The High Court has found in favour of Spark and ordered a stay on the implementation of any clearance granted by the Commerce Commission tomorrow for Sky TV’s merger with Vodafone.

Justice Graham Lang this afternoon granted orders prohibiting Sky and Vodafone from merging “in reliance on any clearance given by the commission until midnight on the third day after the commission has delivered the reasons for its decision to the applicants.”

If Spark or another party files an application for a judicial review within that time, the orders will remain in force until further order of the court.

If no judicial review is filed, the order will lapse.

Although the Commerce Commission is due to deliver its verdict on the merger clearance application tomorrow morning, its reasoning will not be available until some time later.

Spark said it welcomed the court’s decision.

“We and others believe the proposed merger will be bad for consumers – resulting in poorer choice and higher prices for consumers, especially when it comes to sports content. That was at the heart of our decision to take this court action,” said Spark’s general manager regulatory affairs, John Wesley-Smith.

“The stay is important for natural justice and fairness: as it will ensure all interested parties have a chance to properly consider the Commission’s reasoning and make informed decisions on whether to seek a judicial review if there is a clearance decision.”

“We are grateful for the Court and Justice Lang for agreeing to an urgent hearing of the application and issuing a written judgment in an extremely short timeframe.”

Sky placed its shares on trading halt and said it is “considering the implications of the High Court's decision to grant a stay.”

Sky and Vodafone are seeking clearance for a merger in which UK-based multinational Vodafone will become 51% shareholder of the combined pay TV and telecommunications company.

The agreement contains a provision allowing either party to withdraw if it is not completed by February 28. It is also conditional on Commerce Commission clearance.

Opposition to the deal has focused on the potential for Vodafone to require Sky subscribers to switch to Vodafone telco services.

Although rival telcos such as Spark have no right to appeal the Commerce Commission’s decision, they sought a stay of its application on the grounds that they had a right of judicial review.

After an urgent court hearing this morning, Justice Graham Lang agreed.

In his judgment, he said the application for a stay sought Spark and 2degrees aimed “to preserve the ability of the applicants to bring meaningful applications for judicial review in the event that the Commission grants clearance.

“If Vodafone and Sky TV immediately complete the merger once they receive clearance, the transactions will enjoy immunity from subsequent challenge by any third party. Once that occurs, the Court’s hands will effectively be tied in terms of granting relief in the event of a successful challenge by way of judicial review.”

Justice Lang said the Judicature Act gave the court jurisdiction to grant interim orders “for the purpose of prohibiting a respondent from taking any further action that is, or would be, consequential on the exercise of a statutory power. The clearance decision will plainly be a decision made in the exercise of a statutory power.”

The price of immunity

At the hearing, counsel for Spark David Shavin QC argued that the effect of the order would not prevent the merger taking place.

“Our friends say we are trying to stop the acquisition,” he said. “We’re not. Our friends are welcome to settle this afternoon.”

The issue was whether the merger proceeded under the statutory protection provided by Commerce Commission clearance.

“We say the price of immunity from suit is to be subject to the supervision of the court.”

Spark’s application was supported by InternetNZ whose counsel Michael Wigley told the court the interests of consumers were paramount.

“We face total finality now. It would be an extraordinary thing if consumers lost out because of some tight analysis of the [Judicature Amendment Act].”

Commenting on the decision, InternetNZ chief executive Jordan Carter said: “We are pleased the Court has made sure there can be careful consideration of whatever the Commission decides.”

Sky and Vodafone want to create the country's largest telecommunications and media group, with Sky TV buying Vodafone NZ for $3.44 billion, funded by a payment of $1.25 billion in cash and the issue of new Sky TV shares at a price of $5.40 per share. Vodafone becomes a 51 percent majority shareholder in Sky TV, in what amounts to a reverse takeover. The pay-TV operator will borrow $1.8 billion from Vodafone to fund the purchase, repay existing debt and use for working capital.