New Zealand watchdog rejects media merger

Fairfax Media's chief executive Greg Hywood said the NZCC had "failed New Zealand" by stopping a merger between the country's two largest media companies

A merger of New Zealand's two largest media companies was rejected Wednesday as the country's competition watchdog warned it would create a dominant news giant and threaten democracy.

NZME and Fairfax Media NZ signed a merger agreement last September, hoping it would boost their ability to compete with global online giants such as Facebook and Google.

The combined entity would control almost 90 percent of New Zealand's print media and reach an audience of 3.7 million -- more than 80 percent of the population -- New Zealand's Commerce Commission (NZCC) said.

It stood by a preliminary decision issued in November to boycott the move, saying such concentrated media ownership was unprecedented in modern times.

"This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand's democracy and to the New Zealand public," the anti-trust regulator said.

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

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

Fairfax Media's Sydney-based chief executive Greg Hywood said the NZCC had "failed New Zealand" by stopping two local companies from aggressively competing on their home soil against the big internet companies.

"This decision does nothing to address the challenge of the global search and social giants, which produce no local journalism, employ very few New Zealanders and pay minimal, if any, local taxes," he said in a statement.

He also warned the company, which has already slashed jobs, would now have to look at more "cost efficiencies".

"Further publishing frequency changes (of newspapers) and consolidation of titles is an inevitability."

The Commerce Commission said a merger "could expand the lifespan of some newspapers" but the future for both companies was digital anyway.

"In our view, without the merger NZME and Fairfax will be increasingly focused on their online businesses as their print products diminish in number and comprehensiveness over time," it said.

NZME shares closed down 11.25 percent at NZ$0.79.

Fairfax's Australian parent fell 0.93 percent to Aus$1.07 in Sydney, on a day when the company also announced it was cutting 125 jobs from its Australian newsrooms.