Australia's competition watchdog has given its thumbs up to the proposed $4 billion merger of media giants Nine (ASX: NEC) and Farifax (ASX: FXJ/DHG), despite recognising the move would "likely reduce competition".
The Australian Competition and Consumer Commission (ACCC) today announced it would not be opposing the merger after considering more than 1,000 submissions and assessing the potential impact on online news, current affairs reporting and investigative journalism in the country.
In its conclusion, the commission took the approach that significant barriers to entry in the Australian online news market had "already occurred" and that the future landscape was "hard to predict" given the difficulties of monetising journalism online.
"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," ACCC chair Rod Sims said.
""This merger can be seen to reduce the number of companies intensely focusing on Australian news from five to four. 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," he said.
"With the growth in online news, however, many other players, albeit smaller, now provide some degree of competitive constraint. These include, for example, The Guardian, The New Daily, Buzzfeed, Crikey and The Daily Mail."
The ACCC also found Nine's television operations and Fairfax's main media assets generally did not compete closely with each other, with Nine targeting a mass market audience while Fairfax's print and online publications provided more in-depth coverage targeting the demographic of its subscription audience.
The watchdog acknowledged there would be more direct overlap in online news, where both Fairfax and Nine have invested significantly.
"By most measures, a combined Nine-Fairfax will likely become one of the largest online providers of Australian news, alongside News Corp Australia and ahead of the ABC, so this was another area of great focus," Sims said.
"We found that while Nine and Fairfax online sites currently did not constrain each other much, other news websites would likely competitively constrain the combined Nine-Fairfax."
The ACCC also investigated potential competition issues in the provision of regional news. In particular, concerns were raised about combining the two key newsrooms in the Hunter/Newcastle region.
It determined, however, that in the Hunter region, Fairfax and Nine did not compete sufficiently closely with each other.
Many submissions argued that this proposed merger will change Fairfax's culture and result in less investment in journalism. In particular, market participants raised concerns about losing a brand that is known for independent investigative journalism.
The ACCC claims to have understood these concerns.
"Media markets are highly dynamic. The shift to online and the huge reduction in hard-copy classified advertising revenue have changed the media landscape irrevocably," Sims said.
"The impact of some of these changes is demonstrated in the approximate halving of advertising revenue from Fairfax's digital and print mastheads in the last five years.
"The ACCC recognises there will likely be changes to the way Fairfax and Nine operate in future, either due to the changing media landscape more generally or due to the merger itself. However, we reached the conclusion that if such changes do occur, they would not be, to a significant extent, caused by the merger lowering the level of competition."
The merger scheme remains subject to approval from Fairfax shareholders, who will vote on the issue at a meeting on 19 November. Approval will then be needed from the Federal Court at a second hearing due to take place on 27 November.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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