Fairfax New Zealand and NZME merger appeal has been dismissed by the New Zealand High Court

The Fairfax Media Building on Williamson Avenue in Auckland, New Zealand. Photo: Dave Rowland/Getty Images

The High Court has rejected a bid by media companies Fairfax New Zealand and NZME to overturn the Commerce Commission’s block on their proposed merger.

Full reasons for the decision are not expected to be released until later on Tuesday.

But the court said in a statement that it backed the commission’s decision, and that the watchdog was entitled to costs from the media firms.

Justice Robert Dobson said in a two-page summary judgment that the court did not find there was a likelihood of a substantial lessening of competition in the Sunday newspaper advertising market if the merger went ahead.

He also dismissed the commission’s contention that the media companies might introduce a paywall for online news if they were allowed to combine.

But he said that in all other respects the court agreed with the conclusions the commission had reached in May when it declined to authorise the merger.

The appeal hinged in large part on the legal point of whether the watchdog had the authority to consider non-economic detriments that might arise from the merger, for example the risk to democracy from a reduction in “media plurality” or diversity.

Justice Dobson’s ruling affirmed that the commission did have that authority, once it had identified a risk that the merger might substantially lessen competition.

“The commission was also entitled to place significant weight on the prospect of reduced quality of the products produced by the merged entity,” he said.

NZME chief executive Michael Boggs said the company would be reviewing the High Court’s full decision, when it was released, “including the option to appeal the decision”.

The merger was in the best interests of both shareholders and the industry as a whole as it would have “improved the efficiency of news and entertainment content generation and distribution for New Zealand audiences”, he said.

The media firms could appeal the High Court ruling to the Court of Appeal.

But Boggs appeared to indicate he saw a future without the merger.

“While the Fairfax merger offered us benefits, we have not been resting on our laurels in the last 18 months as we pursued the transaction,” he said.

“We will continue to examine shareholder value enhancing strategic initiatives leveraging our strong brands and audience reach, while enhancing the competitiveness of content generation and distribution.”

Fairfax NZ chief executive Sinead Boucher also said the High Court decision was disappointing.

“The two companies sought the merger because it was our belief that it was in best interests of the NZ media industry.

“A combined business would have created efficiencies and benefits that would have made it easier to continue to deliver high quality independent journalism at scale for the benefit of Kiwis around the country,” she said in an email to staff.

But Boucher said Fairfax NZ had also “certainly not stood still”.

“We have taken massive steps forward as we continue to diversify our revenue streams and end the year with a dynamic portfolio of digital products and services. The last several weeks alone have seen us launch Stuff Pix and Done, as well as energyclubnz, and there will be more to come,” she said.

Fairfax chief executive Greg Hywood said while the merger would have brought synergies that would have “sustained journalism at scale in New Zealand for many years”, its New Zealand business had continued to implement its own strategy and shape a separate future.

During their appeal, Fairfax and NZME had taken aim at the processes the commission followed during its original investigation of the merger, arguing it had effectively instructed consultant BDO to produce a report critical of the merger by asking it to pick holes in a report compiled for the media firms by rival consultant PwC.

Justice Dobson agreed the Commerce Commission could have managed its instructions to BDO “more felicitously” but said it did not lead to a “justiciable error”.

Fairfax NZ’s publications include Stuff, The Sunday Star-Times, The Dominion Post and The Press. NZME is listed on the NZX and owns the New Zealand Herald as well as a large number of radio stations.

NZME’s shares were initially unmoved on the NZX, with its shares last trading at 87 cents on Monday.

This article first appeared at Stuff.co.nz. See the original here.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.