In 2016, Vodafone New Zealand and Sky Network Television Limited proposed to merge their businesses, and applied to the New Zealand Commerce Commission (NZCC) for clearance. Under the New Zealand Commerce Act 1986, the NZCC can grant clearance if it is satisfied that the Proposed Transaction will not have the effect or likely effect of substantially lessening competition (SLC) in a market. It tests this by applying a “with and without test”, comparing the likely future state of competition with the transaction (the factual) with the likely future state of competition without the transaction (the counterfactual).

2degrees, the third mobile operator in New Zealand, and TVNZ opposed the merger and engaged Plum to undertake a study of the likely outcome and effects should the proposed merger proceed – and to compare that to possible counterfactuals without the merger – to determine whether the merger would lead to a SLC.

In the developed world, there is now strong convergence between the retail pay TV markets and the retail broadband markets. Suppliers in both markets increasingly compete for the spend of the same consumers. Recognising this trend, regulatory authorities in some countries have imposed regulatory constraints on players which control a substantial proportion of premium content rights, to protect the development of new forms of competition in the supply of pay TV services (however, this option is not available to the NZCC).

Our report summarises the key characteristics of competition in the relevant markets in New Zealand, reviewes relevant market developments in other jurisdictions, and relates their relevance for the proposed merger in New Zealand. We then constructed a likely counterfactual to the merger, examined the applicants’ key arguments as to why the merger would not damage competition and presents our assessment of the impact of the proposed merger on competition in New Zealand.