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Paper industry price-fixing probe



Published July 20, 2005
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Allegations of illegal cartel agreements and/or anti-competitive price fixing now appear to be a regular feature of the European paper and board industry. The latest inquiry, which began on May 25 with a series of raids prompted by the European Commission on the European offices of leading papermakers, also includes their North American subsidiaries. Of course, such preliminary actions do not prejudge a company’s guilt. A similar investigation in 1995-96 into price collusion in the newsprint and magazine paper sector ended years later with no evidence of violations. The difference this time around is that producers of label papers, recycled papers and pulp woodchips are drawn into the investigations.
The action began in Finland with raids on various offices of UPM-Kymmene (which owns UPM Label Papers and Raflatac) by the Finnish Competition Authority. Its director general, Matti Purasjoki, said the investigations could takes months, or even up to a year before charges, if any, come to fruition.
UPM is already the subject of a US grand jury investigation into allegations of price fixing in the label stock business following a subpoena received last August. In April 2003 UPM had planned to acquire MACtac, a manufacturer of label stocks, from Bemis, but a civil antitrust lawsuit blocked the deal. UPM’s general counsel said the group had initiated an internal investigation of competitive practices covering all units in Spring 2003. It had also implemented additional competition law compliance programs for its employees, which it claimed signaled zero tolerance for any antitrust activity. In January this year UPM volunteered information to the respective competition authorities in the European Union, the USA and Canada. This move gives UPM full immunity with respect to “certain conduct disclosed to the authorities,” but no further comments are expected during the investigations.
Paper pundits suggest that UPM’s information prompted the Finnish Competition Authority to rope in such paper giants as Stora Enso, Sappi, M-real and Matsaalitto, a Finnish forestry group, as part of the investigations. Ahlstrom confirmed that it was included in the investigation with respect to release liners and label facestocks. Norway is not among the 25 European Union members, but state regulators raided the offices of Norske Skog’s newsprint operation. In Germany, the Bundeskartellamt is also investigating several magazine and newsprint mills. In a separate action, the national competition authority recently imposed fines totalling €57.6 million ($71.3 million) on 12 paper merchants and 46 individuals after uncovering a series of regional cartels that were seen to have harmed German printers and their customers.
In the USA, Avery Dennison Corporation and Bemis Company Inc. have confirmed that European Commission officials and relevant national competition authorities have visited their respective plants and obtained documents relating to their European facilities. Avery Dennison has facilities in the Netherlands and Germany, while Bemis has a pressure sensitive materials operation in Belgium. International Paper confirmed that it has been visited by the Antitrust Division of the US Department of Justice, and Stora Enso’s North American division was also surprised by a subpoena for documents.
Investigations into alleged cartels take a long time to resolve, so creating considerable uncertainties for boards of directors. For those found guilty the European Commission is empowered to hand out large antitrust fines. They can be reduced or even scrapped for firms that cooperate with investigators, but recent headline stories suggest that the EC’s cartel busters are no pushovers. It levied a record fine of €497 million ($611 million) on Microsoft for abusing its near monopoly of the PC market — now subject to an EU court appeal — and nailed Hoffman-Laroche, the Swiss chemical firm, for €462 million ($568 million) for its role, along with BASF and others, in a vitamin price-fixing cartel. In January 2002, 10 European firms, including market leader Arjo Wiggins Carbonless, were fined €278 million ($341 million) for setting up a carbonless paper cartel. The EC’s latest probe will hardly help those paper companies who are looking to implement price rises in certain expanding markets after failing to do so at the last attempt.



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