Part of the decision relied on the fact that a merger would reduce media plurality - effectively the number of voices in the media.
But Goddard told the High Court today that it was not the commission's place to take that into account under the Commerce Act.
"It's about the economy, that's what the statute's about."
The detriments related to that loss of plurality fell "outside the scope" of the commission's mandate, and it did not have the authority to consider it, he said.
"Even if the language of the Commerce Act is broad enough . . . to [allow] this sort of detriment to be taken into account, the commission's approach to it was essentially speculative."
The "quantified benefits" to the public of a merger would be in the realm of $40-200 million, he said.
Goddard argued a merger would provide a "very large gain to New Zealand compared to many of the transactions that come before the commission".
He also submitted the commission had not put enough weight on the impact of social media on news.
"I don't often find myself quoting President Trump but he said recently that having a Twitter feed was like owning the New York Times, but without the losses, and it just goes to show that you can find truth in the most surprising places."
Social media contained a "scattering of articles from all over" drawing audience attention.
Goddard said the commission has made "a number of significant errors" in its decision and had adopted "an inappropriately static approach" to what was happening in the news environment.
The commission had taken a "snapshot, rather than a moving picture", and the moving picture would have underscored how intense the constraints were on the media.
Goddard also pointed out there was "no likelihood" of an NZME-wide paywall.
The commission had wrongly balanced such a possibility when weighing up detriments against benefits, particularly in their acknowledgement that in a situation where the NZ Herald website went behind a paywall, Stuff.co.nz would remain free to access.
The commission said at the time of its decision that the merged company would have control of the biggest network of journalists in the country, 90 per cent of the daily newspaper circulation in this country and a majority of traffic to online sources of New Zealand news.
The merged business would reach 3.7 million New Zealanders each month, the commission said.
"This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy. The news audience reach that the applicants have provide the merged entity with the scope to control a large share of the news consumed by a majority of New Zealanders. This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand's democracy and to the New Zealand public," commission chairman Mark Berry said when announcing the decision to reject the merger.
"We accept there is a real chance the merger could extend the lifespan of some newspapers and lead to significant cost savings anywhere between $40 million to around $200m over five years. However these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed."
Lawyers spent 45 minutes this afternoon arguing whether a 15 minute video could be played to show the High Court how social media feeds work.
A lawyer for the commission said the video would give a "slanted view" to the court if the judge was not experienced with social media.
He said the video focused on a fictional character who only followed news media outlets on Facebook, and had no friends, so would only see news articles appearing in his feed.
"His feed is full of news and nothing else, and it's from everyone apart from the appellants," he said.
But Justice Robert Dobson said the court's interest had been piqued and they would watch the video, but that the lawyer had done a good job of pricking any bubbles that Goddard might have hoped to leave "bubbling away".
