning democracy.99[243] The appellants' submissions to the Commission included the followingquotation:100According to another commentator, "notions of pluralism, diversity and themarket place for ideas are at best vague and malleable, at worst adjusted to thepurpose of whoever invokes them" (Tambini 2001, 26). Looking atcontemporary media policy debates and the range of objectives advocated bythe positive value associated with the concepts of pluralism and diversity, it iseasy to agree.[244] We agree with the Commission, and what we treat to be the preponderance ofviews on the point, that maintaining diversity of control over the mainstream media isan important component in the functioning of a healthy democracy. Without asufficient measure of diverse views expressed by competing voices, the risk arises thatundemocratic or improper conduct by those in positions of power will not adequatelybe brought to the public's attention. The editorial process also depends importantly99 Significantly greater emphasis was given to the distinct criticism that the Commission had givenexcessive weight to the unquantifiable concern at loss of media plurality.100 Karl Karppinen Rethinking Media Pluralism (Fordham University Press, New York, 2013). Thereference to Tambini is to Damian Tambini Communications: Revolution and Reform (Institute ofPublic Policy Research, London, 2001) at 26.on providing sufficient coverage of competing views on national and local differencesin the political and social life of the country.[245] On the basis of the statistics discussed below New Zealand already has anunusually high level of concentration of media ownership. However there were nostrong concerns expressed in the arguments on the appeal, or relied on by theCommission, that the existing media ownership arrangements deprived New Zealandof adequate plurality.[246] We note four factors that have had a minor influence on our consideration ofthis topic. We accept our views are formed as non-experts. The influence of our viewon these points has not been decisive, but it is appropriate to acknowledge them givenpassing references to them during argument.[247] First, the range of political views in mainstream New Zealand politics isrelatively limited. Mr Goddard acknowledged this as a feature in passing.101 We seethe lack of greater diversity in the political landscape as an influence on themainstream media when it reflects largely centrist political views and expectations.Society is provided, by and large, with political initiatives, and reporting on them,within the range that New Zealand society wants. The focus we perceive on centristpolitics in the mainstream media may reflect a risk influencing editors to think that ifthey report or espouse more extreme views of political thinking, they may discouragetheir core audiences without the prospects of generating sizeable alternative audiences.[248] Our second observation is that New Zealand's mainstream media is relativelyresponsible in recognising the value of accuracy, objectivity and balance in itsreporting.102 As the Chairman of the Press Council, Sir John Hansen, observed in aninterview with the Commission, New Zealand does not have "screaming" tabloids thatSir John saw as a feature of English newspapers.103101 His reference was to the observation some years ago by United States political commentatorThomas Friedman that the whole of the New Zealand political spectrum would fit within one halfof the United States Democratic party.102 We appreciate that this observation may not be accepted universally, with some minorities andinterested observers having concerns about unconscious bias.103 Interview of Press Council CC.FS.2825 at 14.[249] Both these features arguably lessen to a small extent the relative importancethat should be attributed to the maintenance of adequate media plurality to ensure ahealthy range of reporting on political and social issues. We acknowledge that thereis no certainty that either of these features will apply permanently. However both havebeen present for substantial periods and there is no signal that this may change, at leastin the near future.[250] An important countervailing consideration is the relative fragility of NewZealand's constitutional arrangements. In the absence of a written constitution, thebalance of power between the executive, legislative and judicial branches ofGovernment depends on continued respect for conventions and other sources of ourunwritten constitution. An important check on the prospects of abuse of power is themonitoring of all those who can exercise it, by the fourth estate. Robust and inquiringmedia organisations therefore continue to play a vital role in ensuring maintenance ofthe rule of law.[251] Another factor, noted by Levy and Foster, is the absence of a stronglysupported public broadcasting system, such as the state funds in other comparablejurisdictions.104 The existence of state funded but editorially independent mediaorganisations is partly because of the recognition of the importance of a healthy levelof reporting on political, economic and social affairs.[252] In New Zealand RNZ is the only participant in the mainstream media thatdischarges that function.105 It is of more limited scope than comparable publicbroadcasters in the United Kingdom and United States.[253] The report obtained by the Commission from Dr Levy and Mr Foster on itsdraft determination drew stark contrasts between the level of concentration of mediacontrol in New Zealand, and the position in other countries.106 Their report citedanother recent analysis:107104 Levy and Foster, above n 43, at 22.105 We do, however, acknowledge, the growing significance of Māori Broadcasting entities thatreceive state funding and discharge important functions.106 Levy and Foster, above n 43, at 8–10.107 At 9 (citations omitted).In the Bertelsmann Foundation's Sustainable Governance Indicators, underthe rubric "To what extent are the media characterised by an ownershipstructure that ensures a pluralism of opinions?", on the basis of their analysisNew Zealand currently rates at 4 out of a 10 point scale compared to Australiaat 5 and other similar sized countries, namely Finland, Denmark, Norway andSweden at 9 and Ireland at 8.[254] The authors also expressed the following views:108 the New Zealand news market is already more concentrated, there isrelatively little routine use of news sources from outside New Zealand,certainly compared say to Ireland which as stated has widespread use of UKnews sources, and as noted above the level of public service provision in NewZealand is relatively low.[255] The authors characterised Australia as a country that has an unusually highlevel of media concentration with News Ltd having a 57.5 per cent share of theAustralian newspaper market making it the highest share of any democratic countrystudied. In contrast, if the merger were concluded, New Zealand would have an evenhigher degree of print media concentration than Australia. That part of the reportconcluded with the following:109Finally, while some have argued that the rise of online news renders redundantapproaches to plurality based on newspaper or broadcast sources, this is notcurrently the case in countries such as New Zealand where the most regularlyused news sources online are provided by the dominant providers offline. Theargument that online news makes traditional concerns for plurality obsoletedoes not – at least at present – stand up to scrutiny given existing patterns ofnews provision, use and impact.[256] The Commission adopted the view expressed in this last observation, rejectingthe appellants' argument that dramatic changes in the manner in which online news ismade available to readers is rapidly becoming an adequate alternative source of mediaplurality.[257] In their presentations to the Commission, the appellants relied on two opinionsfrom Professor Randal Picker of the University of Chicago Law School. The earlierof those commentaries ended with this observation:110108 At 10.109 At 11.110 Randal C Picker Commentary on News Media Quality Issues in Fairfax/NZME ProposedAcquisition (15 October 2016, CC.FS.0614.0001) at [56].A number of submissions appropriately emphasize the critical role of themedia in democratic societies. But the internet has put media firms on the runand media have to be financially sustainable if they are to play their importantFourth Estate role.[258] In Professor Picker's second commentary which was on the Commission'sdraft determination he assumed that internal plurality would be maintained. He opinedthat the Commission had paid too little attention to the incentives of the merged firmto produce news with different perspectives. He criticised the Commission for notconsidering the incentives the merged firm would have to provide differentperspectives "if that is what New Zealanders want".111[259] The attitude of the appellants' expert was therefore not that plurality in themedia was unimportant, but that the Commission had failed adequately to appreciatethat it could be maintained by the merged entity.[260] The Commission received a substantial volume of submissions opposed to theapplication that raised concerns at the loss of media plurality. These includedsubmissions from 11 former editors of newspapers (including those published by theappellants), which reflected concerns that the merger would be detrimental to thepublic and that it would not be healthy in a society where there are so few checks andbalances in New Zealand's constitutional arrangements.[261] The Commission interviewed a number of those former editors, includingDr Gavin Ellis who had been Editor-in-Chief of the New Zealand Herald and is nowa lecturer at Auckland University, and Mr Tim Pankhurst whose previous rolesincluded Editor at the New Zealand Press Association and of a number of newspapers.[262] Generally these submitters held positive views about the relatively highstandards of New Zealand journalism, but considered the extent of aggregation ofownership that would result would threaten existing standards. For instanceMr Pankhurst projected a rationalisation of resources within the parliamentary press111 Randal C Picker Commentary on Draft Determination of New Zealand Commerce Commission reFairfax/NZME Proposed Acquisition (25 November 2016, CC.FS.0015.0001) at [13]. We do notaccept that the production of news by the merged entity would be dictated solely by what itsmanagers perceived New Zealanders wanted. That may not accord with the financial imperativeto improve performance as much as possible. See our example at [82]–[83] above.gallery, leading to a narrowing of voices which he considered "a significant threat toour democratic process".112[263] The Commission also received a joint submission from six academics whoopposed the merger.113 Their concerns were similar in that they saw greater publicbenefits being derived from journalism where it was diversified in open markets. Theyconsidered that democracy functions best when there are many voices andperspectives. They saw the concentration of "voices" that would result from themerger as reducing the plurality and diversity of New Zealand news coverage.[264] The Commission received submissions raising similar concerns from the NewZealand Political Studies Association and the Coalition for Better Broadcasting.[265] The Commission was given a different perspective from an experienced mediaeditor in a confidential session with X []. X saw a number ofsimilar challenges facing the media in New Zealand, both with and without the merger.X was more confident than other submitters that editors for separate newspapers underjoint ownership would strive to maintain their independence, and their pursuit of arange of views. X's comments suggested that any reduction in the range of viewsbeing produced by the merged firm would create opportunities for others, [ ],to replace the wider range of views currently provided by the appellants' newspapersand separate websites. To this extent, X did not undermine the importance of mediaplurality but suggested a range of views could still be provided, despite the merger.112 Interview of Tim Pankhurst, CC.FS.0820.003 at 3.113 Dr Julienne Molineaux (Auckland University of Technology), Associate Professor DonaldMatheson (University of Canterbury), Dr Merja Myllylahti (Auckland University of Technology),Dr Sean Phelan (Massey University Wellington), Dr Peter Thompson (Victoria UniversityWellington) and Associate Professor Geoff Lealand (University of Waikato).[266] X did not see a substantial change occurring in the short term after the merger,but treated the future as being more uncertain two to four years away. X accepted thatthere would be less content produced by a merged company because the need for costsavings would involve rationalisation of the journalistic resources. X was confidentthat, in the short term at least, the merged firm would maintain adequate internalplurality but acknowledged that that would be uncertain in the longer term future.[267] On all the evidence before the Commission, we consider that it is appropriateto attribute material importance to maintaining media plurality. It can claim status asa fundamental value in a modern democratic society.114 We cannot be certain that amaterial loss of plurality will occur because of the factors we review that wouldhopefully assist in maintaining it. However the risk is clearly a meaningful one and,if it occurred, it would have major ramifications for the quality of New Zealanddemocracy. In our analysis on the clearance application appeal we have recognisedmaterial barriers to entry in the market for production of New Zealand news.115 Weagree with the Commission that a substantial loss of media plurality would be virtuallyirreplaceable.Adequacy of internal plurality[268] As to the diversity of opinions likely to be promoted because of editorialindependence, we have acknowledged the good faith of existing editors' ethos instriving to publish a range of views and to maintain the breadth of New Zealand newsthat is reported.116 In terms of editorial standards the appellants criticised theCommission for giving inadequate weight to the capacity of the Press Council toencourage maintenance of standards of editorial independence.117114 And not so modern. As Thomas Jefferson put it: "The basis of our governments being the opinionof the people, the very first object should be to keep that right; and were it left to me to decidewhether we should have a government without newspapers or newspapers without a government,I should not hesitate a moment to prefer the latter. But I should mean that every man shouldreceive those papers and be capable of reading them." Letter from Thomas Jefferson to EdwardCarrington (16 January 1787) as reproduced in Paul Leicester Ford (ed) The Works of ThomasJefferson Vol 5 (GP Putman's and Sons, New York, 1904) 251 at 253.115 See [97]–[108] above.116 Observed at [79] above.117 This criticism includes one of the process complaints, discussed below, that the Commission didnot re-interview Press Council representatives after doubts were expressed in post-conferenceinterviews with opponents about the Council's effectiveness in influencing behaviour by themerged entity.[269] The Commission made the point that the Press Council could intervene onlyafter complaints are made about non-complying conduct committed by a member ofthe Press Council. Membership of the Press Council is voluntary, and it has no powerto enforce standards prospectively. The appellants argued that position overlooks thepressure to meet standards that are acceptable to the Press Council, which constrainsthe editorial policies adopted by Press Council members. The appellants also arguedthat relegating the influence of the Press Council on these grounds failed to giveappropriate weight to the confidence expressed by the chair of the Press Council in itsability to influence journalistic standards.[270] To evidence its ongoing commitment to membership of the Press Council,NZME completed a deed poll in favour of the Press Council on 9 February 2017 whichcommitted the merged entity to continued membership of the Press Council and to themaintenance of standards of accuracy, balance, professional conduct, integrity andindependence.[271] We do not treat the position of the Press Council as an answer to the loss ofexternal plurality. There is no reason to doubt its efficacy in its present self-regulatoryregime, and the extent to which its presence is a prospective constraint on editorialstandards. However it cannot be expected to be a bulwark against change in animportant area where we are satisfied that material change would occur post themerger because of the financial imperatives for such change to occur. Nor are wepersuaded that NZME's deed poll adds materially to the prospect of internal pluralitybeing maintained in the same way as the present competitive forces that are a featureof the present plurality of ownership of these dominant media organisations.[272] Mr Goddard invited the Court to take judicial notice of the healthy state ofcompetition that existed between the Dominion and Evening Post newspapers inWellington, during the period in which both those newspapers were published dailyand were under common ownership. The former was published as a morning paperand the latter as an evening paper, and readers' perception was certainly that healthycompetition existed. However that activity was in a very different market from thepresent one. Printed newspapers enjoyed relatively much wider circulation than isnow the case, and it was pre-internet, so no online sources of news existed.[273] We are also mindful that if the merger does not proceed, then a material extentof retrenchment of journalistic and editorial resources is likely to occur in thecounterfactual scenario. The comparison cannot be made on the difference betweenthe status quo continuing and the extent of rationalisation we project is likely if themerger proceeds. Rather, it is an issue of how extensive the difference of degree isbetween retrenchment assessed as viable in an ongoing competitive situation, and theretrenchment that becomes possible when the publications are in common ownership.[274] We are satisfied that the extent of retrenchment would be influenced to amaterial extent by the presence or otherwise of competition. The concern is that agreater level of retrenchment will occur when approached from the perspective ofremoval of duplicated resources, and when the constraint of another major player isremoved.[275] By comparison with the extent to which major media organisations in otherjurisdictions identify with political parties, the level of political influence over mediaowners in New Zealand is relatively slight. Given that, and given the initial listedcompany ownership structure, we accept that the risk of a dominant ownershipposition of the merged entity being exploited for political purposes is somewhatremote. Of course a single ownership structure that creates even a remote risk of suchserious adverse change is deserving of some weight.[276] The larger risk is that financial imperatives will pressure a significant loss ofplurality, despite the aspirations of editorial staff. We therefore treat the best intentionsexpressed in that regard as inadequate to materially reduce the detriment arising fromthe loss of external plurality. Ultimately, as Mr Every-Palmer submitted, internalplurality is a discretionary matter whereas competitive forces provide an externalconstraint that is materially more compelling in providing for diversity of views andquality of news reporting. Any internal plurality is therefore inadequate to meetbroader plurality concerns associated with the proposed merger.Other unquantified benefits and detriments[277] The Commission assessed a number of other potential benefits and detrimentsthat were projected to result if the merger ensued. In doing so the Commissiondisagreed with the appellants on a number of unquantified benefits and detriments, butno separate challenge was advanced to these conclusions on the appeal. Instead theCommission's rejection of the propositions advanced for the appellants formed a partof the appellants' criticisms of the Commission's analysis of the prospect of an SLC,when dealing with the clearance application.[278] The appellants claimed that the merger would reduce the current duplicationof resources and free up journalistic resources to report on an increased number ofstories. This projection relied on Professor Picker's analysis which suggested thatwhilst the two news organisations presently competed to provide content that appealedto the core majority of reader preferences across both publications, once they weremerged the core content could be produced more efficiently so that the remainingresources would be available to add diversity.[279] Another aspect of this was that, because the core of news reporting would beproduced more efficiently, there would be proportionately less loss of intellectualproperty in the news content from so called "free riding". This refers to the practiceof other publishers feeding off the product of quality content that the appellantsproduce, such as resulting from investigative journalists' work. The merged entitywould more easily obtain a return on the product of such resources, leaving free ridersless scope to recycle the published product of such endeavours.[280] Consistently with the view it adopted on other parts of its reasoning, theCommission did not accept that efficiencies achieved by removing duplication ofjournalistic resources would be committed to the production of more diverse items inthe merged entities' publications. Although the Commission accepted the possibilityof a reduction in free riding, it did not see that as a material benefit.[281] The appellants also contended that the efficiencies to be obtained from themerger would strengthen the merged entities' financial capability to prolong the lifeand quality of print publications. This was on the premise that an improved financialposition would lessen the pressure that is presently leading to reductions in printpublications. Mr Goddard put this as "lengthening the runway" (that is, the periodduring which it would remain financially viable for the merged entity to continue printpublications that are otherwise under more pressing threat).[282] The Commission's analysis of this claimed unquantified benefit dealtseparately with the position it projected in the digital plus limited print scenario andin the digital plus print. In the former scenario the Commission accepted there wouldlikely be greater financial resources available. However the Commission doubted thatthe resources would be committed to continuing production of print publications thatare no longer profitable on a standalone basis, so that the future for such publicationsis gloomy, regardless of the proposed merger. The Commission did accept that theremight be a degree to which the retrenchment of publications or prolonging thedecisions to rationalise them might arise from a lower level of financial pressure ontheir operators.[283] On the other side of this evaluation the Commission accepted that there mightbe a greater downsizing of editorial resources in the digital plus limited print scenarioif the merger does not proceed. Overall on these considerations the Commission didnot accept there would be a significant benefit in the event the merger proceeded.[284] In terms of the quality of the product produced for readers, the Commissionconsidered the merger would reduce competition, which would lead to lower overallquality. Lack of competition would lessen the incentive for journalists and editors toproduce high quality news and also lessen the incentive on the merged company toinvest in journalistic and editorial resources. This approach was consistent with theCommission's rejection of the proposition that the merged businesses would facesufficient competition for advertising revenue for it to be incentivised to optimisenumbers of readers and viewers so as to optimise demand for advertising space.Rather, the imperative would be to gain financial advantages by achieving efficienciesby reducing costs.[285] The result, on the Commission's analysis, was that there would be a materialbut unquantifiable detriment in the reduced quality of output available to readers. Thiswas seen by the Commission as likely to involve a significant reduction in quality.118118 CCFD, above n 1, at [1674].[286] We have reviewed the competing contentions on these potential unquantifiablebenefits and detriments. We do not agree with the Commission on its projection thatthe merged entity would introduce a form of paywall for the online version of one ofits publications. Whilst we accept that common ownership of the two presentlycompeting online versions of their newspapers would remove a compelling reason thatpresently exists for not introducing a paywall, we are not satisfied that the prospectsof introducing a form of paywall on terms where the revenue it generated exceededthe overall loss of advertising revenue are sufficiently likely for that initiative to beundertaken.[287] We have previously explained our view that the financial imperativesfollowing the proposed merger would lead to a reduction in the quality, including somereduction in the scope of the news produced in the appellants' print and onlinepublications. In assessing the materiality of this reduction in quality as a detriment inthe authorisation assessment, we are mindful of the parties' opposing views on theability of the appellants to reduce quality without affecting the level of readership andthereby the level of advertising revenue. The appellants' position is that if any materialreduction in quality occurs, it will be noticed by readers to an extent that it harms theadvertising revenue because readers will read their publications less. TheCommission's view is that in this market there are opportunities for a reduction inquality that either goes unnoticed, or, despite being material in an objective assessmentof quality, does not cause a reduction in readership.[288] We prefer the Commission's approach. In the context of the appellants'position in the media markets, their dominance is likely to make the level of readershiprelatively more resilient to changes because of their established reputations, andbecause they occupy by far the broadest position in the mainstream media. In termsof coverage, for many readers if they do not resort to either one or the other, then theirrange of interest is unlikely to be satisfied elsewhere.[289] For our part we see the unquantified detriments of reduction in quality of theonline news products, in the Sunday newspapers and community newspapers (wherethey overlap), as well as the loss of plurality, as highly material but unquantifiabledetriments that would follow from the merger.Quantified benefits and detriments[290] We have reservations about the quantification of benefits and the availabilityof the sums quantified as resulting from the efficiencies that would apply to the mergedbusiness. The merged entity could not be required to apply the financial benefitsderived from efficiencies available to the merged entity to improve the quality orreduce the price of the products produced. The owners of the merged entity can beexpected to apply any surplus generated by efficiencies in the best interests of theirshareholders. That might well include a combination of commitment of additionalcapital to improve the quality of their products, and a return to shareholders of part ofthe benefits of the merger, by way of dividends.[291] The Commission's projections as to the extent of quantifiable benefits includedthe gains arising from efficiencies resulting from reduced costs.119 The Commissionrecognised as a generality that wealth transfers from New Zealanders to non-New Zealanders may give rise to a detriment to New Zealand.120 On this point theCommission cited the decision in Godfrey Hirst 2 in the High Court.121 Judgments onsuch appeals have taken context-specific views about the prospect of monopoly rents,arising both from an ability to impose increased prices or savings from delivery ofreduced quality. The Courts have also appreciated that repatriation of returns oninvestment to foreign shareholders may not automatically constitute a detriment to theNew Zealand consumer if that is the price of the investor's provision of ongoingcapital support.122[292] In this case the appellants provided a confidential projection of the likelypercentage of the merged entity that would be New Zealand owned.123 []. The Commission projected net detrimental wealth transfer to non-New Zealanders in a range between approximately $1 million and $6 million peryear.124 The Commission deducted amounts for New Zealand shareholders and for tax119 The projections are set out at [25] above.120 CCFD, above n 1, at [72].121 Godfrey Hirst 2 (HC), above n 16, at [39].122 Godfrey Hirst 2 (CA), above n 72, at [42].123 CCFD, above n 1, at [1284]–[1297].124 At [1304] and table 12.on dividends payable to foreign shareholders. These focus on the figures adopted bythe Commission in its digital plus print scenario.[293] We agree with the Commission's approach to wealth transfers and the sequenceof its calculations, but our different conclusion on the prospect of a paywall reducesthis range to an upper number of approximately half the projection as calculated bythe Commission.[294] The Commission undertook an equivalent analysis for the digital plus limitedprint scenario, arriving at the same range of $1 million to $6 million for detrimentalwealth transfers.125 Consistently, we would approximately halve that range to excludethe impact of wealth transfers from a paywall.[295] If we are wrong in reaching the opposite conclusion to the Commission aboutthe prospects of a paywall being introduced for one of the merged entity's publications,we would then acknowledge the existence of wealth transfers being generated by thepresence of a paywall. While we agree with the appellants' criticism that theCommission's quantification of allocative efficiency detriments erred significantly inthis respect in its modelling of the likely demand facing a site behind a paywall, thatcriticism does not impinge on the analysis of wealth transfers, estimated at [ ]over a five year period by the Commission, who acknowledged that that number is,"likely to be overstated".126[296] The appellants challenged the Commission's approach to wealth transfers,disputing that improved financial performance post-merger could be treated as supracompetitive rents. [], Mr Goddard submitted that the projected returnscould not be reasonably viewed as a supra-competitive return on assets.127[297] The competing views on this point depend on whether [125 At [1319] and table 14.126 At [1317].127 [].]. That is not a difference we can resolve. TheCommission stated that, []128 but provided no particular reasoningor rationale for taking this view. On balance we consider that the doubts surroundingthis position are such that the prospect of wealth transfers as detriments is a factor thatshould not be given any material weight.The overall assessment[298] If the total quantifiable benefits of the merger were put at, say, $200 millionthen in broadest economic welfare terms the country would be better off if thetransaction were completed so long as the value attributed to all the detriments wasless than $200 million. Put another way, the appellants would submit theunquantifiable detriments have to be attributed a value greater than the total of thequantifiable detriments ($200 million) before they should be recognised as sufficientto outweigh the recognised benefits.[299] We do not accept that the assessment of all benefits and detriments is able tobe tested in this way. Material unquantifiable detriments are simply unquantifiable.In this case concerns for the preservation of media plurality as a support for a strongdemocracy, when measured as to its impact on the whole economy, has a significancethat outweighs the significant quantifiable benefits that have been acknowledged.[300] We certainly do not accept any characterisation that the projected extent ofbenefits would be a sum "available to New Zealand", in the sense that it accrues forthe public good and could somehow be committed, if necessary, to provide substituteforms of media plurality by way of public broadcasting initiatives.[301] As the concerns pursued by Godfrey Hirst in those appeals demonstrate, it canbe frustrating for participants in an authorisation application to be confronted with anoutcome that is determined by findings of unquantifiable benefits or detriments. Asthe Court of Appeal confirmed in Godfrey Hirst 2, a decision on such matters must128 [ ].strive not to rely on a purely intuitive judgment and is to avoid undisciplinedsubjectivity. An outcome determined by application of unquantifiable factors(detriments and/or benefits) is a matter of qualitative judgement, informed as in thiscase by expert opinion.[302] The projected extent of quantifiable benefits, after netting off of thequantifiable detriments which on our approach are reduced because of the absence ofthe likelihood of a paywall, produces a range of significant amounts. The Commissionprojected the total quantified benefits in the digital plus print scenario between$145 million and $210 million. After setting off the summary of quantified detrimentsin that scenario, the Commission projected over a five-year timeframe a range of highdetriment/low benefits of $41 million and low detriment/high benefits of $204 million.The Commission's projections in the alternative digital plus limited print scenarioproduced a range of total quantified benefits between $144 million and $199 million.Offsetting quantified detriments produced net quantifiable impact over the five-yeartimeframe between high detriment/low benefits of $55 million and low detriment/highbenefits of $196 million.[303] The appellants accepted the range of quantified benefits projected by theCommission. However the appellants criticised the extent of quantified detrimentsand submitted that if they were reduced to close to zero, the net quantifiable benefitsfrom the transaction were in a region between $140 million to $200 million. On eitherview the projected economic outcome of the merger is strongly positive.[304] Requiring the owners of businesses whose conduct is otherwise lawful toforego such significant efficiency gains, and bearing in mind the indirect efficiencygain of at least a portion of such benefits to the New Zealand economy, anunquantifiable detriment of sufficient importance to outweigh that recognised benefitmust be of some national significance.[305] We are satisfied that maintaining media plurality and the quality of the mediaproduced are fundamental values of benefit to the public and of real and nationalsignificance.Conclusion on authorisation appeal[306] Weighing all aspects of the opposing views put to us, our own view is that theimportance of the likely loss of plurality, and the prospect of reduced quality of theproducts produced by the merged entity comprise detriments justifying greater weightthan the quantifiable and unquantifiable benefits we have identified.[307] We accordingly agree with the Commission that the application forauthorisation should be declined. The Commission did not allocate relative levels ofimportance to the unquantifiable detriments to which it had regard. The parties wereat odds in attempting to rank the importance attributed to loss of media plurality.129An issue does arise as to the weight to be given to the remaining unquantifiabledetriments if we are wrong in taking the loss of plurality into account as a relevantfactor in the s 67 evaluation.[308] We accept that the weighing of all detriments against all benefits would be alot nearer to being evenly balanced, if that were the case. We treat the loss of qualityof what would be produced by the merged entity as a significant unquantifiabledetriment.[309] If reduction in quality was to be assessed without loss of media plurality as aseparate detriment because detriments to the public at large had to be ignored, thenloss of media plurality would become an important additional component of thereduction in quality of the products delivered to the consumers of all of the mergedentities' products. Given the reach of the appellants' publications, on a confined in-markets analysis a substantial component of the wider loss of media pluralitydetriment also arises. Those reading the appellants' publications are likely tocontribute, at least proportionately to the part they comprise of the general population,to debates on social and political issues. It is possible that they may make adisproportionately larger contribution to such debates. The quality of consumers'contributions to social and political debate is likely to be diminished as a result of themerger. It is unnecessary to be definitive, but we incline to the view that assessed in129 See [232]–[234] above.this light, the reduction of quality would still be likely to outweigh the net benefits asotherwise identified.Process complaints[310] The appellants' notice of appeal included criticisms that the Commission hadfailed to follow a fair process.130 I overruled an objection on behalf of the Commissionto the inclusion of these process complaints within the appeal, rejecting theCommission's arguments that they were in the nature of judicial review and ought tohave been separately pursued as such.[311] The Commission sought particulars of the allegations which were provided byway of a letter dated 3 July 2017. The scope of the criticisms at their widest causeddeponents for the Commission to respond in four affidavits. 131 The matters respondedto included an allegation of predetermination or apparent bias on the part of a memberof the Commission. When the appellants filed their separate submissions on theprocess complaints on 25 September 2017 the range of complaints were reduced totwo respects in which the Commission had allegedly failed to abide by the principlesof natural justice and procedural fairness.[312] The two remaining complaints were, first, that the Commission had solicitedand conducted interviews selectively with third parties who were known to oppose themerger after the conference on 6 and 7 December 2016, with transcripts of thoseinterviews only being disclosed belatedly, and then on a counsel only basis. Second,the appellants criticised the lack of balance and inadequate process involved in theCommission's request for a report from BDO Wellington Ltd (BDO) in April 2017, torespond to matters raised in reports prepared for the appellants by PwC.Conduct of post-conference interviews[313] After the Commission's conference on 6 and 7 December 2016, it initiatedcontact with a number of third parties who the appellants reasonably saw as being130 Notice of Appeal, 26 May 2017, at [19(a)]–[19(c)].131 The affidavits were from the Chair of the Commission, Dr Berry, [ ]and two from Ms Katie Rusbatch, Competition Manager for the Commission.opposed to their merger. Between 19 December 2016 and 10 February 2017 theCommission conducted interviews with eight individuals (one of those on twooccasions) and with a pair of experienced participants in New Zealand mediabusinesses.[314] The appellants criticise the Commission's conduct in seeking furtherinformation and comments from those known to oppose the merger whereas no followup occurred with submitters who had supported the merger. The appellantscomplained that this process gave third parties who were opposed to their merger aninappropriate level of influence over the Commission's analysis. This disadvantagewas exacerbated by the content of such interviews being provided on a counsel onlybasis to the appellants' counsel, rather than to the appellants, where wider disclosurewas arguably necessary to enable them to test the content. Matters conveyed by theinterviewees included numerous opinions later referred to in the Commission'sdetermination and on which the appellants had competing views.[315] As to the standard reasonably expected of the Commission, Mr Butler, for theappellants relied on the High Court decision in New Zealand Co-operative Dairy CoLtd.132 That case addressed process complaints in equivalent circumstances wheredialogue had occurred between the Commission and interested parties after theconduct of a conference held on an application for clearance or authorisation. Thestance adopted was explained in the following terms:133We recognise that the procedure which the commission normally follows, iethe circulation of a draft determination inviting responses, and the holding ofa conference of the interested parties at which evidence and submissions inresponse to the draft are received, goes a long way towards meeting therequirements of fairness. But the commission must always be alert to ensurethat the fairness encouraged by that procedure is not undermined by whatoccurs thereafter. In other words the procedure to that point does notnecessarily exhaust the requirement of fairness. It may be necessary to gofurther by ensuring that any matter of substance which may then emerge andwhich is likely to be material to the final determination is made known to theapplicant or principal participant with an opportunity for reply. In the end itis a matter of degree, weighing the practicalities of the sometimes tight timerestraints under which the commission must operate against the importance ofthe material involved. While basic fairness must be preserved the desire toconform to the niceties may have to be tempered by the need for an urgent132 New Zealand Co-operative Dairy Co Ltd v Commerce Commission [1992] 1 NZLR 601 (HC).133 At 638–639.commercial solution, bearing in mind at the same time, that the issues to beresolved, at least in a merger situation, are not so much the resolution of legalrights between adversaries as the less precise task of weighing privatecommercial interests against those of the public, of which the commission isin a sense the guardian.Ultimately the commission must stand back and ask itself whether the use itis intending to make of a particular idea or item of evidence is fair, withoutfirst inviting a response from those whom it might affect. We apprehend auseful test might be for a tribunal such as this to ask itself if it is satisfied thatits decision on the point would have been the same without adopting that ideaor item of evidence. If the new material is merely a make-weight to reinforcean otherwise supportable conclusion, the exigencies of the commission'sprocedures and the need for a prompt result may justify no further reference.But if the new material is the only means by which a particular conclusioncould be reached then to do so without reference is likely to result in unfairnessor, which is equally undesirable, in a reasonable apprehension of unfairness.[316] The Commission accepts this description of the extent of its obligations,emphasising that the requirements of natural justice in any given case are inherentlyfact and situation specific. Mr Farmer cited the approach in Contact Energy Ltd vElectricity Commission where a change of stance partway through a consultationprocess would require further consultation if the change was a fundamental one, butno further consultation obligation arose if the new material does not alter the proposalsin a material way.134[317] The Supreme Court has considered the scope of consultation obligations underthe Biosecurity Act 1993 in New Zealand Pork Industry Board v Director-General ofthe Ministry for Primary Industries where promulgation of provisional import healthstandards are being considered.135 The Director-General was challenged for notundertaking a second round of consultation. The Supreme Court drew a distinctionbetween work of a "tidy up" nature that is unlikely to trigger a further obligation toconsult, and work that raises a substantial change, where further consultation may berequired.136[318] In this case some of those interviewed after the conference had either not hadan adequate opportunity to convey views to the Commission in the time allowed, or134 Contact Energy Ltd v Electricity Commission HC Wellington CIV-2005-485-624, 29 August 2005at [30]–[36].135 New Zealand Pork Industry Board v Director-General and Minister for Primary Industries [2013]NZSC 154, [2014] 1 NZLR 477.136 At [168], [172]–[173].in a small number of cases had been unable to attend or remain at the conference. TheCommission denied that any of the content of the post conference interviews wassufficiently significant, or new in a sense that an obligation was triggered to invite aresponse from the appellants about it.[319] The Commission disputed that it had any obligation to be even handed inchoosing those it conferred with after the conference. It submitted that in conductingits inquisitorial process it could not be constrained in the range of persons from whomit sought information and views. It was submitted for the Commission that it had heardextensively from the appellants and supporters of the merger before and at theconference. It perceived there were gaps in the depth of understanding it had on topicsthat it considered to be relevant.[320] The standards of procedural fairness reasonably required can vary with, forexample, the complexity of an inquiry and the extent to which the decision maker isconstrained by time frames. In the case of another Commission inquiry in WellingtonInternational Airport, this Court observed:137In evaluating the submissions and information received from interestedpersons, the Commission must be able to clarify matters for itself, includingby obtaining expert advice. If it is required to test on interested persons anychange in its view or refining of its position, the Commission's inquiry willindeed never end.[321] Mr Farmer characterised the content of the post conference interviews asproviding more extensive detail on themes that the Commission was previously awareof.[322] It is difficult to measure the state of information available to the Commissionat the point at which it had produced its draft determination and conducted the two dayconference on the issues, and then to contrast that with the enhanced state ofknowledge acquired by the time the post conference interviews had been completed.137 Wellington International Airport Ltd v Commerce Commission (2002) 10 TCLR 460 (HC) at[70(a)].[323] The appellants were aware that the Commission was conducting the furtherinterviews. Transcripts of four of the interviews were provided to counsel for theappellants on 15 February 2017 and further transcripts were provided on 1 March2017. On 31 March 2017 the appellants presented a further submission on thetranscripts of interviews that had been held since the conference. Because ofconfidentiality constraints, the appellants' counsel were unable to refer the content ofthose transcripts to the appellants so that their submission in response was completedwithout counsel being able to take specific instructions on those responses. Howeverthe issues had by then been relatively well canvassed, and the topics covered werelikely to have been the subject of substantial dialogue between the appellants and theircounsel at earlier stages of the Commission's inquiry.[324] The transcripts do suggest that the interviewees provided firm andwell-reasoned views for the concerns they raised about the consequences of theproposed merger. They appear to have been presented persuasively, with theinterviewees speaking from positions of authority on the topics that they addressed.They could provide added justification for the views of the Commission subsequentlyexpressed in the determination, in particular about loss of media plurality.[325] However the views expressed and the conclusions they led to were not new atthat stage of the inquiry. There is no evidence that the post-conference interviewscaused the Commission to change its views on topics covered by the interviewees.[326] The Commission cannot dismiss the post-conference interviews asinsignificant. Nonetheless we are not persuaded that they contained matters ofsignificance that signalled a change in the direction the Commission might take andwhich would require the Commission to open that fresh topic for a further round ofconsultation with the appellants.[327] Given the inevitable pressure on the Commission to complete itsdetermination, the position at the end of those interviews was that if it treated them asrequiring a further round of consultation with the appellants then they would berisking, as foreshadowed in Wellington International Airport, circumstances wheretheir inquiry "will indeed never end".[328] A discrete complaint about this aspect of the Commission's process is that theconstraint preventing counsel from giving appellants' representatives access to thetranscripts was procedurally unfair because it hampered the preparation of an effectiveresponse. The Commission's submissions indicated that it first learnt that this was acomplaint on behalf of the appellants when they saw the appellants' submissions onthe process complaints. Further, the arrangement for disclosure of the transcripts on abasis that was restricted to counsel was one offered by the appellants' counsel.Certainly there is no suggestion that a complaint was made at the time about counsel'sinability to share the content with the appellants, or of any proposals for partial orparticular disclosure to named representatives of the appellants where counsel werehampered in preparing a response.[329] The submission commenting on the transcripts and file notes of interviews ofthird parties that had been received since 5 December 2016 was lodged on aconfidential counsel-only basis.138 The overall tone of that submission is verypositive, drawing on various comments recorded in the interviews that werecharacterised as supporting the application. The submission does not advert to anyconcern about an inadequacy in the time for it to be prepared, or the inability to takeinstructions from the appellants on any particular points.[330] The only content that might be taken as implying criticism of the Commission'sprocess is that one interviewee had been given "a final – and non-transparent – rightof reply".139 That criticism related to information conveyed on a topic that wasdisputed by the appellants, but which has not featured on the appeal. In other respectsthe submission dealt head-on with opinions recorded in the transcripts that opposedthe appellants' case. For example, the submission challenged the credibility of anidentified interviewee to proffer adverse opinions, and in other respects aninterviewee's observations were criticised for containing "emotive hearsay".140[331] There is no comment in the submission that the post-conference interviews hadraised fresh matters that were material, and on which the appellants had an inadequate138 Submission on NZCC transcripts/file notes of interviews with third parties received since5 December 2016 (31 March 2017, CC.FS.0920.0001).139 At [33].140 At [28] and [38].opportunity to respond. The appellants' written submissions on the process aspect oftheir appeal included some four pages of matters that had been covered byinterviewees in the post-conference interviews, which the appellants argued wererelevant to the Commission's final determination. For instance, the appellants citedthe Commission's observation in its final determination that it was "persuaded by theviews of existing competitors as to their position in the market relative to theApplicants".141 To the extent that that conclusion relies on post-conference interviews,their content is generally confirmatory of the range of views previously conveyed tothe Commission. Furthermore the appellants' submission in response engaged on theircontrary view of the position of existing competitors.[332] We are satisfied that the appellants were afforded sufficient opportunity toadequately respond to the matters raised in the post-conference interviews.[333] A specific criticism about the one-sided choices the Commission made inidentifying those that it would interview post-conference is its failure to re-interviewrepresentatives of the Press Council. The appellants' case was that the self-regulatorystandards enforced by the Press Council would be effective in maintaining plurality.Some of the post-conference interviewees doubted the effectiveness of the PressCouncil to achieve this, and the appellants argued that a balanced process required theCommission to seek a rejoinder from the Press Council before accepting the opinionsof those who doubted its ability to prevent a material loss of plurality.[334] The Commission found that the Press Council (and internal codes of conduct)may ensure a level of fairness, balance and integrity, but that it could not influenceeditorial decision-making of the merging parties. The Commission referred to doubtsexpressed by the expert it had retained, Mr Foster, about the efficacy of internalplurality.[335] In rejecting the appellants' specific criticism, the Commission submitted thatits view on the role of the Press Council had been signalled in the draft determination,which did not result in any further comment from the Press Council, although it didsubmit a comment on a third party submission. The Commission also submitted that141 CCFD, above n 1, at [653].the appellants had not identified any material new information that might have beenconveyed by the Press Council in a subsequent interview, had the Commission electedto do so.[336] We consider those points are valid. We are not persuaded that the differentviews about the role of the Press Council received in post-conference interviewsobliged the Commission to put such views to Press Council representatives beforesettling on a view as to the role it might play in maintenance of media plurality post-merger. Overall, we are not persuaded that the Commission's post conference processwas deficient.Terms and timing of instructions to BDO[337] The appellants advanced a number of criticisms of the process adopted by theCommission in instructing BDO, and receiving a report from it.[338] By mid-March 2017 the appellants had submitted three reports from PwC tothe Commission in support of their applications. These comprised separatecounterfactual forecasts for each of Fairfax and NZME provided on 25 November2016, and a report on projected merger synergies provided on 17 March 2017. Inaddition to those reports, the appellants also provided, on 22 March 2017, an expertresponse from NERA to the Commission's then thinking on the nature of thecounterfactual that had been conveyed in a letter from the Commission to theappellants on 6 March 2017.[339] At that point the Commission elected to engage BDO as independentaccounting experts to comment on PwC's merger synergies report and also on theearlier counterfactual reports. The Commission engaged BDO on 4 April 2017 onterms that the appellants complain were slanted in respects suggesting that theCommission was looking for views opposed to those of PwC.[340] BDO provided its report to the Commission on 19 April 2017. That same daythe Commission provided it to counsel for the appellants.[341] After an inquiry from counsel for the appellants the Commission advised themon 21 April 2017 that it would consider any response to the BDO report provided itwas received by 27 April 2017. The Commission also indicated that if that time framewas inadequate for a response to be prepared, the Commission would contemplate anextension of time. An extension for some few days was possible without disruptingthe Commission's timing for the issue of its determination, but the Commissionindicated that if any extension for a longer period was required then that would involvedeferral of the Commission's decision until late June 2017. Counsel for the appellantsconfirmed that they did not want an extension.[342] Some days before the 27 April 2017 deadline the appellants provided theCommission with critiques of the BDO report, one prepared by the appellants, and theother by PwC. The two complaints about the Commission's process in relation to theBDO report that have subsequently been raised in the appeal were not raised at thattime.(i) Terms of instructions[343] The terms of the Commission's instructions to BDO were repeated in the firm's19 April 2017 report, and were accordingly conveyed to the appellants' counsel whenthe report was copied to them. The specific questions posed by the Commission werein two parts, dealing first with the PwC counterfactual reports for NZME and Fairfax,and second with PwC's Impact of Synergies letter. The instruction in relation to thefirst set of reports included the following:1421. What are the shortcomings in the scenarios suggested in the PwCcounterfactual reports?2. If the Commerce Commission can't take PwC at face value, why not?What are the gaps in the analysis? What else would the CommerceCommission want to know?4. Please highlight any other issues that you have identified with thecounterfactual reports, e.g. potential inconsistencies with otherdocumentation, etc.142 BDO NZME/Fairfax Merger: Review of PwC Counterfactual and Synergies Submissions forNZME Limited and Fairfax NZ Limited (19 April 2017, CC.FS.0930.0001) at 3–4.[344] The instruction on PwC's letter about the Impact of Synergies included thefollowing:1. The Commerce Commission are interested in whether the mergerwould necessarily prolong the lifespan of struggling printpublications that are not profitable on a standalone basis.Specifically, can the Commerce Commission be satisfied that it islikely that they would use the cost savings from the merger tosubsidise unprofitable parts of the business?2. If not, why not?3. [The] Commerce Commission are also interested in whether themerged entity would necessarily use merger-related cost savings toreinvest in the merged entity. Specifically, is there a real chance thatsuch reinvestment would not occur, e.g. if merger savings were usedto fund dividends to shareholders?4. In light of these queries, please provide any other relevant commentsyou have regarding this letter, or specific paragraphs therein.[345] The appellants criticised the closed form of the questions and terms of theinstructions to BDO which they characterised as inviting criticisms of PwC andtherefore not inviting a properly independent assessment. The deficiency in the termsof instruction was arguably compounded by the limited information provided by theCommission to BDO, and the relatively tight timeframe they were given to completetheir report. Arguably the terms of the instructions suggested that the Commissionwanted answers that found fault with PwC's analyses which would pressure BDO toundertake its task in a way that produced the result the client wanted. Mr Butlersubmitted that the closed form of some of the questions risked BDO approaching theirtask with a less than fully open mind.[346] In the first of two affidavits sworn in response to the process criticisms, KatieRusbatch, the Competition Manager for the Commission, provided an explanation forthe terms in which the instructions to BDO were cast. Those terms were settled byCommission staff and not the division members. The context as explained byMs Rusbatch was that the Commission had conducted a substantial analysis ofsubmissions and expert reports. Preliminary views had been formed. TheCommission did not necessarily disagree with the methodology that PwC had adoptedin its counterfactual reports but was concerned about the validity of the underlying keyassumptions behind PwC's findings. The focus was accordingly on whether anindependent accountant confirmed the reasonableness of PwC's underlyingassumptions. Ms Rusbatch denied that the instructions were cast in terms seeking areport to support a particular view.[347] If the Commission's letter of instruction to BDO had been prepared bysolicitors for a defendant in commercial litigation, inviting a critique of an expertreport that was to be relied on by the plaintiff, then the lack of an open invitation toform views about the content of the work being critiqued would be relevant tochallenging the objectivity and therefore the weight that might be given to the reportprovided in response. Instructions in those terms would certainly afford grounds forarguing that little or less weight should be given to a report produced in response tosuch instructions, compared with the weight that could be given to opinions that weresought in entirely open terms.[348] However that was not the context in which the Commission sought an opinionfrom BDO in the latter stages of this inquiry. The Commission already had its ownprovisional views. It does not appear to have been intent on rejecting any particularcomponent of the assumptions that PWC had worked on, where reliance on them waslikely to influence the Commission's ultimate analysis. In those circumstances thereis not the same basis for criticising instructions in terms that focused BDO on the areasof concern to the Commission.[349] It was reasonable for the Commission staff to adopt the view that if theinstructions were cast in entirely open terms, it would have been more difficult for itto focus BDO on the matters on which it wanted their opinion. Time was relativelyshort. As independent accountants, if BDO agreed with the scenarios that PwC hadsuggested in their counterfactual reports, then it was open to them to respond that theydid not identify material shortcomings. We are not satisfied that inadequacies in theterms of instructions provided to BDO ought to have required the Commission to rejectBDO's report provided in response to those instructions.[350] Ultimately the determination cited the BDO report on only one point. This wasto reject one aspect of PwC's analysis as to [].143 In adopting a likelyoutcome inconsistent with that in PwC's November 2016 analysis, but which wassupported by BDO, the determination also noted that PWC's last contribution of23 April 2017 acknowledged the prospect of that different scenario, consistently withthat put to the Commission by BDO.144[351] The Commission retained BDO because it wanted to test a number of theassumptions that PwC had relied on in that firm's proposals as to the nature of thecounterfactual. To the extent, if any, that the Commission adopted a differentcounterfactual from that PwC contended for (and without assessing what influence onthat different definition of counterfactual that BDO's report had) the Commission'scounterfactual has not been challenged on appeal.[352] The practical upshot is that there is no material prejudice to the quality of theconsideration given to all the submissions presented by the appellants that can beattributed to any deficiency in the terms in which BDO was instructed.[353] The appellants advanced a related criticism of the Commission's instructionsto BDO, in that the Commission was selective in the information provided, and didnot provide BDO with sufficient background and information to enable it tocompetently carry out the instructions the Commission gave it. BDO's report noted alimitation on its work by virtue of the limited extent of information and alsoacknowledged the absence of opportunity to talk with PwC or the appellants' counsel.[354] This was not advanced as a criticism of BDO. Rather, that the Commissionerred in considering that it could obtain a report that was based on adequately informedconsideration, when it was as selective as it was in provision of information to BDO.The appellants did not advance any respects in which they contended that the viewsexpressed by BDO were wrong because BDO were unaware of other materialinformation.143 [ ].144 At [170].[355] Again, the materiality of such criticism depends on the extent of relianceultimately placed by the Commission on BDO's report. We are not persuaded that thatlevel of reliance was such as to treat any inadequacy in the information provided toBDO as constituting material error in the Commission's process. Similarconsiderations to those noted in [349] above apply to the choices confrontingCommission staff when they decided to instruct BDO at the stage of the inquisitorialprocess when that occurred.(ii) Limited time to respond[356] The second criticism of the Commission's handling of the BDO report was thatit was provided to the appellants only seven working days prior to the publication ofthe determination. Arguably that was insufficient time for the appellants to provide athorough response, and also too near the Commission's decision on its finaldetermination ("in a real politik sense") for any response the appellants provided to beadequately taken into account.[357] The Commission's response to these criticisms is that the sequence of eventsdemonstrated that the appellants' advisers were sufficiently resourced to provide aresponse some three days before the deadline, that no complaint was made at the timeindicating the time allowed was too short and indeed that the appellants rejected aninvitation to seek either a short or longer extension of time. Further the adequacy ofthe rejoinder on behalf of the appellants tends to be confirmed by the absence of anynew grounds for criticising the BDO report, beyond those raised in April 2017, asbeing material on the appeal.[358] We agree that the Commission's points are a sufficient answer to the complaintof inadequate time for the appellants to provide a response.[359] The appellants' related concern was that the timing of receipt of their reply tothe BDO report left too little time between receipt of that response and completing itsdetermination for the Commission to give meaningful consideration to the appellants'criticisms of the BDO report. The Commission's first response to this was to disputeany obligation to provide the BDO report to the appellants at all. That is notpersuasive. We consider it was appropriate for the Commission to provide the BDOreport, and invite the appellants to comment on it, as it did.[360] Having afforded that opportunity and received comments on the BDO report,the Commission was obliged to consider the appellants' response. The Commissionsubmitted that the BDO report was in the nature of clarification about a matter onwhich the appellants had made submissions. The Commission is right to characterisethe BDO report as part of its deliberative process and there is no evidence to suggestthat the Commission had closed its mind to any new or compelling contrary argumentsraised in the appellants' response to the BDO report.[361] We accept the reasonableness of this response for the Commission. It is aquestion of fact as to how important the BDO report was in a relative sense to theCommission's determination, and how different the outcome would have been if theCommission was then persuaded to reject any part of the BDO report it was otherwiseintending to rely on, because of the final submissions on behalf of the appellants. Theydid not draw our attention to any content of that final response which was differentfrom matters previously put to the Commission and which was not acknowledged bythe Commission but arguably ought to have been. We accordingly reject this aspectof the appellants' process criticism.Nature of any relief[362] We therefore do not find any material errors of process committed by theCommission on the criticisms advanced for the appellants. Had we done so, we wouldhave real reservations about relying on such findings to grant any measure of the typeof relief requested by Mr Butler in his oral submissions. The appellants' propositionwas that if any of their criticisms were upheld, then the appropriate relief was for theCourt to disregard the content of the BDO report (or, depending on the criticismsupheld, the post-conference interviews) and ensure that no weight was placed on thosematters. Mr Butler described this as a nuanced evaluation that could be left with theCourt as an open invitation.[363] Our analysis of the extent of the appellants' opportunity to respond to the post-conference interviews negates any prospect of excluding them from the evidence inthe appeal. The content of the BDO report does not figure materially in any aspect ofour analysis of the merits of the appeal. Even if that had been the case, we would bedisinclined to alter the substantive outcome by ignoring evidence that was before theCommission merely because of some inadequacy in the process by which thatevidence was obtained by the Commission, or the opportunity the appellants weregiven to comment on it.[364] We accordingly dismiss the process complaints, and reject the invitation thatthey should influence the evidence available on the appeal.Costs[365] The Commission is entitled to costs. Counsel for the Commission requestedthat, if the Court dismissed the process complaints, they be afforded an opportunity tomake submissions in support of increased costs on this aspect of the appeal. Counselfor the appellants responded that, if their process complaints were entirelyunsuccessful, the manner in which that part of the appeal had been pursued would notjustify an increased award of costs in the Commission's favour.[366] My provisional view on costs for the whole appeal is that it warrants an awardof costs on a 3C basis, with certification for second counsel throughout.[367] I accept that the Commission was required to respond at short notice to a rangeof process criticisms that were then not pursued. This included preparation ofaffidavits, and some of the criticisms raised relatively serious matters. The responseswould have taken significant resources of a time when their focus would otherwisehave been on preparation of the Commission's case on the substantive appeal.[368] Had timing issues not been relevant, the appellants could well have beenrequired to plead these process criticisms in a separate judicial review. The scale ofwork on allegations not proceeded with, and the discrete nature of the processcriticisms that might equally have been advanced in a separate proceeding (andtherefore result in a separate costs award on unsuccessful completion) do warrant anuplift. However, my provisional view is that there is no justification for its quantumto be increased to reflect criticism of the manner in which process criticisms wereadvanced for the appellants. My provisional view is that a separate award for theCommission's successful opposition to the process complaints of approximately$4,000 is likely to be warranted.[369] I leave the parties to reflect, and hopefully confer, on an appropriate outcomeon costs. If not agreed, the Commission may file a memorandum, not exceeding10 pages, within 42 working days of delivery of this judgment. If such a memorandumis filed, the appellants are to respond, with the same limit as to length, within 10working days of service of the Commission's memorandum.Summary[370] We have dismissed the appeal against the Commission's clearance decision.We have not found a likelihood of an SLC in the advertising market for Sundaynewspapers, and dismiss the prospect of one of the appellants introducing a paywallfor their online publication, post a merger. In other respects we come to the sameconclusions as the Commission on the prospects of an SLC in the reader market foronline national news, reader market for Sunday newspapers, and both advertising andreader markets for community newspapers in the 10 areas in the North Island wherethe appellants' existing community newspapers compete.[371] We have also dismissed the appeal against the Commission's refusal to grantan authorisation for the proposed merger. We have upheld the jurisdiction of theCommission to consider detriments beyond economic or financial detriments applyingin the market in which the Commission had found the likelihood of an SLC, and inparticular for the Commission to take into account the material detriment arising fromloss of media plurality. The Commission was also entitled to place significant weighton the prospect of reduced quality of the products produced by the merged entity.[372] In the evaluation of public benefits and detriments, we have found thatsufficient benefit to the public to warrant an authorisation cannot be made out.[373] The appellants' complaints of inadequate or improper process on the part ofthe Commission in the course of its work on its determination do not constitutecriticisms that require us to assess the merits of the substantive appeal any differently.It was legitimate for the Commission to select those with whom it conducted post-conference interviews, and whilst the terms of the Commission's instructions to BDOas an external accounting expert might have been dealt with more felicitously, thataspect of the Commission's process does not lead to a justiciable error.[374] The Commission is entitled to costs.Dobson JSolicitors:Russell McVeagh, Auckland for AppellantsMeredith Connell, Wellington for Respondent