Australia will be ‘slightly worse off’ but ACCC will not oppose Nine’s takeover of Fairfax, Rod Sims says
Nine Entertainment’s takeover of the Fairfax Media empire looks set to be consummated after the competition regulator said it would not oppose the $4 billion deal.
Australian Competition and Consumer Commission (ACCC) chairman Rod Sims told ABC News the Australian news landscape would change, but the regulator could not have come to any other conclusion.
He said, despite some lessening of competition, there would still be a diverse range of views out there for Australian audiences.
“I think you’d have to say, because there’s a lessening of competition in the news market, Australia will be slightly worse off,” Mr Sims told The World Today.
“But in saying that, it’s really a hard call to make. Because this media market has changed in ways that won’t be reversed.”
The ACCC said it conducted a thorough investigation — contacting hundreds of stakeholders and reviewing more than 1,000 submissions, as well as Nine’s and Fairfax’s internal documents.
Nine’s television operations and Fairfax’s main media assets “generally do not compete closely” with each other, the ACCC said.
It noted, in particular, that Nine’s news and current affairs programs target a mass market audience — while Fairfax’s publications tend to provide “more in-depth coverage”, targeting a specific subscription audience.
The ACCC considered that one area of “more direct overlap” was online news, an area in which Fairfax and Nine have both “invested significantly”.
Despite the green light from the competition regulator, questions remain about whether the company will sign up to and abide by a new charter of editorial independence and if there could be job cuts if the deal is approved by shareholders on November 19.
Media Entertainment and Arts Alliance (MEAA) chief executive Paul Murphy said the ACCC’s decision was a “body-blow to media diversity, and the forerunner to future mega-deals that will reduce coverage of matters of public and national interest and do untold harm to media jobs”.
Competition won’t be ‘substantially’ lessened
“While the merger between these two big-name media players raised a number of extremely complex issues, and will likely reduce competition, we concluded that the proposed merger was not likely to substantially lessen competition in any market in breach of the Competition and Consumer Act,” Mr Sims said.
“This merger can be seen to reduce the number of companies intensely focusing on Australian news from five to four,” he said.
“Post the merger, only Nine-Fairfax, News/Sky, Seven West Media and the ABC/SBS will employ a large number of journalists focussed on news creation and dissemination.”
Mr Sims said Nine’s takeover of Fairfax would be balanced out by the growth in online news and the rise of smaller providers such as The Guardian, The New Daily, Buzzfeed, Crikey and The Daily Mail.
“While there are important barriers to building trust and scale, significant new entry into the Australian online news market has already occurred and made a noticeable difference,” Mr Sims said.
“Due to the difficulties in monetising journalism online, however, it is hard to predict the future landscape with any certainty.”
Will Fairfax newspapers survive?
Mr Sims said he thought Fairfax and print journalism would survive irrespective of whether or not the merger proceeds.
“Trying to work of what’s going to happen to the Fairfax papers with or without the merger is complex, ” he said.
“Certainly the merged entity does have an incentive to keep the Fairfax newspapers as they are — to continue to appeal to the current readership. If they don’t then ABC online, Guardian, New Daily etc are there.”
He said if Nine sold off its print mastheads including The Australian Financial Review, The Sydney Morning Herald, and The Age, to another player, that would be “pro-competitive because you’d have a seperate voice out there”.
And ACCC analysis showed that such a newspaper entity — with an online presence — could stand on its own.
But there were questions about how much someone would pay for that business if it was sold off, he said.
Nine’s next steps
Nine’s chief executive Hugh Marks welcomed the ACCC’s decision.
“It is a clear acknowledgement of the changing competitive landscape in our industry, where the ability to compete across a variety of platforms and to engage different audiences is key,” he said.
The next challenge for the merger will be shareholder approval, with Fairfax investors voting on November 19.
Following court approval, the merger is scheduled to be completed on December 7, with the combined group beginning business on December 10.
Under the proposal, Nine Entertainment will hold 51.1 per cent of the company with Fairfax investors holding 48.9 per cent.
Assuming it all goes to plan, the combined entity will simply be called “Nine” from December 10, and the Fairfax brand will cease to exist.
Fairfax’s share price jumped 1.9 per cent to 63.7 cents, while Nine Entertainment’s shares lifted 1.8 per cent to $1.71 at 11:10am (AEDT).
Union calls for new charter
The MEAA had wanted the regulator to block the merger on the grounds it would substantially lessen competition and diversity in the media industry.
Mr Murphy said despite the ACCC’s tough talk about protecting competition, the merger had been approved without any conditions being attached about editorial independence, protection of jobs or employment conditions, or continued operation of existing mastheads.
“MEAA does not accept the ACCC’s view that the growth in online news by smaller media companies ‘now provide some degree of competitive constraint’,” he said.
“None of the new entrants to the Australian media market have the capacity to conduct journalism at the scale of Nine, Fairfax, ABC, NewsCorp or SevenWest.”
Mr Murphy said the merger had become easier to get through since the Federal Government’s removal of the two-out-of-three media ownership rule last year.
The union would now be asking the new owners of Fairfax to sign a new charter of editorial independence, guarantee there will be no closures of newsrooms or titles, especially in regional areas, and maintain existing wages, entitlements and employment conditions.
Mr Murphy said that since July, when the Nine-Fairfax merger was announced, the share values and market capitalisation of both companies have fallen by at least 30 per cent, with the combined value of the merged company down by more than $1.3 billion to less than $3 billion.