Sharing the presses

In the long history of newspapers the relationship between owning a title and owning a press have existed under different models.

The classic model of the original "gazette" was of one person who wrote the stories, typeset them himself and then printed the paper. Ownership of a press was very important. But as presses grew to being large capital investments and had capacity beyond the requirement of just the titles of the owner, capacity on those presses have been sold to others.

For example, Fairfax pays others to print the AFR in states other than Vic and NSW.

Often this is for bespoke rather than competitive titles, and more usually through smaller presses. But declining circulation and shrinking classified volumes means that the large presses of the majors have increasing spare capacity.

It is no surprise, therefore, that News and Fairfax are reported to be close to a deal to share printing presses in Sydney and Melbourne.

While this should be welcomed on technical efficiency grounds it creates a risk of what is known as hold-up. If the deal results in Fairfax being a client of News it creates the possibility that sometime in the future News increases the price it charges Fairfax (unreasonably).

There are solutions to this, either by specifying all future prices in the contract or by empowering an arbiter of future pricing (the latter being exactly what an access regime is). Fairfax should have some protection as the News presses will become a monopoly.

The deal would technically meet the acquisition rules of s50 of the Competition and Consumer Act. As just noted the new business is a monopoly. To gain approval for the deal the Fairfax group could seek to produce a new national title that would increase competition in some markets.

It will be interesting to see how the ACCC eventually responds to any proposal that emerges.

Novae Meridianae Demetae Dexter delenda est