NZME and Fairfax are heading to the High Court to appeal the Commerce Commission's rejection of their merger proposal.
The regulator believed the merger between the two media companies would likely lessen competition - specifically in Sunday newspapers, online news and community newspapers in 10 regions.
The commission, which released its final decision earlier this month, was also of the view that the deal wasn't of enough public benefit that it should be allowed.
Both companies are now challenging its ruling in the High Court.
NZME owns the NZ Herald, Herald on Sunday, nzherald.co.nz website, a range of regional newspapers, Newstalk ZB and entertainment radio stations, while Fairfax owns stuff.co.nz, the Sunday Star-Times and other metropolitan and regional newspapers. The companies wanted to merge as traditional revenues decline so they could better stand up to the likes of Google and Facebook, which are taking an ever increasing share of the online advertising market.
At the time of the commission's decision, a disappointed NZME chief executive Michael Boggs said the prospect of a merger had been exciting for both businesses and their audiences.
He said NZME's strategic focus continued in six key areas: growing audience reach, retaining print revenue, returning radio revenue to growth, growing new revenue streams, ensuring effective cost management and developing people and talent.
Commission chairman Mark Berry said when rejecting the merger proposal that the regulator recognised that NZME and Fairfax face a "challenging commercial environment".
But he disagreed with some of the scenarios put forward by NZME and Fairfax about their respective futures without the merger.
"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," Berry said.
In their notice of appeal to the High Court, NZME and Fairfax said the commission had failed to take into account, or give sufficient weight to, the number, variety and nature of other small small and large, local and international media organisations that provide online New Zealand news.
The appeal also says the commission wasn't allowed to take plurality into account in rejecting their application, and that even if it could, it gave the issue too much weight.
NZME and Fairfax are also appealing on the grounds that the decision was procedurally unfair by granting anonymity to many submissions opposing the application and breached natural justice by not telling NZME and Fairfax in a timely manner how it would assess the deal against a likely counterfactual.
The regulator rejected the application earlier this month, saying the merged entity's competitors would not be able to constrain it in any real way from making cost-cutting decisions that reduce quality and plurality "and that it didn't regard promises to maintain current levels as a sufficient safeguard on future editorial decisions".
The commission had already rejected the merger in a draft determination in December, prompting Fairfax and NZME to work overtime to try to convince the regulator it had got it wrong in its draft determination to reject the deal over fears their aggregated soft power wasn't worth the economic efficiencies from laying off staff, cutting duplication, and pooling their resources in a more targeted fashion.
NZME and Fairfax New Zealand have hired the Queens Counsel whose Court of Appeal arguments helped secure the Commerce Commission's authorisation of a competition-killing merger in the wool-scouring sector.
The media companies have hired Queens Counsel David Goddard to appeal the commission's rejection of their planned merger, hoping his pedigree in the Cavalier wool-scouring authorisation will win the backing of the courts.
- additional reporting: BusinessDesk