The Australian Competition and Consumer Commission wants listeners and advertisers to comment on the merger of 2UE/2GB/3AW/4BC.   Here's the Commission's letter. 

Our ref: 56527

Contact officer: Morag Bond / Andrew Gallagher

Contact phone: (02) 9230 3824 / (02) 9230 9129

16 January 2015

Dear Interested Party

Re: Request for submissions: Macquarie Radio Network’s proposed acquisition of Fairfax Media’s radio assets, and Fairfax Media’s proposed acquisition of 54.5 per cent of Macquarie Radio Network 

The Australian Competition and Consumer Commission (ACCC) is seeking your views on the proposed acquisition of Fairfax Media Limited (Fairfax)’s radio assets by Macquarie Radio Network (MRN), and the acquisition of 54.5 per cent of MRN by Fairfax (the proposed transaction).

MRN is an ASX listed company which owns and operates commercial radio stations, including two in Sydney (2GB 873 AM and 2CH 1170 AM) along with eight radio stations in regional Queensland. 

Fairfax is an integrated print, radio and online media company operating in metropolitan, rural and regional Australia. Fairfax’s radio broadcasting assets include 2UE in Sydney. Fairfax is also an ASX listed company. 

Details of the proposed transaction can be found at Attachment A.

The ACCC’s investigation is focused on the impact on competition. In particular, we are seeking your views on:

• whether the proposed transaction will affect the quality of content provided on radio stations in Sydney
• the effect of the proposed transaction on the price of advertising on radio in Sydney. 

Further issues you may wish to address are set out in the questionnaire at Attachment B. 

This matter is public and you can forward this letter to anybody who may be interested.

The legal test which the ACCC applies in considering the proposed acquisition is in section 50 of the Competition and Consumer Act 2010. Section 50 prohibits acquisitions that substantially lessen competition in a market, or are likely to do so. 

Please provide your response by no later than 5pm on 3 February 2015. Responses may be emailed to [email protected] with the title: Submission re: Macquarie Radio Network and Fairfax Media - attention Morag Bond / Andrew Gallagher. If you would like to discuss the matter with ACCC officers over the telephone or in person, or have any questions about this letter, please contact Morag Bond on (02) 9230 9138 or Andrew Gallagher on (02) 9230 9129. 

Updates regarding the ACCC’s investigation will be available on the ACCC’s Public Mergers Register at (ACCC mergers register).

Confidentiality of submissions

The ACCC will not publish submissions regarding the proposed acquisition. We will not disclose submissions to third parties(except our advisors/consultants) unless compelled by law (for example, under freedom of information legislation or during court proceedings) or in accordance with s155AAA of the Competition and Consumer Act 2010.  Where the ACCC is required to disclose confidential information, the ACCC will notify you in advance where possible so that you may have an opportunity to be heard.  Therefore, if the information provided to the ACCC is of a confidential nature, please indicate as such. Our Informal Merger Review Process Guidelinescontain more information.

Yours sincerely

(Signed)

Tom Leuner

General Manager

Merger Investigations BranchAttachment A

Macquarie Radio Network (MRN)

MRN owns and operates two commercial radio stations in Sydney: 

• 2GB 873 AM
• 2CH 1170 AM.

MRN also owns and operates eight stations based in regional Queensland, including:

• 4VL and Triple C in Charleville 
• 4LM in Mount Isa 
• 4ZR and 4DB in Roma 
• 4HI and 4EM in Emerald 
• 1071 AM in Kingaroy.  

Fairfax Media Limited (Fairfax)

Fairfax is a leading integrated metropolitan, rural and regional, print, radio and online digital media company. Its radio broadcasting assets include: 

• 2UE in Sydney
• 3AW and Magic 1278 in Melbourne
• 4BC and 4BH in Brisbane
• 6PR and 96fm in Perth. 

Fairfax’s leading metropolitan print and digital publications include The Sydney Morning Herald, The Age, The Sun Herald and The Australian Financial Review. Fairfax also publishes numerous regional and community newspapers across Australia. 

The proposed transaction

The parties have entered into a conditional merger implementation agreement, whereby:

• MRN will acquire all the assets and licences of Fairfax Radio Network Pty Limited, except for the Perth 96fm licence, through the purchase of all the share capital of Fairfax Radio Network Pty Limited. The Perth 96fm licence is subject to a separate transaction between Fairfax and APN News and Media. 
• Fairfax will acquire shares in MRN, such that Fairfax holds a 54.5 per cent interest in MRN. Existing MRN shareholders will hold the remaining 45.5 per cent interest. 

Following the proposed transaction, MRN would own three commercial radio licences in the Sydney RA1 area: 2UE, 2GB and 2CH. MRN has stated that, due to regulatory requirements under the Broadcasting Services Act 1992, regulated by the Australian Communications and Media Authority (ACMA), it will divest 2CH in Sydney and 4LM in Mt Isa following the completion of the proposed transaction. 

ACCC review 

The ACCC commenced a review of the proposed transaction on 13 January 2015 and the ACCC’s proposed decision date is 5 March 2015. The ACCC asks that responses to this letter be received by 3 February 2015. 

Of particular interest to the ACCC is the effect of the proposed transaction on the quality of news and other content provided to end-consumers and also whether the transaction would cause the price of advertising on radio stations to increase due to less competition.

Following the proposed transaction, MRN would control the highest overall rating and leading news-talk radio stations in both Sydney (MRN’s 2GB) and Melbourne (Fairfax’s 3AW). In Sydney, MRN would also control 2UE, one of the other leading news-talk radio stations. 

Following the proposed transaction, MRN would have a particularly strong position in serving the 65 year old plus demographic in Sydney where it would own the two leading commercial radio stations serving that demographic. MRN would also have a strong position in serving the 55 to 64 year demographic in Sydney where it would own the leading radio station serving that demographic as well as the fifth ranked commercial radio station for that demographic. 

Competition from other media platforms (such as newspapers, television and online) will also be relevant to the ACCC’s review. This will include the extent to which both advertisers and end consumers can substitute these other media platforms for the services offered by MRN. Attachment B

Questions for advertisers 

1. Please describe how you currently advertise your business (or community/ political group). In particular, please explain:
1. The forms of advertising you currently use and in the case of radio advertising, the radio stations on which you advertise
2. The percentage of your advertising budget you spend on radio advertising, and on each radio station 
3. The percentage of your advertising budget you spend on other forms of advertising, e.g.:
1. Free-to-air TV
2. Pay TV 
3. Online search and directories 
4. Online display 
5. Online classifieds
6. Newspapers 
7. Billboards (outdoor advertising) 
8. Other (including mail drops, magazines, cinemas etc.).
2. Please explain whether your business (community or political group) seeks to reach consumers residing in a particular location or whether you seek to advertise your products nationally. 
3. Please explain whether reaching a particular demographic (e.g. over 65, 45-65) is important to your business. If so: 
1. Which demographic does your business target? 
2. What media outlets are most useful for targeting this demographic? 
4. If you advertise on 2GB, what radio stations do you consider to be a close alternative to advertising on 2GB (i.e. capable of reaching the same target demographic)?
5. If you advertise on 2UE, what radio stations do you consider to be a close alternative to advertising on 2UE (i.e. capable of reaching the same target demographic)? 
6. Do you consider other forms of advertising close substitutes to radio advertising and capable of reaching the audience at which your advertising is aimed? Please provide details of those forms of advertising which you consider the closest alternative to radio advertising and capable of reaching your target audience. 
7. If you currently advertise on radio and there was an increase in the price of radio advertising by, say 5-10% (this is a hypothetical scenario only), would you change your advertising purchases? And if so, how? (e.g. would you purchase less radio advertising and use more online advertising or newspaper advertising?)
8. If you currently purchase advertising on 2UE, do you purchase an advertising package from Fairfax which includes advertising across a range of Fairfax controlled media? 
9. In your experience, when you have sought to advertise your business (or community or political group) in Sydney, which radio stations/media companies have competed most strongly for your business? Have any of the radio stations/media companies undercut each other in order to win your business? If so, which radio stations/media companies?

Questions for listeners / consumers 

1. Please outline your listening habits, particularly insofar as they relate to news and talk-back radio. 
2. If you currently listen to 2GB or 2UE, how would you respond if the quality of content declined on one or both of these stations (e.g. stories, format became less interesting or the quality of the news information provided declined) or the amount of advertising increased? In particular, would you switch to other radio stations or other forms of media and if so, which ones? 

General questions for all interested parties

1. Do you have any comments about competition for advertising or competition for listeners/consumers between 2GB and 2UE (or other Fairfax media outlets)? 
2. Will MRN and/or Fairfax be able to bundle advertising packages in a way that will cause anti-competitive harm in the market? 
3. Please address any other competition issues you consider relevant to the ACCC’s review of the proposed transaction including any potential impact the proposed transaction may have on the supply of content to radio stations or other media platforms