Risky option to revive Sky merger
Sky Television and Vodafone New Zealand would be taking ‘‘an enormous risk’’ if they pressed ahead with their merger without Commerce Commission approval, a lawyer says.
The companies have declined to comment on speculation they are considering such a move.
The commission declined to grant clearance for their merger in February on the grounds that the combined company could use Sky’s stranglehold over premium sports broadcasting rights to gain an unfair advantage in the broadband and mobile markets.
Sky and Vodafone have lodged a High Court appeal but have yet to say whether they have found any legal grounds for the possible challenge.
A source said there were ‘‘some concerns’’ that, rather than pursue an appeal, Sky could offer to wholesale its sports content, say it had addressed the commission’s concerns, and then press ahead with the merger without seeking clearance.
A commission spokesman confirmed clearance from the watchdog was not legally required for a merger, but instead provided a level of assurance that companies couldn’t subsequently be sued for anti-competitive behaviour.
Sky chief executive John Fellet and Vodafone spokeswoman Elissa Downey said they would not be making any decisions before the commission released its full reasons for declining the merger.
Competition lawyer Andrew Matthews of Matthews Law said merging without formal clearance would be a ‘‘legitimate strategy’’ that would leave the commission in the position of having to go to court to prove the merger was anticompetitive.
Sky and Vodafone could brief the commission on why they thought steps they took addressed its concerns, or ‘‘just take an aggressive approach’’ and merge without such prior consultation.
That would be much faster and simpler than trying to overturn the commission’s clearance ruling, he said.
But another top lawyer said Sky and Vodafone would be taking a big risk, unless they first struck deals that allayed the concerns of all the telecommunications companies that might object.
Otherwise, either the commission or any party that felt it had been disadvantaged by the merger could go to court to claim it was an illegal transaction, he said. In that situation, the merged companies’ directors would risk being held personally liable, he said.
‘‘It would be a brave decision to make. You would have all of the resources of the commission against you.’’
Even if a combined Sky and Vodafone genuinely intended to wholesale premium sports on exactly the same terms that they bundled them with their own broadband and mobile offerings, they could face difficulties proving they were living up to any such commitment, given the lack of an oversight and enforcement regime, he said.
Matthews said there had nevertheless been a precedent. Mobile phone top-up companies epay and Ezi-pay combined their New Zealand businesses despite the commission refusing to clear their merger in 2012, he said.
Commenting on Tuesday prior to the speculation, Vodafone NZ chief executive Russell Stanners said it had a range of alternative plans to provide video content to customers if the merger couldn’t be revived. He said it had always had a ‘‘plan B, C and D’’ in case of a rejection.
Stanners reiterated a comment from Sky that the two companies had initiated their lawsuit challenging the merger ruling ‘‘simply to preserve’’ the companies’ rights ahead of a technical deadline for an appeal.
‘‘Life goes on. Once we see the reasons from the Commerce Commission then we will be in a position to make some decisions.’’