2762

THE NEW ZEALAND GAZETTE

No. 107

What is quite clear is that controlling 30% of the shareholding is a unified newspaper group, which, if a substantial group of the remaining shareholders do not stand together, might well exercise control of the applicant and which, with the support of the managing director, could undoubtedly exercise that control. If that situation resulted, the company which now controls most of the newspapers published in the region could also control the proposed broadcasting station which aims to make local news one of its principal features.”

Mr Paterson the chairman of the applicant, Independent Broadcasting Co. Ltd., (IBC), acknowledged that in practice a 45% holding in the company would give the holder of such shares effective control of the company.

He said that it was intended that the vacancies caused by the resignation of Messrs Butcher and Lazarus would be made up by the appointment of two other persons by the remaining directors and it was not intended that employees or directors of companies in the Independent Newspaper Group form the majority of the board.

Under-cross-examination Mr Paterson argued that control of the company was with the directors. However he admitted that the appointment of the new directors by the existing directors would have to be confirmed by the annual meeting at which one company would have 45% of the voting power.

The Tribunal has concluded that it is undesirable that this newspaper company should have a significant increase in the shareholding of IBC, the operator of the only private radio station in the area.

The maintenance of competition ultimately involves independence from major degree of common ownership and thus control. The Tribunal considers that in the Waikato area it is in the interests of the listeners that the existing competitive situation be maintained. The private station competes for a radio audience with Radio New Zealand stations. In terms of a local news service it has to compete with the New Zealand Herald, which publishes a Waikato section, two free weekly newspapers, and weekly papers in four district towns. Other newspapers in the area, including the daily afternoon newspaper, the Waikato Times, are owned or controlled by the Independent News Ltd., group of which IPL is a part.

The Tribunal considers it possible that the element of competition would be seriously diminished by the increased shareholding, particularly if difficulty arose in maintaining advertising revenue in either the newspaper or the radio station. There would be compelling pressure brought to bear for some accommodation to be made on advertising rates or in using identical sources of news. It is not accepted that the only difference desirable in news dissemination is a difference of presentation.

Three other private radio stations have strongly opposed the application and do not wish to see the newspaper industry’s involvement in radio increased. While the Tribunal has no fixed opinion about the involvement of newspapers in any other situation, it is satisfied that in the position as it exists in Hamilton with effectively only one local afternoon daily newspaper, it is undesirable that the proprietors of that newspaper should have a controlling interest in the shareholding of the only private radio station.

The Tribunal has carefully considered the submissions made for the applicant:

1. Private Radio has a need for continuity of efficient and effective management. Substantial losses were made by Radio Waikato in earlier years and firm managerial control was required for the company to survive and become viable. It is prudent to guard against possible problems which could arise if the management were changed, by having a large public company with a proven record as a substantial shareholder.

Evidence was given of the assistance which Radio Waikato had received from the newspaper company when it suffered serious losses in the first two years of its existence. The fact that this help was forthcoming was, as the objectors pointed out, an argument that works against the application. Even with the 30% interest it proved to be in the interests of the newspaper company and practicable to support the radio station’s return to profitability.

Evidence was given of the interest of at least one other private sound-radio warrant holder in acquiring shares. Such a company could have specialised managerial experience. The managerial expertise available from IPL did not appear to be specialised but rather of a general kind. The managerial control of the directors, emphasised by Mr Paterson as independent of IPL, would be available irrespective of the extent of IPL’s shareholding.

2. In future there will be closer association between radio and newspaper companies and this will become more likely as news-gathering techniques and equipment become more sophisticated and expensive. There are possible future advantages in a close association with the INL group with its qualified engineering staff and financial resources.

In this respect the evidence was vague and appears not to refer to the immediate future. On the contrary, the evidence of Mr Mason, the managing director of Radio i, indicated that the benefits of association between a radio station and a newspaper company at this stage were more supposition than reality. If such a situation did arise there was no proof that the association would be economically more compelling to the two parties because of 15% higher shareholding by one in the other.

3. It is unrealistic for the company to expect significant help from the newspaper group while the group’s shareholding is restricted to 30% of the capital and it can be outvoted by the next three largest shareholders.

The Tribunal is not satisfied that the basis on which it should consider matters of shareholding is that there must be a single major public company with a 45% shareholding in existence in case a radio station strikes economic difficulties. Moreover IPC knew very well, when it undertook its minority shareholding, that there were three other major groups and a large number of small private shareholders. It knew that it could be outvoted by the three largest shareholders. It accepted that position. It is unlikely that it had insufficient commercial understanding to appreciate that the identity of the individual groups of shareholders could change.

4. At present there is a real possibility that some other party might obtain a majority interest and take control of the company.

Neither Mr Paterson, the chairman of the applicant company, nor Mr Wickham, a director of IBC, IPL, and INL, named the persons who were a threat to the company. But accepting that there is a possibility of some party obtaining a majority interest it is open to IPL to find a suitable buyer for the available shares other than a news media company.

5. The company is also exposed to the risk of corporate raiders acquiring shares, giving the company a temporary boost by methods which are not conducive to long-term stability, and then selling its shares. Interest had been shown by persons whom the directors considered fell into that category. The company could be purchased comparatively cheaply.

It must be accepted that there is a risk of takeover bids but the company has been exposed to this risk which was implicit in the basis on which the warrant was applied for. It was open to the directors of IPL, at the time, to assess the position and if necessary to make adequate provision to prevent the control of the company falling into other hands. One would expect that IPL would be in a position to organise opposition to a takeover which is not an unusual feature of commercial life and one in which the directors of the INL group would have some knowledge and expertise.

6. An increased participation of the INL group which publishes the Hamilton afternoon daily newspaper, Waikato Times, would not create a monopoly of ownership or control of news media. The New Zealand Herald and Radio New Zealand, from two commercial stations at Hamilton and Tokoroa, and two television channels, including one with a special section for Waikato advertisers, all compete. Also non-commercial stations, IYW Hamilton, and IYA Auckland and IYC Auckland, could be received in the area.

The Act requires the Tribunal to have regard to the desirability of avoiding monopolies in the ownership or control of news media (section 30 (i)).

The Tribunal does not consider the increased shareholding of the INL group would create a monopoly or control of news media.

However, a monopoly in a particular instance may develop in stages. At one stage the Tribunal might recognise that in dealing with an application such as the present one it must make a decision with the objective of avoiding a tendency towards monopoly.

We do not find it necessary to state whether or not, in this particular case, the stage has been reached where the Tribunal ought to prevent a monopoly developing by assuring th