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Competition test eased in new media merger guidelines

The Australian Competition & Consumer Commission has issued new guidelines for media mergers as a result of the recently-passed government reforms, which would see a substantial lessening of the current competition test.

The new test would make mergers of media companies focussed on different platforms easier to achieve following the repeal of the two-out-of-three rule and the 75 per cent reach rule. However impact on news consumers will remain a major consideration.

The guidelines issued on Wednesday take into account developments over the past 11 years, which has seen the rise of international tech gains, such as Google and Facebook, and their adverse impact on advertising revenue of Australian media businesses.

“In the media context, the quality and range of diversity or supply of news are important factors we consider as outcomes of competitive rivalry, but they are not standalone considerations,” ACCC chairman Rod Sims said.

“The media landscape in Australia has completely and irrevocably changed since we last issued our media merger guidelines in 2006. We want to ensure that as an agency, the ACCC continues to keep pace with the rapidly evolving media market when considering these matters,” he said.

Despite increased leniency when it comes to mergers, the commission will still assess whether any proposed mergers will negatively affect the market, whether through increased prices, reduction in services and/ or a reduction in the incentive to innovate.

ACCC chairman Rod Sims
ACCC chairman Rod Sims

The guidelines state: “As markets continue to evolve, the ACCC’s merger analysis will take these developments into account. It is not possible to indicate in advance what the outcomes of any proposed merger might be, as each case will turn on its unique set of facts.

“The ultimate test however will remain the same: whether a merger is likely to substantially lessen competition in any market in Australia,”

In each case, the ACCC would critically examine the extent to which current market dynamics are likely to accurately reflect future patterns. This may include evidence of changes which are already occurring in similar markets overseas. Little weight will be given to speculation about future technological developments.

Mr Sims particularly noted the impact of social media giants Facebook and Google on diversity.

“We are in a period of transformation of the media sector and there is a growing concern that the market position of Facebook and Google is significantly affecting online advertising revenue for traditional media.

“We are aware of the concerns in the industry about the ability for traditional media to keep local newsrooms running and journalists producing new content and to ensure we continue to have a range of diverse voices making up the Australian media landscape. There could well be a market failure here and it’s something we are keen to take a look at if asked to do so” Mr Sims said

The new guidelines will take into account technological innovation and forward project the impact of any proposed merger on barriers of entry and the vigour of competition.

“Technology plays a significant role in the delivery of products and services in media and related markets, and it can have a significant influence on the competitive landscape,” the guidelines say.

“Similarly, changes in technology – and changes in how technology is used and applied by consumers and business – can shift the competitive dynamics of media markets, sometimes dramatically. For example, in recent years, the rise of digital media, including social media, has led to significant changes in how media content and advertisements are supplied and consumed.”

The full guidelines can be downloaded here.

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